CHARLESTON, W.Va. — With state tax collection coming up $81.2 million short over the past three months, West Virginia Revenue Secretary Bob Kiss said Tuesday that “remedial action” will be necessary to head off another budget deficit.
“I can’t draw you a scenario by which I think we’ll meet the revenue estimates for the current [budget] year,” Kiss said during a monthly briefing on tax collection. The 2015-16 fiscal year began on July 1.
Kiss said his office will work with Gov. Earl Ray Tomblin’s office to come up with a plan over the next four to six weeks to close the new budget shortfall.
That could include more across-the-board spending cuts, cuts directed at particular agencies, use of one-time funds, or withdrawals from state Rainy Day reserve funds or other state accounts, he said.
“Right now, I’m not in a position to tell you what the best course of action is to solve the problem,” Kiss said.
Over the past three years, Tomblin has imposed mid-year budget cuts of 7.5 percent, 7.5 percent and 4 percent for most state agencies.
Kiss said it is too early to project how large the 2016-17 budget deficit will be.
“It’s not as simple as saying, we’re $80 million behind for the quarter, so it’s four times that for the year,” he said.
Unlike past months, the culprit in the September revenue collection shortfall was not severance taxes — which, at $26.2 million, came in slightly above estimates — but a steep drop in personal income taxes and corporate net taxes.
September income tax collections of $173.7 million were $30.5 million, or about 15 percent, below estimates, and about $11.2 million below Sept. 2015.
“The energy sector plays a key role there,” he said.
While natural gas prices have increased significantly nationally, Muchow said state producers haven’t experienced that amount of increase because of a lack of pipelines to get the gas to market.
Payroll withholding taxes grew by a smaller-than-expected 0.7 percent, as state employment did not grow as quickly as anticipated, he said.
In addition to severance tax collections reaching projections, another bright spot in September was consumer sales tax collections, which at $109.58 million beat estimates by $3.75 million and were up 6.2 percent over Sept. 2015 collections.
Kiss said that could reflect flood-recovery spending, as well as improved consumer confidence. September sales tax collections reflect consumer spending during the month of August.
Muchow noted that sales taxes are one of the first taxes to respond to an economic recovery, while income taxes are one of the last to recover.
Overall, the state government collected $376.1 million in taxes in September, $32.3 million below estimates, and $2.9 million below the same month in 2015.
Year-to-date, West Virginia has collected $914.8 million, down $14.99 million from the same point in 2015.
Reach Phil Kabler at [email protected], 304-348-1220 or follow @PhilKabler on Twitter.