West Virginia is flush with cash.
Follow me on these numbers.
State government ended the 2022 fiscal year with a surplus of $526 million dollars.
So far in fiscal year 2023 the state has collected $850 million more in taxes than estimates. That number is projected to reach $1.7 billion by the June 30th end of the fiscal year.
Add them together and the state is expected to end the fiscal year with a surplus of $2.2 billion. That is an amount equal to almost half of the General Revenue budget for the entire year!
How is that possible?
The biggest reason is that state revenue streams are setting records. Collections for severance taxes on extraction industries like gas and coal, corporate net income tax, personal income taxes and consumer sales taxes have been surging.
“It’s jaw dropping,” said State Revenue Secretary Dave Hardy during a budget briefing Wednesday. “We’ve never had times like these before.”
There are other factors that have contributed to the massive cash surplus.
The state has held the line on spending for the last several years, so the additional money has not been allocated to building the base of the budget. Governor Justice has set the tone for that by keeping revenue estimates artificially low.
Also, federal money poured into West Virginia during the pandemic. The state has been able to use that one-time money for pandemic-related expenditures, and that freed up General Revenue funds.
But still, the revenue growth is remarkable. Deputy Revenue Secretary Mark Muchow has been on the job for nearly four decades and he is stunned.
“This hasn’t happened in at least 40 years,” he said.
But how long will this last? The prices for coal and natural gas are notoriously volatile. Nationally, many economists continue to predict a slowdown or even a recession.
If that happens, West Virginia will feel the effects. Justice and lawmakers must keep that in mind as they plan for tax cuts and any new spending, including the Governor’s proposed average five percent pay raise for teachers and state workers.
Over the years, many times the state has struggled to end the fiscal year with a balanced budget, as required by law. There have been mid-year hiring and spending freezes and years without pay raises.
Those were tough times.
Now, the unprecedented revenue surge has created what the budget briefers yesterday called “a historic window of opportunity.”
What West Virginia’s elected leaders decide to do with that opportunity will be decided over the next two months, and those decisions will have ramifications for years to come.