WIXLIB

ARYThe Honorable Jim Justice, GovernorThe Honorable Members of the West Virginia LegislatureCitizens of the State of West Virginiaestablished a comprehensive internal control framework that is designed to protect thegovernment's assets from loss, theft, or misuse and to compile sufficiently reliable informationfor the preparation of the State's financial statements in conformity with GAAP. Because thecost of internal controls should not outweigh their benefits, the State's comprehensive frameworkof internal controls is designed to provide reasonable, rather than absolute, assurance that thesefinancial statements are free from material misstatements. As Management, we assert that, to thebest of our knowledge and belief, this financial report is complete and reliable in all materialrespects.The State of West Virginia's financial statements were audited by Ernst & Young, LLP.The independent auditors concluded, based upon their audit and the reports of other auditors, thatthere was a reasonable basis for rendering an unmodified opinion.Profile of the GovernmentThe State of West Virginia provides a full range of services, including education, socialand health services, transportation, public safety, conservation of natural resources, andeconomic development. In addition to general government activities, this report includesfinancial information regarding various discretely presented component units which arefinancially accountable to the State, or for which the nature and significance of their relationshipwith the State are such that their exclusion would cause this report to be misleading orincomplete. The criteria used to determine financial accountability of a particular entity are theappointment by a state official of a voting majority of the entity's governing body and (1) theability of the State to impose its will on that entity or (2) the potential for the entity to providespecific financial benefits to or impose specific financial burdens on the State. See Note 1(Summary of Significant Accounting Policies) for a comprehensive discussion of the criteriaused in determining the State's financial reporting entity.Budgetary control is maintained through legislative appropriations and the ExecutiveBranch quarterly allotment process. Agencies submit budgetary requests to the State BudgetOffice. The State Budget Office compiles the Executive Budget on behalf of the Governor, whosubmits it to the Legislature. After the approval of the budget, the State Budget Office maintainscontrol over the spending patterns of the State at the activity level and by use of the quarterlyallotments. The State Auditor exercises control over spending at the annual appropriation level.All appropriations, except funds which are reappropriated, expire 31 days after fiscal year-end.Economic ReviewWest Virginia leads the nation with its commitment to energy research and a diverseenergy portfolio that includes not only coal but natural gas, wind, hydroelectric, geothermal,biomass, and solar. The State has long been, and remains today, one of America's leading netexporters of electricity. West Virginia is a net supplier of electricity to the regional grid and isamong the top five states in the nation in net interstate sales of electricity. West Virginia remainscompetitive in low-cost energy.xi

ARYThe Honorable Jim Justice, GovernorThe Honorable Members of the West Virginia LegislatureCitizens of the State of West VirginiaThe State is the sixth-largest producer of marketed natural gas in the nation. Thissubstantial increase in production can be attributed to the discovery of vast gas reserves in theMarcellus and Utica Shale formations beneath portions of the Appalachian region and theutilization of horizontal drilling techniques to access those reserves. The region's 6,000-foot-deepMarcellus Shale gas fields, extending from New York to West Virginia, are believed to containmore than 84 trillion cubic feet of recoverable natural gas, one of the world's largest natural gasfields.West Virginia's business climate is among the best in the country and ranks tenth in theBusiness Facilities 2021 State Rankings Report. Business Facilities also ranked Charleston, WV,as third best business climate for populations less than 200k. Business Facilities considers thecompetitiveness of each state's infrastructure, workforce, economy, business friendliness, andaccess to capital when determining a state's business climate ranking.West Virginia continues to diversify its economy, which includes industries such astechnology, chemicals and polymers, automotive, manufacturing, natural gas, aerospace, metals,fulfillment distribution, and building products.Global companies and organizations have selected West Virginia for their expansionbecause of its business climate and productive workforce. Below are examples of this economicgrowth in the State: Virgin Hyperloop announced it will locate its new Hyperloop Certification Center(HCC) on nearly 800 acres of land, spanning Tucker and Grant counties, where it willleverage intellectual capital and resources from West Virginia University, MarshallUniversity, and from across the State. West Virginia was chosen over 17 others statesfor this development project and will now be at the center of developing the nextinnovation in barrier-breaking transportation. West Virginia Methanol, Inc., announced a 350 million investment to build WestVirginia’s first methanol-producing plant in Pleasants County, generating constructionand ongoing manufacturing jobs for the State. DataRobot, the leader in augmented intelligence, announced that the company isopening an office in Vantage Ventures in Morgantown, West Virginia. Gruppo Fanti, a metal packaging manufacturing company headquartered in Bologna,Italy, will open its first U.S.-based plant in Weirton. The new plant will initially create40 new full-time jobs, and Gruppo Fanti plans to invest 30 million into the BrookeCounty operation. Clorox’s new manufacturing facility is under construction and hiring, bringing 190million in economic impact to the Eastern Panhandle.xii

ARYThe Honorable Jim Justice, GovernorThe Honorable Members of the West Virginia LegislatureCitizens of the State of West Virginia Companies like Toyota Motor Manufacturing ( 210 million facility upgradeinvestment), Macy’s ( 120 million automation investment), and Proctor and Gamblecontinue to invest in and promote job growth in West Virginia. The Department of Economic Development has assisted with many significant tourismdevelopments in 2021 and promoted the use of the Tourism Development Act taxincentive. Since 2019, the Tourism Development Act tax credit program has receivedmore applications than the first decade of the program alone. Recent applicationsrepresent more than 250 million in investment in West Virginia’s tourism industry. The New River Gorge was named the nation's newest national park, promoting furthereconomic growth for the state.Looking forward, other significant developments for 2022 include: Mitsubishi Heavy Industries RJ signed a contract in May 2021, investing 20 million toexpand the facility by 100,000 square feet and adding two hangars, expected to becompleted in 2022. This will generate more jobs and growth for the State. Technologies and Materials North American manufacturing plant located in JeffersonCounty announced that it is set to add a 7 million expansion, which will double thesize of the facility. This will increase construction and manufacturing jobs for the State. CS Global Group, a Turkish Mining company that specializes in barite manufacturingand sales, has chosen Moundsville, West Virginia, as the location for its firstmanufacturing plant in the United States. The company will create 47 new full-timejobs and plans to invest 10 million in the facility, which will be operational by the firstquarter of 2022.These investments reflect the increasingly diversified nature of the economy that WestVirginia is building. West Virginia is well positioned as the ideal location for new and expandingcompanies that want to create good jobs in the State. West Virginia provides access to: A skilled and flexible workforce that has earned a reputation for dedication, loyalty andlow turnover rate Business taxes that are among the lowest in the country Electricity rates that are 13% below the national average A strategic location within an eight-hour drive to half the U.S. population and a third ofthe Canadian market A community and technical college system that is highly responsive to business andworkforce needsxiii

ARYThe Honorable Jim Justice, GovernorThe Honorable Members of the West Virginia LegislatureCitizens of the State of West Virginia High quality of life, low cost of living, and unparalleled outdoor recreational activities.Major InitiativesThe State of West Virginia focused on several major initiatives during FY 2021. Some ofthese initiatives are outlined below:Pro-Growth Tax ReformsWest Virginia enacted significant business tax reductions between 2006 and 2011 to helpboost future investment in the State's economy. The Corporation Net Income Tax rate wasreduced from 9% to 6.5%. In addition, West Virginia eliminated the Business Franchise Tax, theCorporate Charter Tax, the Telecommunications Tax, and a Business Registration Fee renewalrequirement. The latest estimates project a net reduction of more than 70% in Corporation NetIncome Tax for businesses over a ten-year period.Beginning in 2022, the general multi-state corporation apportionment formula for incometax purposes changes from a three-factor formula involving the share of payroll, property, andsales in West Virginia to a single sales factor formula. As a result of this change, corporationswith property and/or payroll in West Virginia face no direct marginal increase in tax liabilityassociated with a decision to expand their physical presence in the State. An increase in eitherproperty investment or payroll in West Virginia has no direct impact on future corporation netincome tax liability in the State.In addition to lower business taxes, West Virginia offers a variety of tax credits,exemptions and special valuations for new and existing companies. Credits for manufacturersand certain other types of businesses that create new jobs can offset up to 100% of the State'sbusiness taxes. There are special valuations on aircraft, high technology, pollution abatementequipment, and property tied to specified customer supplier relations, which can dramaticallyreduce property taxes, and exemptions for manufacturers can eliminate sales tax for goods usedin manufacturing. There are new tax credit programs that are now available for customerfulfillment and distribution centers as well as ethane cracker facilities.Roads and HighwaysDuring fiscal year 2021, the Department of Transportation (DOT) continued work onseveral of its major initiatives around the State, including Corridor H, the Wellsburg Bridge, US35, WV 10, and the Airport Road - John Nash Boulevard portion of the King Coal Highway (toname a few). As a result of increased funding available from the Roads to Prosperity initiative,the DOT was able to direct additional resources toward secondary road and bridge preservationand renovation programs. During fiscal year 2021, the DOT authorized 995 highway and bridgeconstruction projects statewide. Rugged mountainous terrain and numerous streams and riverscharacterize the topography of the State, and, consequently, West Virginia's road system includes7,232 vehicular bridges, of which the DOT is responsible for 7,124. The DOT’s bridge programxiv

ARYThe Honorable Jim Justice, GovernorThe Honorable Members of the West Virginia LegislatureCitizens of the State of West Virginiain fiscal year 2021, enhanced by an infusion of general obligation bond sales proceeds, inconjunction with the traditional State-Funded and Federal-Aid programs that started in 1988,allowed for 64 construction starts on bridge initiatives ranging from full replacement to deckoverlays. The resurfacing initiative comprised 537 resurfacing projects, which addressed nearly1,508 miles of roadway.State Park EnhancementsThe West Virginia State Park system is a recognized leader in park systems in the UnitedStates, and features a multitude of full-service restaurants, developed campgrounds, vacationlodges, golf courses, cabins ranging from pioneer to contemporary styles, conference centers, atourist railroad, aerial tramways, rail trails, an island, and a major ski resort.The system is composed of 35 state parks, nine state forests, the Greenbrier River Trail,the Elk River Rail Trail, and the North Bend Rail Trail. Facility inventory includes 798 lodgerooms, 358 cabins, 1546 campsites, 152 picnic shelters, and 559 playground units. More than700 miles of hiking trails are provided across 46 areas.The park system serves as a strong foundation for the growing tourism industry asdestination locations. According to the Outdoor Industry Association research, the outdoorrecreation economy in West V

The State of West Virginia focused on several major initiatives during FY 2021. Some of these initiatives are outlined below: Pro-Growth Tax Reforms West Virginia enacted significant business tax reductions between 2006 and 2011 to help boost future investment in the State's economy. The Corporation Net Income Tax rate was reduced from 9% to 6.5%.