West Virginia leaders are still assessing recent comments by Gov. Patrick Morrisey, who indicated the state has a $40 million structural gap in funding for Temporary Assistance for Needy Families.

The safety net program, often called TANF, provides monthly cash payments and support services to low-income families with children to help them achieve economic stability and self-sufficiency. It is a federally funded, state-run program often referred to as “welfare.”

Morrisey, responding to questions during a press conference last week, suggested the state might have to respond to a financial gap by making cuts to West Virginia’s childcare assistance and a voucher program that helps low-income families afford school clothes.

He also seemed to make reference to family support centers, but it was not clear.

However, the governor acknowledged all of that remains under review and would need to be discussed with legislators.

“There are a few that are out there that we have to make the decisions. We have not announced anything yet. We want to confer with the legislature, but for example, the clothing allowance, the FNS, and then childcare – they’re all in that bucket,” Morrisey said.

Since then, lawmakers and other close observers have said they need to learn more about the underpinnings of the financial gap cited by the governor, as well as his early ideas for what to do about it.

“I think there’s a lot of questions to still be answered,” House Speaker Roger Hanshaw, R-Clay, said on MetroNews Midday.

“None of that discussion was had with us during the regular legislative session this year, so we did what we did with respect to the budget for the upcoming fiscal year and the remainder of this fiscal year, absent that revelation. So the first thing we have to do is understand exactly how we got where we evidently are.”

Hanshaw and other lawmakers said legislative finance personnel would be working to learn more about the state’s position with TANF funding.

“We’re what we’re not going to be very excited about, I don’t think, would be substantial cuts to other services that are that are needed, necessary and beneficial,” Hanshaw said.

“There are there are things that the TANF funds support, other than direct payments, that that are also important to a lot of families, particularly some of the low-income families in West Virginia. So, we’re not excited necessarily to be making cuts to those programs, but we first of all don’t necessarily understand the announcement yet.”

Spotlight on TANF spending

The governor’s discussion of TANF funding came during a broader discussion of state agency audits that the administration concluded could result in millions of dollars in savings for the state.

However, the conclusions drawn about TANF were adjacent to those audits rather than direct conclusions from them.

“The TANF issue was identified as part of the administration’s broader review of the Department of Human Services, alongside the audit work being conducted across multiple departments,” said Lars Daleside, communications director for the governor, after a request for clarity from MetroNews.

“It was not a standalone ‘TANF audit’ in the traditional sense.”

The governor’s verbal explanation and Daleside’s followup indicated a structural imbalance developed over the years. The administration cited a temporary federal funding increases associated with the covid-19 pandemic that allowed programs supported by TANF to expand significantly.

Spending levels grew beyond what the recurring annual federal TANF block grant could support, the administration said.

As a matter of straight math, they said a federal block grant for TANF amounts to $100 million a year, while projected obligations tied to programs currently supported through TANF exceed that amount by about $40 million.

Earlier on, the state was able to rely on temporary carryover balances to bridge those gaps, Daleside said, but those balances are projected to be depleted in the coming years.

Morrisey said the emergency spending levels created a big structural deficit, “and quite frankly, we had these silos operating within human services that led to inadequate oversight of the TANF budget. So we’re obviously looking to fix that.”

The governor said funding for Temporary Assistance to Needy Families goes to help vulnerable families, support children and help people move toward stability and self-sufficiency. “Our kids and our families definitely need the help from that TANF program,” Morrisey said.

Going forward, he said, “You’ll be seeing that we’ll have those briefings with the legislature with an opportunity to solve a number of these problems.

“You can’t run deficits, and you can’t run them because you forgot to turn off the spigot with covid (emergency funds) going offline, and we’re certainly committed to being fiscally responsible, while also helping people who are very much in need.”

West Virginia budget trends and TANF

A review of West Virginia’s general revenue budget over the past few years shows relatively flat spending for TANF until recently.

Temporary Assistance for Needy Families runs through a federal block grant that requires a state match called “maintenance of effort.”

Both the federal and state portions were pretty stable from 2021 to 2025. Then the state budget data shows a jump that reflects the amount the governor cites.

The most significant driver is a $42,000,000 increase in the “Current Expenses” category of the federal TANF block grant.

Fiscal Year 2021
State Maintenance of Effort: $25,819,096
Federal Block Grant: $127,660,783
Total: $153,479,879

Fiscal Year 2022
State Maintenance of Effort: $25,819,096
Federal Block Grant: $127,725,762
Total: $153,544,858

Fiscal Year 2023
State Maintenance of Effort: $25,819,096
Federal Block Grant: $133,070,827 (includes $4,617,546 in Federal Coronavirus Pandemic funds)
Total: $158,889,923

Fiscal Year 2024
State Maintenance of Effort: $25,819,096
Federal Block Grant: $133,678,671 (includes $4,617,546 in Federal Coronavirus Pandemic funds)
Total: $159,497,767

Fiscal Year 2025
State Maintenance of Effort: $23,237,186
Federal Block Grant: $134,664,564
Total: $157,901,750

Fiscal Year 2026
State Maintenance of Effort: $25,819,096
Federal Block Grant: $176,664,564
Total: $202,483,660

Fiscal Year 2027
State Maintenance of Effort: $25,819,096
Federal Block Grant: $177,081,080
Total: $202,900,176

The fiscal 2026 budget appears to mark the transition where this gap is no longer covered by carryover funds and is instead reflected as an increase in budgeted federal spending authority.

Kelly Allen, executive director of the West Virginia Center on Budget & Policy think tank, suggests a likely explanation for what happened is that the state was diverting reserves to pay for programs related to TANF.

As those reserves began to run dry, the expenses continued and what is exposed is the true cost.

“It’s a flexible block grant from the federal government, states have a lot of flexibility in how they can use it, and they don’t have to spend their whole allocation in a year; they can run up a reserve and bank some of those dollars, and that’s what we did for several years,” Allen said on MetroNews Talkline.

At one point in 2023-2024, she said, West Virginia had a reserve of more than $120 million — more than an annual allocation but spent down in recent years.

When the governor talks about a “deficit,” Allen interprets that as the state spending down that TANF reserve, not a traditional budget deficit

“So, when the governor says ‘deficit’ that evokes a certain thought, but I think what he’s actually saying is we’ve been spending down into that reserve, and eventually that’s gonna run out,” she said. “And why we’ve been spending down into that reserve is that we’ve been funding a lot of childcare subsidies with TANF dollars.”

Some good news, Allen said, is that the governor alluded to an 18-month window to address the financial situation.

“This is a lot of reading between the lines,” she said, “but that to me says we have time for legislators to find alternative sources of revenue to continue these really, really important programs.”

To Jim McKay, state director of Prevent Child Abuse West Virginia, what the governor described represents a TANF surplus, not a deficit.

“The governor himself said that the state has 18 months of reserves remaining. That is not a crisis requiring immediate cuts to programs serving children and families,” McKay said.

Over many years, McKay said, the state actually underspent TANF and a large reserve grew to over $100 million.

“In recent years, the state has drawn on the TANF surplus to fund services such as Family Support Centers, Legal Aid, and child care,” McKay said.

“These programs help children stay safely at home with their families, which is the core statutory purpose of TANF. West Virginia leads the nation in the rate of children in foster care. We should be investing more in keeping families together, not less.”

Meanwhile, he cited emerging consequences: organizations across the state are waiting with uncertainty because their contracts for funding in July have not yet started the process for renewal.

“They heard the governor describe a deficit that has caused concern throughout the state that programs will have to stop serving families in a few weeks,” McKay said.

“This is occurring despite the approval of the budget bill that included sufficient funding from a combination of TANF and reserve TANF appropriations, but the contracts have still not gone out. These delays have real-life consequences.”

Broad picture of state use of covid dollars

The Pew Charitable Trusts has spent significant focus on how states have been able to manage covid relief funds, particularly as the emergency financial support was made available and then contracted. 

Rebecca Thiess, who helps lead Pew’s managing fiscal risks project, focuses on how federal policies affect states.

Most states “did a pretty good job spending the one-time dollars on one-time expenses,” Thiess said in an interview with MetroNews. But, “some states did kind of put money towards operational expenses in the study that we did.”

On the whole, she said, states like West Virginia may benefit from financial caution.

“I do think that if the spending continued for even just a few years at COVID levels in an unsustainable way, you know, that’s an argument — I think you hear the governor saying this — for kind of more practical management of federal funds, so you don’t get kind of unpleasant surprises like this,” Thiess said.

West Virginia is following a lot of the same trends as most states right now, said Justin Theal, senior officer for The Pew Charitable Trusts. He said policymakers are facing the most widespread fiscal budgetary pressures since at least 2020, driven by factors like slower revenue growth and rising spending demands.

“During those years of unusually strong revenue growth, many states made long-term commitments in response to those temporary highs, like tax cuts, wage increases for public employees, expansions of spending programs. Those are now becoming much harder to afford now that revenue is back towards more normal conditions,” he said.

And now states are navigating the wind down of those pandemic funds. That marks a transition from an extraordinary period for state leaders who had sigificant extra resources and fiscal flexibility.

“But now they’re asking questions like, were the programs that we expanded or the tax rate changes that we enacted — were those affordable only with temporary resources? Do we have the ability to meet our ongoing spending with enough revenue? And that’s a very real part of the policy debate right now,” Theal said.

‘We need to find out if that’s actually the case or not’

West Virginia lawmakers now have work ahead to determine the basis of the governor’s conclusions and to assess priorities with available state funds.

“I think most are equally confused and maybe it’s designed this way,” said Delegate Anitra Hamilton, a Democrat from Monongalia County who is a member of the House health committee.

Hamilton was among the delegates in meetings last week about topics like data centers while the governor was making his remarks. She said she started receiving texts and emails about what the governor had said while she sat in those meetings.

“Until more information is given that can provide clarity, we can only restate what has been said and make assumptive remarks,” she said.

It’s the governor’s responsibility to make his case, said Delegate John Williams, D-Monongalia, speaking on “Talk of the Town” on WAJR Radio.

“We need to find out if that’s actually the case or not,” said Williams, who is the ranking Democrat on House Finance. “The Legislature, we just allocated $177 million to TANF, so let’s see if the governor is correct.”

Williams added, “We would like some more evidence. If that’s the assertion he’s making, we’d like that pointed out somewhere that we have a structural deficit. As far as we were concerned, when we passed our budget for fiscal 2027 just two months ago, there was no such structural deficit.

“So if he thinks that there’s going to be a deficit the burden of proof is on  him and so far we haven’t seen anything.”

Hanshaw, the House speaker, agreed that more homework is necessary. But he believes there’s time to gather more information.

“As I understand it,  we’re not in a catastrophic situation yet; it’s just going to be a problem that we face toward the end of the fiscal year,” Hanshaw said. “So we’ve got a little time on that left, not a lot. We’ve got a little time on that left, so step one for us is having our finance team understand exactly how we got where we are.”

Speaking at a panel on financing the energy transition during Temasek’s Ecosperity week, veteran financier Shriti Vadera said governments continue to rely on the unrealistic assumption that private capital alone can close the climate financing gap, even as many projects in developing economies remain commercially unviable without stronger policy support and public-sector intervention.

“There’s a sort of convenient untruth that the private sector is going to spontaneously combust and find ways of providing capital when it can’t go to things that are essentially not commercial,” said Vadera, who is chair of UK-based insurer Prudential plc and the World Bank Private Sector Investment Lab.

Her comments came as a vast majority of clean energy investment today remains heavily concentrated in a handful of major economies despite growing global momentum behind the low-carbon transition.

While investment in renewable energy and green technologies has accelerated sharply in China, Europe and previously the US, financing flows into emerging and developing economies continue to lag far behind what is needed to meet climate targets.

Vadera said emerging markets excluding China now account for roughly 30 to 40 per cent of global emissions, yet climate financing into these economies remains deeply insufficient.

She cited estimates showing emerging and developing economies require around US$1.3 trillion annually in transition financing for emerging markets, compared to roughly US$200 billion currently flowing into the sector.

The financing shortfall is particularly acute when it comes to allowing investors to participate in transition financing via equity, or the buying of shares, said Vadera. She described this lack of risk-bearing capital as the “biggest problem” facing transition projects.

“There’s a lot more debt [available], but the real problem is that 80 to 90 per cent of the financing is available in debt. The start of any capital stack at any project is the risk-bearing capital, and that is in much shorter supply,” she said.

Vadera highlighted that many climate discussions continue to overestimate the willingness of institutional investors to absorb risks tied to emerging market infrastructure, particularly where currency volatility, illiquid markets and inconsistent regulations remain unresolved challenges.

To unlock the trillions in private financing available in the capital markets, investments need to be rated, liquid and tradable, she said.

Vadera also called for the creation of standardised financial structures that allow climate-related debt to be packaged, traded and distributed more efficiently across global markets.

One such model currently being explored by the World Bank’s Private Sector Investment Lab involves creating originate-to-distribute models that pool loans and structure them into investable assets, while also standardising documentation, securitisation frameworks and debt issuance practices across multilateral development banks and domestic financial institutions.

The aim is to turn transition financing into a recognisable asset class that institutional investors can more easily access.

“That is the nearest thing we have to a solution that will be at the scale that is needed,” she said.

However, she stressed that financial engineering alone will not solve the problem.

For hard-to-abate sectors such as steel, cement and industrial decarbonisation, projects may never become commercially competitive without carbon pricing or direct public support.

“However much structuring you do, they’re not going to be bankable,” Vadera said.

Stronger policies and financing reform

Other speakers at the panel echoed the need for stronger policy frameworks alongside financing reforms.

Adair Turner, chair of the Energy Transitions Commission, said although the world has made substantial progress in scaling clean energy investment globally, many hard-to-abate sectors remain structurally more expensive to decarbonise than existing fossil fuel-based systems.

These sectors include green hydrogen, steelmaking, cement production and carbon capture technologies, where low-carbon alternatives continue to face higher upfront and operating costs.

“No amount of clever financial design will make things bankable unless there are carbon prices or regulation as a framework,” he said.

He noted that a growing number of renewable energy technologies have now reached cost competitiveness due to rapid technological advancements and manufacturing scale-up over the past decade.

The cost of solar photovoltaic systems and batteries, for example, has fallen by roughly 95 per cent over the past 15 years, helping make solar-plus-storage systems cheaper than new coal or gas-fired power generation in some markets.

The falling costs have also accelerated the economic viability of electric vehicles and industrial electrification technologies, particularly for low-temperature industrial processes such as food processing, textiles and manufacturing.

However, Turner cautioned against assuming that international capital alone would solve the financing challenge, as most transition financing would ultimately have to come from domestic savings mobilisation and stronger local capital markets.

He said policymakers must also address foreign exchange risks associated with renewable infrastructure projects in emerging markets, many of which generate revenue in local currencies but rely heavily on foreign-denominated financing.

Annual global investment in the green transition has doubled from around US$1 trillion in 2020 to approximately US$2 trillion today with much of that growth concentrated in China, Europe and the US. 

Ma Jun, chairman of Green Finance Committee of China Society for Finance and Banking highlighted China’s extensive green finance system that has helped support the rapid scaling of renewable technologies and clean manufacturing, offering an example of how coordinated policy and financial system design can accelerate deployment.

China has established the largest green banking system in the world, with roughly US$7 trillion in outstanding green loans. It has also developed one of the world’s largest green bond markets.

This deep domestic financing base has enabled large-scale investment into solar, wind, electric vehicles, batteries and other clean technologies, supporting both domestic deployment and global supply chains.

Ma said that technology deployment may now matter more than financing cost reductions, given the steep learning curves in clean technologies.

“Technology is more important. While finance can optimise and reduce costs by one to two per cent, the right technologies can cut costs by as much as 50 per cent,” he said.

He also stressed the importance of developing interoperable green taxonomies and stronger local green financial systems across emerging economies, to ensure that capital is consistently directed towards credible transition activities.

According to Ma, many developing countries still allocate only a small share of domestic bank lending towards green projects, leaving major financing capacity untapped.

He suggested that strengthening domestic green financial systems could unlock significantly more transition finance without relying excessively on foreign capital inflows.