By David Gutman and Lawrence Messina
With tax revenues that could lag below expectations by up to $70 million by the end of the budget year, West Virginia Gov. Earl Ray Tomblin has ordered a freeze on hiring for all executive agencies under his authority.
The governor ordered the restriction on Tuesday, effective immediately and continuing until June 30.
Through the end of February, the first eight months of the fiscal year, the state’s tax collections were $35 million below expectations. While that’s less than 1.5 percent of projected general revenue collections to date, Deputy Revenue Secretary Mark Muchow expects the budget woes to continue before the fiscal year ends on July 1.
“We expect the $35 million to grow to a bigger number between now and the end of the year,” Muchow said. “It could get in excess of $60 million and possibly above $70 million.”
While tax revenues are down across almost every sector, Muchow said that reduced severance tax revenue from coal and gas production is the biggest issue.
“The biggest item by far is the severance tax,” Muchow said. “The decline in the coal industry is a little bit more severe than initially predicted, and to compound that, on the natural gas side, we were expecting an increase in revenues going into this fiscal year and instead we have received a decrease in revenues mainly because of significantly lower natural gas prices.”
The hiring freeze applies solely to executive agencies under the governor, and does not apply to other executive agencies, like the attorney general or the secretary of state. It includes all cabinet agencies, the board of education and the Higher Education Policy Commission.
Muchow said that the hiring freeze alone would not be enough to make up for the entire expected shortfall in revenue. He expects that the state will have to tap a reserve account that is used to pay income tax refunds when the state has cash flow problems. That account was established in the late 1980s to prevent delays in tax refunds. There are about $45 million dollars in the reserve account and Muchow expects that they will have to use a substantial amount of that.
Tuesday’s order applies to jobs and vacancies funded by general revenue, and not to those that rely on special revenues such as license fees.
Tomblin said he would allow exceptions on a case-by-case basis. The governor also ruled out layoffs or furloughs.