CHARLESTON, W.Va. — Gov. Earl Ray Tomblin announced a 4 percent cut for most state government agencies, seeking to recover $100 million after what he called an unforeseen drop in West Virginia’s coal and natural gas tax collections.
Public school systems that have avoided cuts in recent years will see a 1 percent dip.
“This is a difficult decision that results from several factors beyond our control,” Tomblin said. “We are taking this action based on trends we see in the first three months of the fiscal year that we expect to continue throughout this budget cycle. While the cuts we’re enacting today will not be easy, we must maintain a balanced budget and this will help us do that.”
Sagging severance collections from coal and natural gas were more dramatic than projected, said the governor’s communications director Chris Stadelman.
“It has not only not gotten better, it’s gotten dramatically worse, and exceeded I think everyone’s expectations from Wall Street stock analysts to our own folks,” Stadelman said. “Our budget folks do a great job; historically been very accurate with their estimates. Nobody saw a decline like this coming.”
Tomblin also announced the state’s hiring freeze will continue, nonessential travel for state employees will be eliminated, and annual holiday parties will be canceled. Stadelman did not anticipate any job cuts.
“We think that agencies will be able to avoid any layoffs. We still do have a hiring freeze in place,” Stadelman said. “What it means in raw numbers is a little over $100 million in budget cuts between now and the end of this fiscal year.”
The projected deficit for the 2016 fiscal year is currently more than $250 million, in large part due to a $190 million shortfall in severance tax collections. As of the end of September, general revenues are more than $60 million behind estimates, a figure that was only $12 million at the end of August.
“Gov. Tomblin wanted to do it early in the budget year. We don’t know exactly what the final number is going to end up. But this will let agencies know to start making cuts now, and frankly, he has already informed most cabinet secretaries that this was a possibility,” said Stadelman.
Coal production is down 15 percent compared to last year. Although natural gas sales are up roughly 30 percent early this fiscal year, natural gas severance tax revenues are expected to decrease for the year because of significantly lower prices. Stadelman said that even though that’s good news for people heating their homes this winter, it negatively impacted the budget.
“We hope the price of natural gas, at least from a state budget perspective, comes back up,” said Stadelman. “It’s historically low, and it’s causing folks to stop drilling. We need that natural gas revenue to come in and we need the jobs that are associated with it.”
Tomblin said The Rainy Day Fund, created in 1994, could see an appropriation.
“We have been prudent in our use of the Rainy Day Fund, and adjustments prior to this budget year beginning resulted in us taking just $14.8 million from the fund rather than the $85 million initially expected,” said Tomblin. “We continue to have one of the best Rainy Day Funds in the country, and we created the fund for unexpected difficult times such as this.”