WV begins fiscal year $11M in hole after revenue collections fall short

CHRIS DORST | Gazette-Mail

Despite finishing strong in June, state revenue collections for the just-completed 2016-17 budget year came up short of estimates at $4.166 billion — which effectively puts the state in a hole to start the 2017-18 budget year, Nick Casey, chief of staff to Gov. Jim Justice, said Wednesday.

Casey blamed the Legislature for relying on “fake money” to balance the 2017-18 budget — a budget that became law without Justice’s signature — causing the new budget to immediately start out $11 million short, a deficit Casey said will require midyear spending cuts.

“We started the year $11 million in the hole,” said Casey, who said the Legislature had earmarked their anticipated budget surplus to help fund the Department of Health and Human Resources and volunteer fire departments.

Through a combination of spending cuts and use of about $123 million of one-time funds, including about $40 million from the state’s Rainy Day emergency reserve funds, the state General Revenue Fund carried over about a $30 million surplus into the new budget year, which began July 1.

However, in order to balance the 2017-18 budget, the Legislature assumed there would be a $41 million surplus carried over, creating an immediate $11 million budget gap, which Casey referred to as the Legislature’s “fake money.”

Despite finishing strong in June, with the $465.14 million of revenue collections that exceeded estimates by $21.78 million, overall 2016-17 revenue collections of $4.166 billion were $21 million below estimates, although up $63.8 million from fiscal 2015-16.

“The budget itself is dismal,” Casey said. “The only two bright spots are the severance tax and the economic driver the governor gave us through the road bond.”

The 2017-18 budget assumes about $130 million in growth, assuming continued improvement in severance tax collections, as well as new economic activity beginning next spring generated through the governor’s road-building initiative. However, that depends on voters approving a $1.6 billion road bond issue in an Oct. 7 referendum election.

Severance tax collections began an upturn in March, primarily because of an upswing in natural gas prices and to a lesser extent, an increase in coal production.

June severance tax collections of $47.03 million topped estimates by more than 40 percent, while severance tax collections for the 2016-17 budget year totaled $321 million, exceeding estimates by $58.5 million, as natural gas collections jumped 59 percent.

However, the two major sources of state tax revenue — sales taxes and personal income taxes — each missed estimates for the year by about 5 percent.

Sales tax collections of $1.22 billion came up $63 million short of estimates, while personal income tax collections of $1.8 billion were $100 million below projections.

“Our ability to get through the first three quarters [of the budget year] is going to be difficult,” Casey said, blaming the Legislature for failing to enact revenue measures proposed by Justice.

Justice did not attend the budget briefing, but his office put out two news releases Wednesday criticizing the Legislature:

Justice blamed the Legislature for a new CNBC report that rated West Virginia as the worst state for business, declaring it to be in an “economic death spiral.”

“The Legislature allowed West Virginia to sink even further down the list of worst states for business because they completely failed to adopt my vision of change,” Justice said. “The state Legislature has cost us thousands of job opportunities and further damaged our reputation.”

Justice followed that up with a release criticizing the state Senate for budgeting $860,000 to renovate eight restrooms in its section of the Capitol, saying the money could be better used for drug treatment centers.

“Based on how poorly the Legislature did this past year, the taxpayers shouldn’t pay them for a new outhouse — much less a new luxury bathroom,” Justice said in the release. “We’ve got schools with bathrooms that don’t work and these politicians want the taxpayers to pay for gold-plated toilets? You’ve got to be kidding me.”

In response, Senate President Mitch Carmichael, R-Jackson, called the statement “crass and callous,” and said, “I don’t believe anybody who owes this state $4.5 million in unpaid taxes is in a position to tell a legislative body that has responsibly managed its own budget for decades — and has given back several million dollars to the state’s General Revenue Fund — how to spend a single penny.”

The restroom renovations are part of a proposal by the state General Services Administration to renovate 34 restrooms, nine janitors’ closets and three women’s lounges at the Capitol, a project originally budgeted at $6 million.

When legislators raised objections to the project cost at a 2010 meeting, then-Administration Secretary Robert Ferguson stressed that it would require replacing original water and sewer lines, some of which date back to the 1920s.

“This is not a simple replacement of fixtures,” he said at the time. “This is a big, big project.”

It actually turned out to be bigger than that: When bids for the renovation project were opened in June 2012, the low bid of $9.34 million came in nearly $3.4 million over budget, and the contract solicitation was canceled shortly after, with the project being put on hold since then.

Reach Phil Kabler at philk@wvgazettemail.com,

304-348-1220 or follow @PhilKabler on Twitter.

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