photo by: Photo courtesy of WV Legislative Photography

West Virginia Department of Revenue Secretary Dave Hardy told lawmakers Monday that the percentage growth of state tax revenue sources shows improvements in the state’s economy.

CHARLESTON – Officials with the West Virginia Department of Revenue pushed back Monday against criticisms that record-breaking tax revenue surpluses are due to lowballing the revenue estimates that determine the annual state budget.

Dave Hardy, cabinet secretary for the Department of Revenue, briefed members of the Joint Committee on Finance on Monday, the second day of January interim meetings prior to the start of the 2023 legislative session on Wednesday.

December tax collections for the general revenue fund came in at $552.5 million, 35.8% more than the $407 million estimate from the Department of Revenue, resulting in $145.6 million in surplus tax revenue for the month.

Year-to-date tax collections for the first six months of fiscal year 2023 between July and December were $3.1 billion, 37.5% more than the $2.2 billion revenue estimate, giving the state more than $833 million in surplus tax revenue with six months to go in the current fiscal year.

At the end of fiscal year 2022 in June, the state netted approximately $515 million thanks to a $1.3 billion tax revenue surplus. State tax officials and lawmakers believe West Virginia could end the current fiscal year in June with approximately $1.8 billion in surplus.

But the tax revenue surpluses have come under criticism from some quarters. The surpluses are due in part to Department of Revenue officials setting low revenue estimates and Gov. Jim Justice and the Legislature passing flat budgets with no new spending.

“There’s been a lot of conversation about the surplus number is based on the governor’s revenue estimate, so, therefore, the surplus number is inflated,” Hardy said.

Justice has called the high tax revenues a “rocket ship,” due in part to natural growth in tax revenue and higher prices for coal and natural gas. The left-leaning West Virginia Center for Budget and Policy disputes Justice’s rosy outlook.

“…The state’s current surplus isn’t a sign that West Virginia’s economy is uncharacteristically strong or that tax revenues are greater than is needed for the state budget; rather, it has been driven by a combination of temporarily high energy prices, artificially low revenue estimates, and years of ‘flat’ budgets that have left state needs unaddressed,” wrote Budget and Policy Senior Policy Analyst Sean O’Leary and Executive Director Kelly Allen in a Dec. 2 blog post.

But Hardy said Monday that the tax revenue surpluses only tell part of the story of West Virginia’s economic successes.

“I’m not even going to use surplus numbers,” Hardy said. “I’m going to use percentage numbers; percentage growth of all our revenue sources.”

According to Hardy, state revenue growth for the month of December 2022 was up 9% compared to December 2021. Year-to-date revenue growth was up 21.2% from 12 months ago, with 92% of that growth coming from the state’s personal income tax, the consumer sales and use tax, the corporate net income tax, and the severance tax on coal, natural gas, and oil.

Over a 12-month period, severance tax growth was up 113%, with 70% of the growth due to higher natural gas prices. Year-to-date personal income tax revenue growth was 13.6%, corporate net income tax growth was 11.8%, and consumer sales and use tax growth was 5.8%.

“When you add all that up, you can see how we’re in such a great position of having our revenue stream increase by 21.2% in one year,” Hardy said.

Justice is expected to introduce another flat budget similar to the $4.645 billion general revenue budget approved by lawmakers last year. That budget bill will be delivered to lawmakers Wednesday night when he gives his annual State of the State address.