Extra $70 million, spending cuts help state balance budget

LAWRENCE PIERCE | Gazette file photo

With the help of $70 million in one-time appropriations and $33 million in mid-year spending cuts, the state should finish the 2013-14 budget year June 30 with a balanced budget, Revenue Secretary Bob Kiss said Tuesday.

“We did not have a great May, but we will be on pace, we believe, to finish the year on balance,” he said.

State tax collections for May of $264.15 million were $16.45 million below estimates, as consumer activity failed to rebound as strongly as hoped after a harsh winter.

With one month remaining in the budget year, overall year-to-date tax collections of $3.686 billion are $57.32 million below projections, and $75.42 million below the same point in 2013.

However, with the $70 million of supplemental appropriations approved by the Legislature March 14, and with the mid-year state agency spending cuts Gov. Earl Ray Tomblin ordered in December, Kiss said the state should end the budget year with a balance, as required by the state Constitution.

“We’re optimistic that that solution will bring a budget that’s constitutionally balanced,” he said.

Consumer sales tax collections of $96.5 million for May were up nearly $6 million from April, but $2.9 million below estimates for the month.

Because sales tax collections are from retail sales from the prior month, Deputy Revenue Secretary Mark Muchow had hoped for a stronger upturn in April retail sales, following a rough winter statewide.

“The increase in sales has not materialized... The retail sector is still weak,” he said.

A downturn in construction has also hurt sales tax collections, Muchow said.

Year-to-date, sales tax collections of $1.022 billion are $38.4 million below estimate, and down about 2.6 percent from the 2012-13 budget year, he said.

A key factor hurting the state’s economy, Muchow said, is a sharp downturn in non-manufacturing exports, as a worldwide decrease in demand for steel has hurt exports of metallurgical coal.

He said exports are at about $4.5 billion, down from $7.5 billion in the peak year of 2012.

The other major revenue source, personal income taxes, came in at $96 million, $7.9 million below estimates. Year-to-date, income tax collections of $1.512 billion are $91.5 million below estimates, and down 2.7 percent from the same point last year.

A contributing factor, Muchow noted, is that the state last year had a $45 million income tax reserve fund to pay income tax refunds, but that fund was emptied to balance the budget, affecting overall income tax revenue this year.

Meanwhile, Muchow said severance taxes remain the best-performing category of state taxes this budget year, even though May collections of $40.7 million were $1.6 million below estimates.

Muchow said that’s an accounting issue, since the tax payments are due on May 30, and about $30 million of payments were actually posted on Monday.

Year-to-date, severance tax collections of $407.18 million are $6.3 million ahead of estimates, and up 6 percent over the same point last year, fueled by high demand and prices for natural gas, he said.

Also, Muchow said tax revenues from so-called vice taxes on tobacco, alcohol and beer are running behind 2012-13 figures, reflecting declining consumption of those products.

Year-to-date tobacco tax collections of $94.6 million are $2.88 million below estimates, and $4.2 million below the same point last year.

Reach Phil Kabler at philk@wvgazette.com or 304-348-1220.

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