CHARLESTON – West Virginia closed the books on fiscal year 2025 Monday, meeting its constitutional obligation to not go into the red.

But Gov. Patrick Morrisey and lawmakers are already looking ahead at rocky financial seas.

According to the monthly report released Tuesday by the state Senate Finance Committee, West Virginia ended fiscal year 2025 Monday with $5.5 billion in collections for the state’s general revenue fund, or 4.8% more than the $5.2 billion estimate set by the Department of Revenue. That provided the state with a $254.8 million surplus above and beyond projections.

The state’s $5.5 billion in collections was still 3.4% less than the $5.7 billion in collections in fiscal year 2024, when the state ended that fiscal year with more than $826 million in surplus. Since then, a 4% personal income tax cut and a 2% personal income tax cut took effect on top of a 21.25% personal income tax cut that has been in effect since 2023.

June tax collections of $577.1 million were 3.2% above the $559.2 million revenue estimate, adding $17.9 million to the state’s surplus total for the fiscal year. June fiscal year 2025 collections underperformed fiscal year 2024 collections for the month by 5.4%.

In a statement earlier this week, Morrisey praised ending the fiscal year with a positive balance, but he alluded to future stresses on the state budget, such as the increased cost for the Public Employees Insurance Agency, the Hope Scholarship educational voucher program, and possible increases in the state’s share of certain federal programs, such as Medicaid and the Supplemental Nutrition Assistance Program.

“As we expected, Fiscal Year 2025 will end in a surplus – and that’s a good thing for West Virginians,” Morrisey said. “However, looming federal actions and an increase in state mandatory spending requires us to make smart, fiscally conservative decisions as we begin the new fiscal year.”

While ending the previous fiscal year with a $254.8 million surplus on paper, nearly all of that excess revenue is already spent. During the legislative session that ended April 12, the Governor’s Office recommended several supplemental appropriations using one-time monies through available surplus collections in the fiscal 2025 general revenue fund.

Lawmakers approved more than $126.2 million in supplemental appropriations, leaving approximately $110.8 million in unappropriated surplus. The largest of these expenditures included $39.4 million for the Department of Human Services Medical Services line item, which is the state’s Medicaid program, and $28.4 million for the Hope Scholarship educational voucher program to help fully fund the program for the upcoming fiscal year.

Another $100 million will go to the Division of Highways for road maintenance and paving projects as required in the surplus section in the back for the fiscal year 2026 budget, which appropriates available surplus dollars available at the end of the previous fiscal year.

Personal income tax collections, which make up the largest chunk of general revenue fund collections, performed above expectations even with the personal income tax cuts in place. Fiscal year 2025 personal income tax collections of $2.13 billion was 5.1% above the $2.01 billion revenue estimate. That provided the state a $103.1 million surplus for the fiscal year. Personal income tax collections made up 38.5% of total general revenue collections for the previous fiscal year and made up 40.5% of the end-of-fiscal-year surplus.

Corporate net income tax collections for the previous fiscal year of $376.2 million were 18.3% more than the $318 million revenue estimate, providing the state with $58.2 million in surplus. The severance tax on coal, oil, and natural gas also performed well in fiscal year 2025, bringing in $439 million, which was 8.1% greater than the $406.3 million estimate, adding $32.7 million to the surplus total.

Fiscal year 2025 consumer sales and use tax revenue came in below estimates, but only barely. Sales tax collections for the previous fiscal year of $1.82 billion were 1.1% below the $1.84 billion estimate, or $19.8 million below expectations. However, sales tax collections did keep pace with fiscal year 2024 collections of $1.816 billion, or just .26% above fiscal year 2024 collections.

The Legislature passed a balanced budget bill setting the fiscal year 2026 general revenue budget at $5.318 billion. Morrisey signed it after issuing 29 line-item vetoes that reduced the budget to $5.28 billion. But future budget years beginning in fiscal year 2027 one year from now show deficits, beginning at nearly $400 million and growing, caused in part by increases in spending for PEIA and the Hope Scholarship.

“As Governor, I submitted and approved a balanced budget for Fiscal Year 2026, but the state still has fiscal challenges for 2027 and beyond,” Morrisey said.