CHARLESTON — Lagging tax revenues are threatening West Virginia state government with a budget deficit, but Gov. Joe Manchin does not yet plan to lay off public workers, ax programs or raise taxes to keep the books balanced.
The latest revenue figures show a $16 million shortfall, which officials expect will widen to around $100 million by the June 30 end of the budget year. The gap equals about 2.6 percent of the $3.78 billion the Manchin administration expects from general revenue taxes for the year.
Manchin has responded by repeating his earlier plea to all state agencies, including those outside his office and cabinet, to find savings. He had already asked all of state government to trim their planned spending for the next fiscal year — by 4 percent for the Department of Education, and 5 percent for everyone else.
“We are vigorously looking for additional efficiencies in state government,” spokesman Matt Turner said Tuesday. “He believes there is much more that can be done to improve efficiency and save money.”
The administration also has a cushion: $168 million in revenues left unspent from the two previous budget years. Turner credited efforts to cut agency energy costs and downsize the state’s costly and unwieldy vehicle fleet with smaller and used models, among other measures.
“Dividends are now coming back to the state because of those policy decisions,” said Deputy Revenue Secretary Mark Muchow. “The state has a whole lot of flexibility.”
That surplus is in addition to the state’s emergency reserves, which exceed $537 million. The state also has yet to tap the bulk of its estimated $1.8 billion share of federal stimulus funding. State agencies and programs report spending $250 million from the stimulus between February and Sept. 30.
Such options may help West Virginia avoid the harsher steps forced on other states as the recession continues to take its toll.
New Mexico’s governor on Tuesday called higher taxes there “inevitable.” Kansas is “very close” to following suit, its governor said. The National Conference of State Legislatures has counted 11 states so far this year that have cut their budgets across-the-board. Four states have tapped their emergency reserves to cover spending needs, NCSL said, while others have laid off or furloughed thousands of workers.
Muchow noted that West Virginia reserves equal around 13 percent of its general revenue budget. Nationally, the average balance of a state’s “rainy day fund” has plummeted to 2.5 percent, he said.
“The rainy day balance is a completely last resort,” Muchow said. “We would hold off using that as long as possible.”
But while guardedly optimistic as recently as last month about keeping the budget balanced, October’s general revenue collections have left Manchin officials predicting a shortfall.
Those taxes actually brought in $1.3 million more than expected for the month, or $287 million, Muchow said. Corporate net income, business franchise and natural resource severance taxes all beat their October estimates.
But personal income and sales and uses taxes provide just under three-fourths of all general revenue. Each missed its mark last month, and are down by a combined $52 million during a budget year that so far has yielded $1.16 billion.
“A couple of areas are outperforming expectations, but then there are those areas that are underperforming,” Muchow said.
Muchow believes the picture will worsen because 60 percent of personal income tax revenue is typically collected during the second half of the budget year. He expects to have a firmer projection later this month, as the administration prepares to forecast revenues and spending for the next budget. The Legislature will begin working on it during the 2010 session, which begins in January.
West Virginia
State predicts $100M deficit
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Three aging state power plants to close
