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Energy prices cause continued revenue lag for state

By Pamela Pritt

The Register-Herald

BECKLEY, W.Va. — Low energy prices — while welcome for consumers — are causing headaches for state officials who are seeing revenue numbers continue to lag, mostly due to slow growth or no growth in natural gas and coal.

Severance taxes are down 58 percent from last year, causing overall revenue numbers to fall, as well.

“We did not meet the revenue estimate,” said Secretary of Revenue Bob Kiss. Kiss said the shortfall is “almost entirely a function of severance tax,” which brought in $24 million in August, more than $16 million below estimate.

Deputy Secretary of Revenue Mark Muchow said the trend of lower coal production continues, and the revenue loss “has been compounded by (coal company) bankruptcies.”

Gross severance tax receipts from coal are down 43 percent, and revenue from natural gas is down 22 percent, Muchow said.

“The huge decrease in the price of natural gas has more than offset the significant increase in sales,” Muchow said. He said the bad news for the gas industry is that low prices mean future exploration and drilling activity are “coming to a stop.”

Muchow predicted further decline in the energy sector’s tax revenues. He said coal export statistics show a 70 percent decline over the last three years.

“I do not think we’ve reached bottom yet,” he said. “We’re still falling.”

Still, Kiss said there was some good news, and part of that is that even with a shortfall for the month, revenues are up more than 3 percent from last August.

Better than expected collections personal income tax, business income tax and business and occupation tax helped trim the net loss for the state to $7.5 million for the month and $12.3 million for the year-to- date.

Personal income tax increases had a “very strong surge,” Muchow said. Personal income tax, the state’s largest source of income, showed a 3.2 percent gain, with $137.9 million in collections for August.

Muchow said the prior two months, when averaged, showed a 5.7 percent growth in spite of “flat or declining payroll employment numbers.”

The growth coincides with the 40 percent decrease in refunds because the alternative fuel tax credit was phased out, he continued.

Corporate income tax came in at $2.9 million in August, slightly better than the $2.5 million estimate.

Similarly, the business and occupation tax was up $1.4 million at $9.7 million.

Also, insurance premium taxes came in above estimates; however, the tobacco tax was below estimates at just more than $9 million.

Muchow said tobacco taxes would continue to decline over time because of lower consumption.

A portent of consumer confidence, sales taxes also fell below estimates by $3.5 million, making the year- to-date figures down 4 percent.

“The broader economy is growing a little bit, still sluggish, but there is some growth,” Muchow said. Muchow said that state numbers could pick up, as Proctor and Gamble will have groundbreaking ceremonies in the Eastern Panhandle this month. The company will build a $500 million, 400-square-foot manufacturing plant in Berkeley County.

Kiss said the state has already made significant budget cuts and in light of lagging revenue numbers, worsened by the last round of tax cuts, which eliminated the business franchise tax, corporate net income tax and the sales tax on groceries.

The Secretary would not say that reversing those decisions was in order, or that those tax cuts were bad policy decisions.

“Just because you’ve got some challenges doesn’t mean you need a tax increase,” he said. — Email: [email protected] Follow PamPrittRH on Twitter

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