Aug. 10--CHARLESTON, W.Va. -- Earlier this week, Gov. Earl Ray Tomblin ordered state agencies to free up $85 million in next year's budget, but those cuts are by no means an end to the administration's search for savings and cash.

All told, government projections show the state's general revenue fund needs about $389 million more next year than it needs this year -- if government keeps spending as it's spending now.

The state budget year starts each July. This year's general revenue budget is about $4.5 billion.

Take away the $85 million in cuts Tomblin ordered and the $389 million goes down. Spend the $88 million the state has from last year's budget surplus and the number goes down again.

But, even then -- $173 million in cuts and surplus spending later -- the state still needs to find about $200 million more in cuts or cash.

How?

"That's why I have to work the rest of the year," said state budget director Mike McKown. "If I already knew that I could take the rest of the year off."

The state budget year starts each July. This year's general revenue budget is about $4.5 billion.

Right now, administration officials are awaiting a key piece of information: key revenue projections for next year's budget won't be made until later this year.

But, assuming the budget gap remains at about $200 million, the state has four basic options to deal with it.

--Option No. 1: raise taxes.

But Tomblin, a Democrat, is running for re-election with the motto, "More Jobs, Lower Taxes." So, don't expect tax increases.

"We haven't talked about them," Tomblin chief of staff Rob Alsop said. "We don't anticipate talking about them."

--Option No. 2: tell agencies to make more cuts and hold down spending.

Alsop said there are a couple of ways to do that. Take a $14 million budget increase that the Public Employees Insurance Agency was projected to receive next year. Don't bet PEIA will get that.

"We'll tell Ted Cheatham, 'Develop a program that can live off the current budget level,'" Alsop said, referring to the PEIA director.

Cheatham has a couple of options, including to spend reserve money, hope health care costs don't rise or change the benefits his agency offers to public workers.

Alsop PEIA won't necessarily have to cut benefits.

The state is also looking to turn over the care of a group of 57,000 elderly or disabled Medicaid patients to three private health insurance companies. These managed care companies are expected to help control costs and save the state several million dollars.

Alsop said the administration might also tell agencies to defer maintenance and other capital expenses.

--Option No. 3: tap the state's $800 million rainy day fund.

Alsop said this is a possibility and all options are on the table. The rainy day funds have long been eyed as a solution to next year's long-anticipated budget gap.

--Option No. 4: go through the couch cushions.

While it's a bit more complicated than that, Alsop said there are state accounts that have money in them that goes unused from year to year. It's not clear how much money the state has in such accounts.

When it comes to making cuts, Alsop said the administration has decided there are things it will not cut. Among them are the school aid formula, the prison system, the mine safety office, child care, social services and Medicaid. The governor also can't touch legislative and judicial budgets.

After taking those programs deemed essential off the cutting board, three-fourths of the budget is not up for negotiation. The school aid formula alone is $1.8 billion.

That's why the cuts will fall hard on some agencies. Overall, the $85 million cut Tomblin ordered amounted to only a 2 percent budget cut. But because the reduction didn't apply to some agencies, most agencies are being asked to roll back spending by 7.5 percent.

Two of those exempted programs may deserve special note.

The Tomblin administration got into political hot water earlier this year when its Department of Health and Human Resources announced changes to a child care program that helps low-income working families pay for day care. The administration partially reversed course after criticism from, among others, Republican gubernatorial candidate Bill Maloney.

And Medicaid is, in fact, the budget-busting problem at the core of the budget gap.

"If we could just hold the current year's budget flat and not increase anything, we'd be in great shape, but Medicaid required $180 million bucks more than what we're putting in it," McKown said.

But the state can't do much to control Medicaid costs. The state-federal program insures 420,000 low-income West Virginians.

Plus, every time the state cuts Medicaid, it loses federal matching money. If the state decided not to increase spending by $180 million, the state would also lose about $470 million in federal money.

Alsop said the $3 billionMedicaid program, which is mostly federal money, has not gotten much more expensive because of rising costs. Instead, stimulus-era matching funds for the program have decreased.

When the federal government was paying a greater share of Medicaid's yearly costs, Alsop said West Virginia "socked away state dollars for lean budget years."

Contact writer Ry Rivard at ry.rivard@dailymail.com or 304-348-1796. Follow him at www.twitter.com/ryrivard.

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