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July tax revenues come in hot, Rainy Day Fund takes a hit

CHARLESTON — West Virginia kept up a 13-month streak with July general revenue fund tax collections exceeding estimates, though the state’s Rainy Day Fund lost 5 percent of it value from this time last year.

According to the state Senate Finance Committee, July tax collections for new fiscal year 2023 were $381.1 million, exceeding the $288.7 million estimate by the state Department of Revenue by 32 percent and giving the state $92.4 million in surplus revenue.

“It sounds like a broke record … this thing is not slowing down,” Justice said Tuesday morning during a virtual briefing with reporters from the State Capitol Building. “I’ve told you over and over I was going to take you on a rocket ship ride, and you’re on it, brother. It’s going, and we’re not going to slow down until we flip every rock and try to help everybody we can possibly help.”

More than 55 percent of the total tax revenue collected in July came from the coal and natural gas severance tax. July severance tax revenues of $54.6 million wildly exceeded the $3 million revenue estimate for the month and exceed the $3.4 million in collections this time last year.

According to the U.S. Energy Information Administration, the price per short ton of Central Appalachia coal jumped from $168 on July 1 to $177 by Friday, with the price per short ton of Northern Appalachia coal rising from $141 at the beginning of July to $143 by the end of the month.

According to EIA’s most recent data, export prices for natural gas by pipeline rose from $4.62 per thousand cubic feet in December to $7.62 per thousand cubic feet in May, while liquified natural gas exports rose from $9.62 per thousand cubic feet in December to $12.33 per thousand cubic feet in May.

Justice warned, however, that coal and natural gas prices would not always remain high and in fact have come down some over the last year. He said it was important to responsibly manage the state budget to avoid dependency on severance tax surpluses.

“For those who believe with just blinders on that we’re going to have these surpluses forever and ever and ever are making a big mistake,” Justice said, whose family owns major coal mining operations. “It’s a high-risk gamble.”

Coming in second for the most revenue collected in July was the personal income tax. Collections for the month was $161.2 million, 9.7 percent more than the $147 million estimate, resulting in a $14.4 million. July tax revenue was also 13.7 percent more than the $141.8 million collected 12 months ago.

The personal income tax, which brought in 43 percent of the total $5.9 billion collected during fiscal tear 2022 that ended on June 30, was the focus of a special session that began last week to lower taxes rates a combined 10 percent across all six income brackets. That bill passed the House of Delegates but was never taken up by the Senate.

In other collection categories, the consumer sales and use tax brought in $96.3 million in July, which was 12.2-percent more than the $85.8 million estimate, resulting in $10.4 million in surplus. The corporate net income tax brought in $14.4 million in July, more than the $4 million estimate for a $10.4 million surplus.

While tax collections were good, the state’s fund to handle hard economic times was down slightly. The state’s two revenue shortfall funds, also called the Rainy Day Fund, had a combined $887.3 million as of the end of July, down 5 percent from $932.6 million this same time last year. The Rainy Day Fund grew to $1.033 billion by January, but has lost money due to a volatile stock market affected by high inflation and recession fears.

Until this year, the state was required by law to put half of every end-of-fiscal-year surplus into the Rainy Day Fund. The state ended fiscal year 2022 with a record-breaking $1.3 billion. But the Legislature passed a bill earlier this year capping the Rainy Day Fund, so the state no longer has to put half of any surplus in Rainy Day except when levels drop below 13 percent of the total general revenue appropriation for the previous fiscal year.

“Whether it be the Rainy Day Fund with a little bit of flags going up, to a drop in the severance tax on metallurgical coal with big flags going up .. we need to with all in us to absolutely mind the store and mind the store in the right way,” Justice said. “That’s what I’m here to do.”

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