Tom Miller: West Virginia tax revenues come up short
West Virginia's 2012-2013 fiscal year for state government operations ended June 30 with a $90.6 million budget deficit. Many state officials claim a drop in severance tax collections on both coal and natural gas was the primary reason for this revenue shortfall. And since state law forbids a budget deficit, several steps had to be taken before June 30 to balance the books.
Gov. Earl Ray Tomblin pulled $17.7 million out of the state's Medicaid reserve fund to help cover that shortage. And the state also used $45 million that was in an income tax reserve fund. Finally, the Legislature approved $28.3 million in budget cuts as its contribution to avoid the deficit.
The state ended the 2013 fiscal year June 30 with a total of only $4.05 billion in tax collections. This was well short of the expected -- and originally predicted -- tax revenues of $4.149 billion. Deputy Revenue Secretary Mark Muchow said a drop in severance tax collections was a major factor in creating this shortfall of tax revenues for the previous fiscal year.
In contrast, West Virginia became one of 29 states that doesn't tax retail food purchases July 1 when it finally eliminated the consumer sales tax on groceries that was 6 percent as recent as 2005 when lawmakers began reducing the tax rate. It dropped to 3 cents per dollar in 2008 and was down to 1 cent the past year.
Gov. Tomblin recalled last week that he was president of the West Virginia State Senate when the phase-out of the 6 percent consumer sales tax on food started in 2005. The final move to remove the tax entirely on groceries is expected to save West Virginia families an average of $52 a year -- exactly a dollar a week.
The sales tax will still be collected on soft drinks, food purchased from vending machines and prepared food.
West Virginia's total tax collections between July 1, 2012, and June 30, 2013, included receipts of some $409.7 million in severance taxes during the past fiscal year -- also far short of the anticipated $461.5 million that had been predicted.
Deputy Revenue Secretary Mark Muchow said coal sales dropped more than 15 percent, which meant 20 million fewer tons were mined than the previous year. Another critical factor was the decision by Congress to extend the so-called "bonus depreciation" for another year. This caused corporation income and business franchise taxes to come in at only $238 million -- some $10 million less than expected. And the state also had anticipated Congress would phase out its temporary payroll tax reduction but instead it was allowed to abruptly expire Jan. 1.
The good news is that state officials predict West Virginia needs only 1.9 percent revenue growth in the 2013-2014 fiscal year that began last Monday (July 1) to balance the new year's budget. Muchow considers it a "reachable target" even though he isn't expecting a "banner year in terms of growth."
Another important law that also went into effect last Monday is the so-called "distracted driver" statute that makes talking on a cell phone without a hands free device while you are driving a primary traffic offense. Gov. Earl Ray Tomblin wasted no time calling public attention to this vital new statute.
The idea here is to reduce the number of deaths and accidents caused by motorists who foolishly drive and talk on a hand-held cell phone at the same time. According to statistics from Brent Walker, director of the West Virginia Department of Transportation Office of Communications, there were 3,331 Americans killed and 387,000 injured in 2011 due to distracted drivers.
The governor said he wants to convey a message to all West Virginians to "please don't let your last words be a text. No phone call is more important than a life." And a recent study revealed that cell phone use while driving isn't limited just to teen-age drivers.
State Police Superintendent C. R. (Jay) Smithers said the governor has provided funding for additional patrols that has had a noticeable impact on lowering the numbers of traffic-related deaths on state roads. And he suggested that any passengers in the vehicle should also remind the individual behind the wheel of the dangers of distracted driving.
It's still a long time until the 2014 statewide primary election in West Virginia, but a former chairman of the state Democratic Party has already started his campaign to succeed Rep. Shelley Moore Capito as the member of the House of Representatives from the 2nd Congressional District. And Nick Casey said last week that he has already raised nearly a half million dollars for his campaign.
Capito has already announced she will be a candidate for the U. S. Senate, hoping to succeed Sen. John D. Rockefeller IV, D-W.Va., who has announced he will retire when his current six-year term in the Senate ends in 2014. As for Casey's chances, state GOP chairman Conrad Lucas said Republicans are not worried because Casey is a staunch supporter of President Barack Obama even though Obama is not popular in West Virginia.
Tom Miller is a retired state government reporter for The Herald-Dispatch. He is a regular contributor to The Herald-Dispatch opinion page.
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