West Virginia state government tax collections fell behind $50 million dollars in the first two months of the fiscal year. And when you get in a hole, it takes some time to get out.
The state treasury received a boost last month when State Treasurer John Perdue turned over a one-time payment of $20 million. That money came from the unclaimed property fund and interest on the Board of Treasury investments.
By law, those moneys are directed to the General Revenue Fund. So that helped.
Additionally, the Justice administration revised revenue estimates downward by $16.5 million—$6 million in January and $10.5 million in April. That’s a manageable number because the budget included a small cushion.
But that cushion is now committed, which means the state’s budget for the remaining five months of the fiscal year is tight, and as of today, revenues are $20 million behind estimates.
Can the state make it to the end of June without any cuts?
State Department of Revenue Secretary Dave Hardy believes they will. “There are no plans for mid-year budget cuts at this point,” he told me. However, he cautioned that the monthly numbers can change.
The last couple of months have been a mix of positive and negative economic news.
The highly volatile corporate tax collections are 43 percent ahead of expectations year-to-date and running $33 million above estimates.
However, the gains in corporate taxes are offset by the lower-than-expected personal income tax collections. They are $36 million behind projections for the year. That’s primarily because the state has lost an estimated 4,000 well paying natural gas pipeline construction jobs since those projects are tied up in court challenges.
Sales taxes collections are coming in nearly two percent above last year’s level and right about at the projections for the year. Sales tax collections were three percent higher in January than the same month last year and that could be a positive trend.
The slowdown in the energy sector continues to be a major problem for the state. Severance tax collections are running nearly $40 million behind estimates for the year.
The weather can be a mixed blessing for West Virginia’s economy. A cold winter means more coal and gas sales for power generation. However, if the mild weather turns into an early spring, major road construction projects can get moving again.
So, what’s this all mean? As always, a decline in energy can quickly constrict the state budget. However, we have seen much worse in West Virginia and the odds are pretty good that, despite the headwinds to coal and gas, the state will be able to end the fiscal year in five months without trying to patch a budget shortfall.