Lawmakers urged to approach strong revenue numbers with caution

CHARLESTON, W.Va.¬†—¬†State lawmakers were urged Monday to approach the state’s revenue gains cautiously.

Mark Muchow

Addressing lawmakers at interim committee meetings in Charleston. state Deputy Revenue Secretary Mark Muchow said a key part of revenue collections being above estimates is linked to the ongoing construction of several natural gas pipelines. Muchow said the work is expected to be completed by the end of 2019.

“When that comes off it will be very noticeable,” Muchow said. “It will have an impact on the personal income tax and the sales tax. Fortunately, we still have the road program going on for a five-year period of time.”

The Roads to Prosperity program, approved by state voters in Oct. 17, will bring about $500 million a year to the state’s coffers for as many as six years. The pipeline work is a $4 to $5 billion investment over a short two-year period, Muchow said.

“Certainly there will be a bit of a drop off and that’s something that will be measured and incorporated in coming budgets,” Muchow said. “The timing of that is a little uncertain but it will have some impact when it comes off.”

The state’s revenue collections exceeded estimates by $18.8 million in November, The positive month puts the state at $141 million above estimates through the first five months of the fiscal year. Gov. Jim Justice said last week the state is on its way to a $200 million collection surplus by the end of June. Muchow reiterated the success in his remarks to lawmakers Monday.

“Every component with the exception of one is either at estimate or above estimate. The only component that is below estimate year-to-date is interest income and that’s only off by a half-million dollars. It’s pretty strong across the board for the general revenue fund,” Muchow said.

The severance tax on coal is currently being helped by a strong export market. The price of natural gas has stayed steady this year but Muchow said that could go down next year because of the glut of natural gas in the market, a situation that’s expected to continue until the pipelines are in operation.. Muchow said again Monday taxes from the extraction industries are up and down so it would be much better if the state could add a number of manufacturing jobs in the months to come.

Year-to-date, Severance Tax collections are 34.2 percent above where they were last year at this time. Personal Income Tax collections for November were $135.6 million, $7.3 above estimates. Consumer Sales Tax collections at $121.2 million were $5.8 ahead of estimates and Severance Tax collections finished November at $42.4 million, $7.8 million ahead of estimates.

Muchow refused to tip his hand Monday on next budget year’s revenue estimate that will be released with the governor’s proposed budget in January. He did urge lawmakers to proceed carefully with the current collection surplus.

“I think caution is a good word to use here,” he said.

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