CHARLESTON, W.Va. — West Virginia missed its November revenue estimate by about $4 million — but the real picture isn’t even as good as that, state Revenue Secretary Bob Kiss said today.
If the state hadn’t prepared by shifting $10 million in insurance surcharges the situation would have been worse, Kiss told reporters during a conference call about the monthly state budget report.
“But for that, the deficit would have been larger by about $10 million,” Kiss said.
Mark Muchow, deputy secretary for the Department of Revenue, agreed with that assessment.
“You take that away and it’s pretty flat,” Muchow said.
Both tax department leaders said a tobacco tax increase advocated by Gov. Earl Ray Tomblin and passed by the Legislature is starting to show effects. But that hasn’t been enough to head off stagnation, Muchow said.
“The November numbers were a bit disappointing,” Muchow said.
He ticked off a shortfall in the state income tax, an anemic growth rate in the sales tax, corporate taxes that have come in below estimate and severance taxes that are sluggish because of lower natural gas revenues.
Kiss said, “We anticipate a growing deficit going forward.”
Kiss made alarming budgetary news just a couple of days ago when he told state lawmakers that if there are no more state budget cuts or tax increases then fiscal year 2018 will result in a budget deficit “north of $400 million.” He said that’s an educated guess because he doesn’t yet have revenue estimates for the fiscal year.
He has been using the term “structural hole” and during today’s conference call expanded on what he means by that. Today he defined it as lack of the amount of resources needed to meet estimated budget expenditures.
“If you don’t fix it — and the only way to fix it is to have additional revenues or spend less — if you don’t fix it, over time, it will devastate the state’s finances,” Kiss said.
He warned that the Legislature and the administration will have to make significant moves to alleviate the state’s budget woes.
“The magnitude of the size of the structural hole and not being able to come to a consensus on how to close that structural hole, that’s a little unusual,” he said. “If they continue, it doesn’t bode well for the state.”
Kiss made reference to a record $392 million tax package passed in 1988 during Gov. Gaston Caperton’s administration. Those hikes included a new 6 percent sales tax on food and a 5-cent-a-gallon gasoline tax.
Caperton inherited a treasury that was millions of dollars in debt because of severe slumps in the coal and steel industries in prior years, which drove up unemployment, and cuts in federal assistance.
On Thursday Kiss said, “I would make the argument that was the result of several years of living beyond our means and ignoring a structural hole.”
Governor-elect Jim Justice has touted the potential of economic growth, but has not expressed support for cuts or increased taxes.
During a debate this fall, Justice touted several possibilities to improve the economic picture, including sweeping accounts, a federal environmental subsidy meant to promote the timber industry, what he believes is a trend toward rising coal prices and a short-term loan of millions of dollars.
“The alternative is cut, cut, cut or tax, tax, tax — and I don’t believe in either of those,” Justice said.
After the state revenue conference call today, the Americans for Prosperity West Virginia organization, a conservative policy advocacy group that receives money from the Koch Brothers, urged lawmakers to consider further cuts rather than tax increases.
“Lawmakers’ choices for filling the budget gap could not be more clear: either streamline state government’s overextended structure or raise taxes on struggling families,” stated Jason Huffman, director of the organization. “The latter option is unacceptable and unrealistic if we hope to truly make the Mountain State a place where folks can prosper.”