Published: December 03, 2008 08:57 am      

Recession not cause of tax revenue plunge

Officials say holiday to blame in what appears to be $27 million decline

CHARLESTON — West Virginia state tax revenues took a $27 million hit last month, but officials say an economic recession is not to blame.

The state closed its books on Nov. 26, before the extended holiday weekend, but most businesses had until Sunday to pay what they owed. As a result, those last-minute payments will show up for December.

“That’s purely timing,” said Deputy Revenue Secretary Mark Muchow. “We try to plan for that in the estimates, but more of it carried over than usual.”

The State Road Fund saw a decline for similar reasons, with November’s collections of $23.8 million nearly $14.8 million below estimate. But Muchow said the drop in gas prices is slowly improving revenues for West Virginia’s primary source for highway money.

While the state’s financial health could worsen in a prolonged recession, the Manchin administration believes it will remain among a handful to evade the specter of budget deficits.

“We’re in good shape for the current fiscal year,” Muchow said. “The next fiscal year will bring a pretty tight budget, there’s no doubt about that.”

Gov. Joe Manchin will unveil revenue projections for the 2009-2010 fiscal year, and his proposed budget, with February’s State of the State address. But figures from this year’s address suggested that spending would outpace available funds by $11.7 million. Muchow said he expects those estimates will change by February.

General revenue — provided by most state-level taxes and fees, plus some lottery proceeds — topped $252.2 million last month, missing the projection of $279.2 million.

Better-than-expected collections in prior months still has the state $72.6 million ahead of revenue estimates for the budget year, which ends June 30, 2009. The state expects to raise $3.9 billion in general revenue by then.

A main driver of that robust yield has been the severance tax on such extracted natural resources as coal and natural gas.

The severance tax has brought in $180.6 million so far this year, or $43 million above estimate. But Muchow said the Nov. 26 reporting deadline lists $18.7 million collected for the month, nearly $14.8 million less than projected.

“If it were not for the mining industry, our employment numbers would probably be negative at this point,” Muchow said.

Besides timing, Muchow said recent cuts to several taxes, including those on groceries and corporate net income, also contributed to November’s figures.

The latter reached $2.9 million for the month while sales taxes yielded $96.2 million, both beating estimates. Another chief revenue source, the personal income tax, was $9 million below projection at $94.2 million.

A key tax behind the State Road Fund, on motor fuels, suffered for most of 2008 when rising gas prices curbed consumption. The Legislature created a special account earlier this year to help the fund deal with the decline.

Before November, the fund had drawn down $12.6 million of the $20 million in that account allotted for 2008. But Muchow expects only a $65,000 transfer for November.

He believes the state will end the calendar year without depleting that allotment, with any extra money carrying over for 2009. Muchow predicted that monthly fuel tax revenues will exceed estimates by January.

The Center for Budget and Policy Priorities includes West Virginia among just nine states that have so far avoided budget shortfalls. The others making the national liberal think tank’s list include fellow energy producers Alaska, Wyoming and Texas.