Revenue Estimates Story Archives - West Virginia Public Broadcasting

Justice: September Revenue Numbers Show Surplus Growth Return

In a Justice administration media briefing Friday afternoon, Revenue Secretary Dave Hardy said September revenues were $210 million above than the estimated budget

West Virginia’s state administrators note that this month’s state budget numbers show the personal income tax cut is not hurting but helping revenue collections.

With revenue amounts for July and August prompting administrative concern, July being about $7 million, Gov. Jim Justice said the September numbers were really good news.

In a Justice administration media briefing Friday afternoon, Revenue Secretary Dave Hardy said September revenues were $210 million above the estimated budget.

Hardy said even with the 21.25 percent personal income tax cut that passed earlier this year, the state is breaking even with income tax collections compared to where it was a year ago.

“That means that we have grown our personal income tax income about 20 percent,” Hardy said. “That’s the story for September, that the state income taxes and our incomes are growing to show that type of revenue growth in such a quick way.”

Hardy said September corporate net income tax collections were $54 million above estimate, growing by 2.2 percent compared to a year ago.

He also said the consumer sales tax was $11.2 million above estimate for September, almost 10 percent above where it was for September 2022.

Independent budget analysts have repeatedly said the Justice administration sets its monthly revenue estimates artificially low.

Severance Tax Shortfalls Could Challenge Record Budget Surplus Numbers

Decreases were expected in personal income tax revenues – and in severance taxes relating to a fluctuating coal, gas and oil market.

Breaking down West Virginia’s $1.8 billion surplus from the past fiscal year, while projecting a 2024 budget, Department of Revenue Deputy Secretary Mark Muchow told members of the legislative Joint Committee on Finance that while funding increases were consistent across the board, decreases were expected in personal income tax revenues – and in severance taxes relating to a fluctuating coal, gas and oil market.

“We also expected a big reduction in severance tax due to lower energy prices,” Muchow said. “Here we have a reduction of $633 million, and the official estimate is 66.9 percent.”

Muchow said recent monthly severance tax collections are currently exceeding budget estimates and will be closely monitored going forward. He said energy production was not the problem.

“Coal production is up 5.9 percent,” Muchow said. “We’re on target for 90 million tons of coal. And natural gas production is up 9.9 percent. It’s all about the price. The math is pretty easy, our tax is 5 percent of the price. So we will rise or fall on price. And we had a very warm winter last winter. Who knows what’s coming in the future?”

Gov. Jim Justice has said new workers and their families coming to West Virginia will offset the 21.25 percent personal income tax cut implemented this year.

Revenue Secretary Dave Hardy noted that these revenue streams tend to slow down in July and August.

“As of the end of August our consumer sales tax revenue was up 2.5 percent from a year ago,” Hardy said. “Our personal income tax revenue as of the end of August, was down 16.2 percent. Well, we did a 21.25 percent income tax reduction. So, the fact that our revenue is only down 16.2 percent in the personal income tax category means that we still have real growth in income in our state.”

Hardy said the personal income tax cut will put a projected $696 million back into citizens pockets through the PIT reduction.

Setting State Revenue Estimates Subject Of Debate

Revenue Secretary Dave Hardy said executive branch revenue estimate settings are ingrained in constitutional code.

West Virginia’s annual budget is based on revenue estimates that come from the governor’s office. The budget surplus comes from taxes collected above those revenue estimates. How those estimated amounts are determined garners differing points of view.

Sean O’Leary is the senior policy analyst at the West Virginia Center on Budget and Policy. He said when the Justice administration pointed out that this April’s general revenue collection beat the estimate by $319 million, the base budget estimate of $509 million was $284 million below last year’s actual collections of $791 million. O’ Leary called the surplus ”smoke and mirrors.”

“You’d have to assume that the governor and the budget office thought that the economy was going to collapse,” O’Leary said. “So these revenue estimates were set intentionally low in order to keep the budget low, and to generate these large surpluses.”

Revenue Secretary Dave Hardy said executive branch revenue estimate settings are ingrained in constitutional code.

“In 1968, West Virginians voted on a constitutional amendment,” Hardy said. “We call it the modern budget amendment, even though now it’s not so modern. It allows the governor to set the revenue estimates for the state of West Virginia. So every year, our governor sets the revenue estimates and then the legislature can only budget up to the limit that he sets.”

O’Leary said, unlike West Virginia, many states open up their revenue estimate setting process, getting many parties involved.

“When they do revenue estimates, they do a consensus forecast,” O’leary said. “Most other states do this where they have the tax department, someone from the university, some economists and they’ll have the legislature involved as well. And then you get more realistic revenue estimates.”

Gov. Jim Justice said his revenue estimates and budget drafting have all the transparency and outside involvement in the world.

Hardy said the governor presents a budget on the first night of the legislative session. “We literally spend 60 days talking to the legislators and our constituents and stakeholders on whether that’s the proper budget that the governor’s proposed at the back end of this process,” Hardy said.

Responding to the question of possibly setting revenue estimates too low, Justice said he’s a conservative businessman who minds the store by not being frivolous and wasteful.

“We took care of our counties the right way,” Justice said. “We have given significant pay raises four times, and the state is cooking because we didn’t go throwing money away on frivolous projects. But we sure got a bunch of folks out there that we can still help.”

Justice said a priority is stemming the corrections crisis. He wants to allocate pay raises to keep corrections officers on the job without seeking significantly higher paying positions in border states. He has said he wouldn’t call a special legislative session without a plan that has house and senate consensus. When Hardy was asked why corrections pay increase wasn’t put in the budget, he said there is some movement right now.

“There’s a plan that’s being formulated now in consultation with the legislature to meet that head on,” Hardy said. “But it can be done in a very intelligent way and it can be done through our base budget in fiscal year 2024.”

Hardy said, “throwing money at a problem is not the answer, having a plan and thinking it through is what you need to do.”

House Budget Bill Goes To Floor With Questions

In a surprise move, Gov. Jim Justice increased the state revenue estimate Wednesday by $850 million.

Late Wednesday afternoon, the House Finance Committee advanced a $4.6 billion general revenue budget. The Senate passed its version of the budget bill on Saturday.

In a surprise move, Gov. Jim Justice increased the state revenue estimate Wednesday by $850 million.

House Finance Committee Chair Vernon Criss, R-Wood, said figuring in the additional money for the coming fiscal year revenue estimates, comes as an executive prerogative.

“The legislature is given those dollars by the governor on how much money you’re allowed to spend or put in the budget,” Criss said. “He allowed that he added an additional $850 million in a letter yesterday to allow us to see if we need to use those monies for the things that we’ve all talked about doing for years, and we’re trying to press those out.”

House Finance Committee member John Williams, D-Monongalia, wondered where the governor found the money.

“I don’t know, that’s a heck of a couch cushion,” Williams said. “I asked that question myself in finance to see if there was anybody from the governor’s office that could answer that question. I’m eager to find the answer to that myself.”

Criss and Williams agreed the budget challenge now is to reconcile the revenues expected to come in, with the many state expenditures both mandates and proposed.

“You’re trying to backfill the needs, like we did with the colleges and the CTC’s, setting aside $100 plus million dollars for them, trying to take care of the other necessary items that have been neglected for some time,” Criss said. “We’re trying to catch up with those, as well as keeping a budget for the taxpayers at a minimum cost of raising the budget.”

For Williams, the issue was reconciling the revenue and expenditures.

“This year is a little different in that we have this massive tax cut bill, it’s going to blow a billion dollars into the budget,” Williams said. “That’s before you count some other bills that this legislature has passed and it’s going to knock some holes in the budget. Quite frankly, I’m concerned about our state’s ability to balance, perhaps this budget, but certainly looking at future years, what that’s going to look like?”

The House and Senate have a little more than a week to find that budget balance.

State Revenue Estimates are 'on Target' Halfway through Fiscal Year

West Virginia is on track to meet its budget estimates for this fiscal year.

In a press call with reporters, Revenue Secretary Dave Hardy said the state’s General Revenue Fund is 4.5 percent ahead of where it was this time last year – and overall budget estimates for this fiscal year are, so far, on target.

November saw nearly $300 million in increased revenue bringing the cumulative General Revenue Fund collections to more than $1.6 billion.

“I’m happy,” Hardy said, “I think the revenue projections are good for the people of West Virginia, and there’s certainly, hopefully, we’re beginning to see the making of a trend here, because we are 5/12 of the way through the fiscal year.”

There were some shortfalls in November collections, however – such as severance tax – which taxes coal, oil and natural gas. Severance taxes were down $3.5 million last month, but compared to last year, Hardy notes, it was up 19 percent from November 2016.

Hardy says collections in personal income, consumer sales, and corporate net receipts helped to offset November’s shortfalls.

The State Road Fund saw a big increase from the previous year – over 16 percent above prior year receipts. Hardy says this is due, in large part, to the increase in license plate fees, fuel tax, and a 1 percent sales tax enacted by the West Virginia Legislature.

Gov. Justice Adjusts Budget Proposal, Restores Funding to Some Programs

Gov. Jim Justice’s Office has adjusted his 2018 budget proposal and, as a result, is asking lawmakers to change some appropriations in the plan, including reinstating some previously cut programs.

Justice’s budget was submitted to lawmakers during his February State of the State Address and relies on $450 million in new taxes to close what was an estimated $497 million budget hole.

According to a letter sent to Senate President Mitch Carmichael and House Speaker Tim Armstead dated March 16, Justice says the changes will result in a $54 million general revenue surplus in 2018.

The biggest of the changes made in the budget proposal is the smoothing of payments to the state Teacher’s Retirement System Unfunded Liability program. That would result in a $43 million savings this year, but larger payments over the term of the smoothing, which Justice has previously said would be three years.

It includes the reinstatement of the $4.6 million general revenue budget of the Educational Broadcasting Authority, which is the legal name of West Virginia Public Broadcasting. Justice proposed zeroing out the organization in his initial budget proposal, but the adjustment permits the agency to enter into a transition period with a state “land-grant institution of higher education,” according to the letter.

General revenue adjustments in the letter also include decreasing the budget of the West Virginia Office of Miner’s Health Safety and Training by $605,000 to increase the Department of Forestry’s budget by $550,000, allowing for the rehiring of laid-off foresters.

In a press release Friday morning, the Department of Commerce announced they were immediately recalling 15 laid off foresters.

According to the letter, a fund transfer from the Office of Miner’s Health Safety and Training and the collection of funds from existing vacancies within the Division of Forestry will fund the position through the end of the 2017 fiscal year until the 2018 adjustments the governor has asked for in his budget adjustment take effect.

The governor’s letter calls for the elimination of the Office of Education Performance Audits at $1.1 million and increases the state School Aid Formula by $703,000.

The general revenue spending also calls for a reduction of $70 million in the governor’s Department of Commerce “Save Our State” fund. Justice had originally asked for a $105 million line item for the fund to recruit new business development to the state.

Other appropriations adjustments include combining the Office of Technology and Division of Information Systems. It also combines the State Rail Authority and the Aeronautics Commission into the Division of Multimodal Transportation.