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West Virginia Officials Preparing For Mid-Year Budget Cuts

CHARLESTON — The West Virginia Department of Revenue is preparing state agencies for as much as $100 million in budget cuts for the current fiscal year, with more cuts planned for next fiscal year.

Revenue Secretary Dave Hardy released a statement Friday stating the department is preparing to cut $100 million from the state’s $4.7 billion general revenue budget. While most of the general revenue budget — two-thirds — is spoken for, Hardy said that leaves $1.7 billion from where the state can cut.

“In order to be proactive and to be fully prepared for all fiscal scenarios, Gov. (Jim) Justice has instructed the Department of Revenue to prepare for a possible $100 million cut to the state’s budget…in the event a cut of that amount is ultimately necessary,” Hardy said.

Thanks to September revenue numbers, the budget deficit shrunk from $50 million to $29.8 million for the first quarter of fiscal year 2020, however, the September numbers only appeared better due to some tax collections meant for August showed up on the September books. Otherwise in the first quarter of fiscal year 2020 — July through September — total tax collections were $1.1 billion, or 1.8 percent below tax collections for the first quarter of fiscal year 2019.

Revenue officials blame a slowdown in natural gas and coal production and the associated severance tax revenue, as well as a decrease in withholding tax revenue due to a halt in natural gas pipeline projects across West Virginia, which resulted in the loss of more than 4,000 jobs.

Hardy said that state agencies are not being asked to consider dollar amounts, but revenue officials are asking state agencies to cut 4.6 percent from budgets this year, as well as from their budget proposals for the fiscal year 2021 budget, which will be presented to the West Virginia Legislature in January 2020. Hardy said they are hopeful that revenues will look better next year.

“No specific amount of cuts have been decided upon at this time,” Hardy said. “This way, if revenues end up being higher in the spring, we’re in a much better position to go back and restore funds back into the budget. It’s just us getting ahead of the numbers.”

Hardy said the Department of Revenue has been meeting with state agencies since Labor Day trying to get a handle on the budget revenue shortfall in an effort to be proactive.

“We have held 21 budget hearings with state agencies over the last two months and asked their leaders to identify potential areas for budget cuts in the event the cuts are necessary,” Hardy said. Building the state’s budget is a big operation, and we want input from all stakeholders before reaching a final decision.”

The Legislature and Gov. Justice approved a number of tax breaks when crafting the fiscal year 2020 budget, including a phase-in of a tax exemption for recipients of Social Security, costing $48 million; a $21.1 million cut in severance taxes for steam coal used in coal-fired power plants, a $16 million cut in oil and natural gas severance to fund a well-plugging program, and a $1.1 million tax cut for S Corps and LLC banking.

The Governor’s Office also appropriated surplus revenue toward the end of the fiscal year to fund secondary road maintenance and purchasing road equipment.

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