It’s only September, and already West Virginia officials are making plans to reduce state spending because revenues are less than expected.
In the first two months of this fiscal year, which began July 1, indications are that parts of the state economy are slowing down. In those two months, personal income tax collections were about $21.8 million below estimates. Consumer sales taxes came in at $3.6 million under. Tobacco product taxes were about $4.1 million under estimates.
On the other hand, business and occupation taxes were $1.9 million over estimates. The corporation net income tax was $1.6 million above budgeted estimates. Liquor license renewals were $2.85 million over.
But the big hit was in severance taxes. The budget approved by the Legislature and Gov. Jim Justice expected severance tax collections of $52.15 million in July and August. Instead they came in at $25.34 million — a shortfall of $26.8 million, or about 51 percent.
Severance tax collections in July and August of 2018 were about $65.76 million. The severance tax well hasn’t gone dry, but it’s not as plentiful as it once was.
State Revenue Secretary Dave Hardy told West Virginia MetroNews last week that collections in September have been strong, but nevertheless state agencies have been told to begin planning for a 4.6 percent budget cut should one be needed.
Those numbers are for the general revenue part of the state budget. The state road fund tracks its money separately, as it receives revenue from taxes dedicated to maintaining roads and bridges. The news there for July and August was grim, too. Motor fuel tax collections fell $5.3 million short of expectations, and registration fees came in about $3.17 million under budget. However, the sale and privilege tax on motor vehicles brought in about $10.86 million more than budgeted.
Federal reimbursements were about $29.57 million under budget. Along with other revenue sources, the road fund ended July and August about $37.6 million short.
That’s a lot of numbers, and numbers can tend to run together until they become a mass of figures that is hard to comprehend. What we can comprehend, however, is that the fossil fuel economy is shrinking and West Virginia had better start preparing for it now.
Almost daily, trade publications in the energy industry tell of another coal-fired power plant that will close in the next two to three years. Much of coal’s market in power generation has been taken by natural gas. That industry has grown in the past decade thanks to shale gas drilling in the upper Ohio Valley and elsewhere, but growth there is leveling off.
Construction of midstream processing facilities, where gas from wells is prepared to move through pipelines, has slowed as most facilities are either completed or nearly so.
Add it all up and it’s easy to see that Justice and the Legislature may need to rethink their approach to tax breaks that prop up unprofitable mines and power plants. They’ll also have to look past cutting a nickel here and a dime there and ask themselves if the state hasn’t overextended itself in some areas and will need to cut back some programs or benefits. Another question will be if some tax increases are necessary.
None of these choices will be easy, but they are what voters expect. With statewide elections coming next year, gubernatorial and legislative candidates should be asked over and over how they expect the state to prosper in a national economy that is telling coal it is no longer welcome.