West Virginia’s state government ended the fiscal year $1.8 billion over estimates.
Much of the surplus is already spoken for through legislative appropriations, and state officials will determine what to do with the rest.
Political views differed on whether the surplus is a sign of careful budgeting, a product of setting estimates artificially low, a matter of running a tight ship or an example of underpaying for the maintenance of public programs.
Gov. Jim Justice praised the year-end figures in a news release and in a video from the seat of a vehicle. Justice had gallbladder removal surgery earlier this week and is still recovering.
“We’ve shattered all kinds of records and everything for surplus beyond belief in West Virginia, $1.85 billion,” Justice said in the video. “It’s just mindboggling and hard to believe in lots of ways. But how did we do it? We did it simply, all of us pulling the rope together.”
At the close of the fiscal year at midnight Friday, state officials said total collections would come in at about $6.5 billion — marking the first time in state history that final collections for a single year have exceeded $6 billion.
In addition to exceeding the fiscal estimate set annually by the governor, the revenue exceeds the prior fiscal year by about $590 million.
“It means that West Virginia is doing very, very well today,” state Revenue Secretary Dave Hardy said on MetroNews’ “Talkline.”
Severance tax collections set a record of nearly $950 million, a 24% increase from the prior year, with taxes from natural gas accounting for roughly 60% of total collections.
Corporation net income Tax collections grew at 14% and totaled $420 million, eclipsing a record set
15 years ago in 2008.
Personal income tax collections set a new record of $2.66 billion, despite a rate reduction of 21.25% that kicked in after the West Virginia Legislature passed and Justice signed HB 2526 to cut the income tax.
Consumer sales tax reached an all-time record of $1.75 billion, growing by about 5.7% from last year, and interest income tax collections reached an all-time record of more than $132.4 million.
“So all this indicates that our state is doing ver,y very well. And all the way across the economy, not just in one area but in multiple areas,” Hardy said.
The fiscal 2024 budget passed earlier this year has already appropriated $1.165 billion of the surplus.
By law, a percentage of the year-end surplus must be transferred to the state’s Rainy Day Fund, and this year that amount is about $231 million. This leaves approximately $454 million unappropriated, so lawmakers and the governor will determine priorities for those additional
dollars.
Kelly Allen, executive director of the West Virginia Center on Budget & Policy think tank, said the surplus represents a missed opportunity because it is money that already should have been built into the revenue estimate and the regular budgeting process.
That way, she said, that lawmakers could have addressed emerging funding needs in areas like in higher education, correctional facilities, and volunteer fire departments.
“The full impact of the 2023 tax cuts has not been felt yet and we are already seeing revenues decline despite significant unmet needs across state services, creating concerns for future budget years when energy prices and inflation recede and tax cuts are fully implemented — or made even bigger with automatic triggers,” Allen said.
House Finance Chairman Vernon Criss, R-Wood, said the year-end finances demonstrate the results of cautious budgeting and that state agencies have largely adjusted.
“The fiscal responsibility that we have shown over the last four years shows that the government can run on the money we have provided and kept those dollars relatively not growing — and the government has been able to use those dollars wisely,” Criss said in a telephone interview. “So I think they are managing their monies better than they did.”
For the remainder of the surplus still to be allocated, Criss favors setting aside about $100 million to be used for highways, but he would like to spend some time assessing where what’s left should go.
“I don’t see any rush to use the money now unless there’s a critical need,” Criss said.
Senate Finance Chairman Eric Tarr, R-Putnam, praised the state’s economic performance but blasted Justice.
“U.S. Senate candidate Jim Justice is taking a victory lap claiming credit West Virginia’s fantastic financial position rather than giving credit where credit is due. Thanks to West Virginia’s Republican Legislature, the Mountain State is enjoying financial security and economic growth. West Virginia is enjoying this position in spite of Jim Justice, not because of him,” Tarr stated.
Tarr recalled the response by Justice, then a Democrat, to a 2017 state financial crisis, when the new governor proposed tax increases to cover the budget shortfall.
“Sen. Craig Blair then went on to advocate, and insist for a flat budget for at least four years in order to prepare for a tax cut. Finally conceding after switching parties, Jim Justice agreed, and submitted for consideration four flat budgets,” Tarr said.
“The culmination of reduced spending and flat budgets, in timing with excessive printing of funds by the feds placed West Virginia in a unique position relative to the rest of the country. While other states are seeing surpluses of 12% to 20%, West Virginia will have a surplus of about 38% for FY 23. The Legislature has minded the store while Jim Justice has done little more than adjusting the curtains.”
