West Virginia state government’s budget looks decidedly better four months into the new fiscal year than at the same time the two previous years.
Figures released Monday by the State Department of Revenue show the state collected $354 million in October, matching almost exactly the projections. It’s critical to meet the monthly projections because the budget is based on the expected collections. If revenue falls too far short, mid-year cuts have to be made.
So far this fiscal year revenue collections are just slightly below estimates, by $8 million, but that’s not much considering the General Revenue budget is over $4 billion. The collections-to-expenditures match is positive news for the state.
“We are in a much better place,” said State Revenue Secretary Dave Hardy. “Because the revenue projections are spot-on we don’t have to make the painful decision about recommending mid-year budget cuts.”
That has not been the case in the last couple of years, when a significant slowdown in the coal industry and a drop in natural gas prices wrecked the state’s economy and caused tax collections to spiral downward, well below projections.
Last year at this time revenue collections trailed estimates by $87 million. That hole was serious enough for then-Governor Earl Ray Tomblin to impose a two-percent midyear spending cut. The state faced a similar shortfall in 2015, forcing Tomblin to cut four percent from most state agencies and one percent from public education.
But now the state’s economy is showing some improvement.
For example, for the first four months of the year the state has collected $80.7 million in severance taxes—the taxes on coal, gas and timber—for the General Fund. While that figure is $13 million below projections, it is still 68 percent higher than the same period last year.
Personal Income Tax collections are up, due in part to a slight rise in employment. However, sales tax collections are running behind projections because West Virginians are not spending as much as expected on taxable goods and services.
“We are keeping an eye on sluggish sales tax numbers, but we aren’t worried at this point,” Hardy said. “And we are excited to see marked improvement in our Personal Income Tax and energy industry revenues.”
The revenue projections and collections are indicators of the strength or weakness of the state’s economy. The most recent numbers show some positives, but more importantly they indicate the worst of the state’s economic downturn is behind us.