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State tax revenues crater due to coronavirus

CHARLESTON — The economic effects of the coronavirus have finally caught up with West Virginia, with April tax collections coming in substantially below estimates for the month.

According to data collected by the State Auditor’s Office, tax collections for the state’s General Revenue Fund came in 33 percent below the adjusted revenue estimates set in January by the Department of Revenue.

“They’re terrible, but we expected them to be terrible,” Justice said Friday during his daily coronavirus briefing at the Capitol in Charleston. “We knew this number was coming and we prepared for this number in every way.”

April tax collections came in at $388.5 million, which was $192.3 million less than the projected $580.8 million the state was expected to bring in. April numbers were also $216.2 million below tax collections last April — a 36 percent drop.

Year-to-date tax collections of $3.692 billion were $198.7 million less than estimates, putting the state 5 percent below collections with just two months left in fiscal year 2020 which ends Tuesday, June 30. Year-to-date collections also came in $202.6 million less than this same period last year, also a 5 percent drop.

All major sources of general revenue saw decreases, though the largest drops came from personal income tax collections and coal and natural gas severance tax collections.

Personal income tax collections came in at $206.8 million, $126.4 million (38 percent) below estimates and $132.5 million (39 percent) below April 2019 collections. Year-to-date personal income tax collections came in at $1.642 billion, which was $160.2 million (9 percent) below estimates for the year and $104.6 million (6 percent) below year-to-date collections this same time last year.

The drop in personal income tax collections is tied to an executive order signed by Gov. Jim Justice March 26 pushing back the April 15 deadline for personal income and corporate net income tax filings to Wednesday, July 15. Corporate net income tax collections for April came in at $20.2 million, $22 million (52 percent) below estimates for the month and $12.7 million (39 percent) below April 2019 tax collections. Despite a bad April, year-to-date tax collections for corporate net income tax were 17 percent above estimates at $140.2 million.

“A goodly amount of those dollars are income tax monies we anticipated on April 15th,” Justice said. “But there is still a tremendous amount of shortfall dollars because of the fact that West Virginia was basically shut down and not doing anything.”

Fewer West Virginians are earning a paycheck, with many businesses still closed and even essential businesses operating with fewer employees. According to Workforce West Virginia, the state has processed 148,000 claims for unemployment compensations benefits, with an additional 13,000 claims being processed for self-employed, part-time employees and gig economy workers as part of the federal Pandemic Unemployment Assistance program.

Severance tax collections for April came in at their lowest numbers since last July as demand for coal and natural gas has dropped off. April severance tax collections came in at $10.3 million, which was $36 million (78 percent) below estimates and $15.4 million (60 percent) below collections for April 2019. Year-to-date collections of $232.5 million were $79.1 million (25 percent) below estimates and $114.1 million (33 percent) below year-to-date tax collections for fiscal year 2019.

With non-essential businesses being shut down, consumer sales tax collections show their worst numbers since December. April consumer sales tax collections came in at $92.7 million, which was $7.8 million (8 percent) below estimates and $8.8 million (9 percent) below tax collections for April 2019. Year-to-date consumer sales tax collections were .5 percent above estimate at $1.048 billion, though collections were $55 million (5 percent) below the first 10 months of last fiscal year.

Justice announced two weeks ago that the state could see as much as a $376 million budget deficit by the end of the fiscal year in June. The state Constitution requires that the budget be balanced by the end of the year, meaning the possibility of dipping into the Revenue Shortfall Reserve Funds, also known as the Rainy Day Fund. Money in both Rainy Day accounts as of March comes to $854.8 million. Moving those funds to cover an end of year budget shortfall would require the Legislature to be called in for a special session.

Justice said he is prepared to call that special session to move money around, though he remains optimistic that the U.S. the Treasury Department will send new guidance for use of part of the $1.25 billion sent to the state as part of the $2 trillion Coronavirus Aid, Relief, and Economic Security Act, also called the C.A.R.E.S. Act. Current guidance does not allow C.A.R.E.S. Act funds for states to be used for budget shortfalls.

Justice said he expects that guidance to be changed in the next 10 days after conversations with the state congressional delegation and the White House. Both President Donald Trump and Senate Majority Leader Mitch McConnell, R-Ky., have been reluctant to allow C.A.R.E.S. Act money or future coronavirus relief packages to be used to bail out states – particularly states led by Democratic governors – for budget shortfalls due to pension mismanagement, a problem West Virginia doesn’t have.

“I really believe wholeheartedly that we’re going to address the number through the federal government allowing us to backfill revenue. We do not have that assurance yet,” Justice said. “We are not a state that is upside down on pensions that you see on TV…we were a state that was tracking along and making money and doing great and having surpluses. Now, this terrible pandemic is right in our lap. All we’re asking to do is backfill the cause and effect of this pandemic. That’s it.”

April’s General Revenue Fund collections decline comes as two other major sources of state revenue — the State Lottery Fund and State Lottery Excess Fund — showed declining collections for the month of March.

According to the West Virginia Lottery’s monthly financial report, March net revenues for the State Lottery Fund was $4.9 million, which was $2.8 million below projections. Year-to-date collections were $104.1 million, which was $4.9 million above projections. State Excess Lottery Fund net revenues of $16.8 million for March were $14.6 million below projections, but year-to-date collections of $212.6 million were $16.3 million above projections.

As of 5 p.m. Friday, there had been 1,151 confirmed coronavirus cases statewide, with 47 deaths.

In our region, Hardy County had six cases, while Barbour County had five cases, with one death. Randolph, Tucker and Upshur had four cases each, while Pendleton County had three cases, Pocahontas County had two and Grant County had one, according to the state Department of Health and Human Resources.

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