The surplus money just keeps piling up in West Virginia’s treasury.
The just-released revenue figures for the first four months of the 2023 fiscal year show the state has collected $575 million more than estimates. Add in the $460 million carryover from last fiscal year and West Virginia has a surplus of over $1 billion!
If tax collections continue at the current pace for the rest of the fiscal year, and the state does not spend any of the extra money between now and June 30, West Virginia would have about $2 billion in surplus funds.
That is an amount equal to 44% of the entire General Revenue budget for the year.
These enormous surpluses are unheard of in our history. By law, the state cannot run a deficit, so expenditures cannot be greater than revenue. Typically, the state ends the fiscal year with a small surplus, but nowhere near the numbers we are seeing now.
There are several reasons for these huge surpluses.
State leaders are holding the line on annual spending, while keeping revenue estimates artificially low. Massive amounts of federal money have flowed into the state, backfilling the treasury. COVID relief checks to West Virginians spurred spending, creating more sales tax revenue. The state’s economy has fully rebounded from the pandemic slowdown.
But one of the biggest contributors is severance taxes on coal and natural gas. Increased demand has sent prices to historic highs, resulting in a dramatic increase in the taxes collected. For example, extraction industries paid $769 million to the state last fiscal year, more than the amount collected in the previous two years combined.
Severance taxes continue to pour in this year. The state has collected $341 million in just four months. That is $91 million more than projections for the entire year.
Now comes the interesting part. What to do with all this money?
Gov. Justice and Republican lawmakers want to give some back to taxpayers. However, they do not agree on how to do it, and that is part of what Amendment 2 is about.
Most Republican lawmakers want to amend the state constitution, giving the Legislature the power to eliminate the property tax on vehicles and the property tax businesses pay on machinery and inventory.
Gov. Justice has a different view. He wants to lower the individual income tax rates. Whatever happens on Amendment 2, Justice and Republican leaders will have to find common ground if they want to provide tax relief.
Pay raises will take part of the surplus. Justice and Senate President Craig Blair both favor a 5% increase for teachers, staff and state workers. That will add between $110 million-$120 million to the base of the budget.
Additionally, Justice, state department heads, as well as each of the 134 members of the Legislature, will have their own ideas about where and how to spend surplus money.
That should make for a spirited legislative session. When there is no extra money there is nothing to argue about, but with a flush treasury, you can expect lots of hands reaching into the pot.
