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CHARLESTON -- For the first time in fiscal year 2020, September tax revenue collections came in above estimates, though officials say that surplus is artificial.
According to the governor's office on Tuesday, September tax revenue collections came in at $477.2 million, $20 million above the revenue estimates set by the Department of Revenue and 5.4 percent above tax collections 12 months ago.
It's the first time since May 2019 that tax revenue collections came in above estimates. June, which ended fiscal year 2019, came in at $488 million, which was $8.9 million below estimates after the state transferred $12 million to the Income Tax Refund Reserve account. July and August, the first two months of the fiscal year 2020, came in with a combined $50 million below estimates.
"More than anything, what this shows is that we always need to remember that we have to live within our means," Gov. Jim Justice said in a statement Tuesday.
"Naturally, we were bound for a dip eventually," Justice said. "We saw our numbers turn around for the good again here in September. But, if nothing else, our first quarter this year shows that we have to continue to err on the side of caution and remember we still have work to do and more people to help. And that's exactly what we're going to do."
Thanks to September revenue numbers, the budget deficit shrunk from $50 million to $29.8 million for the first quarter of fiscal year 2020. But last week, Deputy Revenue Secretary Mark Muchow told lawmakers that September revenue numbers would appear better due to some tax collections that would otherwise have shown up in August numbers being collected in September because of August ending on a Saturday.
"August is also going to be a little bit of an abnormal month in that there are some taxes due in the last calendar day every month and the last calendar day of August was on a Saturday, which was part of Labor Day weekend," Muchow on Sept. 24 told the Legislature's Joint Committee on Government and Finance. "That meant that whatever we were collecting this August was going to be a little bit less than what we did a year ago when we hit a more favorable end of the month due date."
So far in the first quarter, 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 slow down in natural gas and coal production and 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.
Personal income tax collections came in just above estimates at $226.7 million in September, or 4.2 percent above collections this same time last year. However, withholding tax revenue grew by less than 2 percent for the month. Personal income tax collections for the first quarter came in $21.5 million below estimates at $503.6 million. Consumer sales tax collections were also a bright spot in September, coming in at $125.8 million, or 3.8 percent above estimates. Consumer sales tax collections for the quarter, however, came in at $330.3 million – $2 million below estimates.
Dragging down the September revenue numbers were coal and natural gas severance collections, which totaled $33.9 million for the month, $400,000 below estimates and .4 percent below September 2018 revenue collections. Numbers for the quarter, $59.2 million, were $26.4 million below estimates and 38.6 percent below the first quarter of last fiscal year.
The Justice administration attributes the poor severance tax collections to a decrease in the price of wholesale natural gas from $2.86 per MCF last year to less than $2 in recent weeks. The administration also blames a drop in coal exports overseas after exports peaked in January 2019.
According to an analysis by S&P Global, a global drop in metallurgical coal used for making steel is due to low demand. At least one metallurgical mine, owned by Murray Energy, has gone idle.
Business and Occupation Tax collections came in at more than $13.8 million for September and $35.4 million for the quarter, with monthly collections up 121 percent over last year. Speaking to lawmakers last week, Muchow credited lower tax credits for driving the revenue numbers up.
"The scrubber investment credits are running out and there's less investment dollars coming in than we expected to replace that," Muchow said. "That means a lower tax credit, which means a higher net revenue."
Tax revenues from the corporate net income tax came in at $43.7 million in September, $10.5 million above estimate, and $50.2 million for the quarter, $12.1 million above estimate. Receipts for interest income came in at $3.8 million for the month, or $400,000 above estimate.