Severance Tax Crash Bad News

You aren’t encountering as many of those gas industry trucks on the back roads as you did for a long time, are you? That may make for a less stressful drive to work, but it’s a bad sign for West Virginia’s economy and the state budget.

Once again this month, Workforce West Virginia’s county-by-county numbers on employment are far from a ringing testimonial to the benefits of the natural gas boom. It tells you something when Tyler and Wetzel counties have among the 10 worst unemployment rates in the state (6.8% and 5.8%, respectively). Marshall County isn’t far behind, at 5%. All three counties are at the heart of the shale gas region, yet all three have unemployment rates significantly higher than the state average (4.2%).

There are other troubling signs in the Mountain State’s fossil fuel industry, which includes coal mining. While our economy as a whole has generated nearly 70,000 new jobs during the past five years, Workforce West Virginia reports the natural resources and mining industry (including coal, gas, oil and timbering) has shed workers. In 2014, that sector employed 30,828 people. By this September, the number was down to 23,803.

None of this is a surprise to the state government and West Virginia University analysts who monitor the economy. They have been warning for some time that the energy industry boom is, at the very least, taking a break in West Virginia.

There are two reasons for that. Much of the gas pipeline work that provided lots of jobs for a few years is over. And, unfortunately, construction of some of the big interstate pipelines needed to ship our gas to markets has been stalled by court action.

In addition, the coal industry isn’t doing well. Murray Energy of St. Clairsville, one of the biggest mining companies in the country, is having trouble paying its bills. It’s been said bankruptcy is a possibility — and that would be very bad news for thousands of miners in our region.

Another indication of trouble in the energy industry can be seen in state revenue collections. During the first three months of fiscal 2019, last summer, Charleston raked in $96.5 million in severance taxes. During the same period this year, collections were down to $59.2 million.

State budget analysts apparently didn’t see that one coming. Earlier this year, they predicted severance taxes would bring in $85.6 million during the first three months of the fiscal year.

Severance taxes could rebound. In September, revenue from that source was $33.9 million, roughly equal to September 2018. We’ll have a better idea of what the future holds when October figures are released in a couple of weeks.

As I’ve written previously, the state’s general revenue budget is a mess. By the end of of fiscal 2020’s first quarter, overall collections were nearly $30 million below estimates. Gov. Jim Justice and legislators used those estimates to approve the $4.7 billion general revenue budget for the whole year.

State government is just like you and me, in a way: We can’t spend what we don’t have.

Good for Gov. Jim Justice for recognizing that and calling for a $100 million spending cut to keep the budget balanced.

Unfortunately, the question now is whether that will be enough.

Myer can be reached at: mmyer@theintelligencer.net.


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