Latest News, WVPA Sharing

Budget office: WV Rainy Day funds in good shape


Charleston Gazette-Mail

CHARLESTON, W.Va. — Despite numerous raids by the Legislature to balance recent state budgets, the state’s Rainy Day emergency reserve funds remain healthy, budget officials told legislators Monday.

Currently, the two Rainy Day funds have a total of $692 million, or equal to more than 16 percent of the state’s general revenue budget for one year, state budget director Mike McKown advised the interim Joint Committee on Finance.

“That’s pretty healthy considering we’ve used it a lot over the past two or three years to help balance our budgets,” McKown said.

In fact, the current Rainy Day A fund balance of $266 million is well below the fund’s high point of $576 million in 2014, he said.

In the 2016-17 budget year, the Legislature shifted $70 million out of Rainy Day A to draw down federal Medicaid matching funds, and used another $61 million to close budget shortfalls and make appropriations.

Additionally, recovery efforts from the June 2016 state floods required appropriation of another $55 million of Rainy Day funds.

McKown said the goal is to bring Rainy Day A up to 13 percent of the general revenue budget, but noted the current $266 million is less than half of that threshold.

“We’re a long way off from what we would consider Rainy Day A to be fully funded,” he said.

The bright spot is Rainy Day B, set up in 2006 using Tobacco Settlement funds, which has reached an all-time high of $425 million, McKown said.

Under the law creating the second Rainy Day fund, Rainy Day B can only be tapped if funds in Rainy Day A are exhausted.

Also Monday, Deputy Revenue Secretary Mark Muchow told members of an interim committee on energy that state severance tax collections have seen an upturn, driven by higher natural gas prices and production and by increased coal exports, but are still well below collections in peak years.

The current upturn helped shrink a projected $192 million revenue shortfall for the recently ended 2016-17 budget year to below $121 million, he said.

“One of the biggest reasons why the shortfall was reduced greatly was the severance tax,” Muchow said.

For 2016-17, the state collected $344.7 million of severance taxes on production of coal, natural gas and oil, up from $260 million in 2015-16, but still down from $437.2 million two years ago.

Coal production — driven primarily by a spike in exports to Europe — has increased from 80 million tons in 2016 to nearly 90 million tons in 2017. However, that’s still down from 120 million tons a year production as recently as 2013, Muchow said.

“It’s a fairly good improvement, but still down from where it was,” he said.

Muchow said a key factor in the upturn in severance taxes has been prices for natural gas, which bottomed out at 66 cents per mcf last summer. Currently, West Virginia natural gas producers are seeing prices from $2 to $2.50 per mcf, he said.

However, he said it is unlikely that state natural gas prices will reach $3 per mcf in the next five years, given competition from natural gas producers in Pennsylvania and Ohio.

“The state’s a big player, but not necessarily the biggest player,” Muchow said.

See more from the Charleston Gazette-Mail

Comments are closed.

Subscribe to Our Newsletter

Subscribe to Our Newsletter

And get our latest content in your inbox

Invalid email address