Revenue causing concern

If you think West Virginia’s fiscal problems are bad now, just wait ’til next year. They could be worse if legislators accept the revenue assumptions in Gov. Earl Ray Tomblin’s proposed budget for the year beginning July 1.

Just Thursday, the Department of Revenue released figures for state revenue collections in February. Important categories, including severance taxes, were down – as usual this year. During the first eight months of the fiscal year, revenue has lagged $117.8 million behind projections on which the budget was based about a year ago.

By this point in the year, state officials had expected $287.6 million in severance tax collections. The actual figure: $145.5 million. Consumer sales tax revenue is off by about $23.5 million. Personal income taxes are down by about $8 million. These are not good signs for how the state economy will perform next year.

Nevertheless, Tomblin’s general fund proposal calls for spending more than the current year’s budget – the one we’re already $117.8 million behind being able to cover. This year’s budget is $4,305,776,000. The governor’s recommendation for next year is $4,327,794,000.

Well, fine – as long as revenue picks up. Tomblin’s 156-page report on the matter predicts it will.

Yes, he scales back expectations for severance taxes. The estimate for them this year was $471.7 million. Tomblin (or, rather, his finance people) guesses $280.1 million next year. But even that may be wildly optimistic. Do the math: If we collected only $145.5 million in severance taxes during the first eight months of this year, what’s the likelihood of nearly twice that coming in during 12 months in fiscal 2017?

But that isn’t the really big leap of faith. Personal income tax collections, already down slightly, were projected at $1.934 billion for this year. Tomblin filled in that blank for next year with $2.033 billion – nearly $100 million more.

Ditto with consumer sales taxes, which his budget forecasts will bring in about $109 million more than was in this year’s budget. Indeed, West Virginians may pay higher sales tax rates; state senators have approved a bill that would increase the rate to 7 percent, up from the current 6. That would bring in about $200 million more a year – all of it earmarked by the Senate for new highway spending not included in the governor’s budget.

And while there’s been lots of doom and gloom in Charleston about balancing next year’s budget with spending cuts, not everyone has to worry if Tomblin’s proposal is adopted.

Department of Health and Human Resources officials would have more to spend. Tomblin’s general fund recommendation for DHHR is for $1.244 billion next year. This year’s budget was for $1.181 billion. In the face of a severe downturn in revenue, the governor wants the DHHR to get about $63 million more in FY 2017. And by the way, this is just the general fund budget. The agency’s total spending – including lots of federal funding for programs such as Medicaid – is around $10 billion.

Now, you may have heard that cutting the size of government is a big thing these days. Not in Charleston. According to the governor’s budget documents, the DHHR had 3,220 FTEs in fiscal 2015 (FTE stands for full-time equivalent, as in employees). The agency was budgeted for 3,768 FTEs this year. Tomblin wants 3,818 next year.

But while the DHHR would get more, the Department of Education would receive about $63 million less if Tomblin’s plan is followed. It was budgeted for $1.925 billion this year; the governor would cut it to $1.873 billion. Last fiscal year, the DOE spent slightly more than $2 billion.

Don’t feel too badly about the DOE bureaucrats in Charleston, though. During FY 2015, the agency had 498 FTEs. This year it was budgeted for 571. The governor wants a slight cut, to 559. Meanwhile, many county school systems are having to lay off teachers.

There’s a word for this: crazy.

Myer can be reached at: