West Virginia officials cheer surplus for last fiscal year
CHARLESTON — Hindsight is 20/20, with Gov. Jim Justice and state revenue officials looking back on the last fiscal year and the first month of the new fiscal year, which both showed surpluses even as the pandemic affects the economy.
Justice and Department of Revenue Secretary Dave Hardy briefed the press Monday morning on the state’s financial outlook going one month into fiscal year 2021.
“Since the day I walked in the door and all the different projects I’ve worked on, from an economic standpoint especially this is a miracle, that’s all there is to it,” Justice said. “It is amazing.”
According to revenue officials, the state ended fiscal year 2020, which ended June 30, with a $28 million budget surplus for the state’s $4.6 billion General Revenue Fund. Half of that surplus, by law, must go into the Revenue Shortfall Reserve Fund, also known as the Rainy Day Fund. Of the remaining $14 million, $6 million will go to fund the Milton Flood Wall, leaving $8 million in excess funds
Revenue officials estimated a $500 million hole in the fiscal year 2020 budget by the end of June after the state moved the income tax filing deadline from April 15 to July 15 to provide economic relief after Justice ordered all non-essential businesses closed and all residents to stay at home to slow the spread of COVID-19, Hardy said.
Calls to tap into the Rainy Day Fund or furloughing state employees were rejected.
“At that time, we told the governor that we were going to run out of cash by May 10,” Hardy said. “We were looking at a period from May 10 to June 30 where we would not have cash flow to run state government.”
Revenue officials went to the drawing board to find ways to end the fiscal year in the black without cutting services, tapping into the Rainy Day Fund, or firing state workers. The state tapped into Medicaid surplus dollars after the federal government increased the Medicaid match rate from 76 percent to 81 percent.
“We could see that was going to generate relief to our Medicaid fund,” Hardy said. “From that, we were able to reach over and start systematically, but carefully with a plan, take funds from the Medicaid surplus that we had in the budget but know it would be replenished as the fiscal year moved on.”
The state also was able to use funds from the $1.25 billion C.A.R.E.S. Act meant for reimbursement of coronavirus-related expenses to help offset costs, using $100 million for reimbursements. Officials also expected maybe 20 percent of West Virginia taxpayers would pay their tax early, with the remainder waiting until July 15. Instead, 40 percent paid their income taxes early. The state also saw better than expected tax revenues from the consumer sales tax.
“As we got into May, our numbers started to brighten,” Hardy said. “We have crossed the finish line in fiscal year 2020 and it was borderline miraculous from where we started on April 3 and where we ended up yesterday.”
Because of moving the income tax filing deadline to July 15, the state ended the first month of fiscal year 2021 Friday with nearly $200 million in personal and corporate net income tax revenue, putting July $44.5 million above estimates. The state collected $480 million in tax revenue in July.
“Because we had done so much work and so much accounting work and talking to the governor and consulting with the state budget, we knew that the $200 million in state income revenue that was due to come in July 15 would be available to us. It was basically a surplus, an engineered surplus, that let us jump start fiscal year 2021 in the month of July.”
While the numbers are a reason to celebrate, Hardy said revenue officials are still watching August tax collections and the rest of the fiscal year in case the pandemic causes more ripples in the economy. As of now, there are no plans to prepare for mid-year cuts, with the new budget being a smaller budget than last year’s fiscal year budget.
“It’s been quite a journey,” Hardy said. “This has been the biggest professional challenge that I have ever had, and I think the largest one the governor has ever had. We feel like we collectively came to the right place.”
Steven Allen Adams can be reached at firstname.lastname@example.org.