The state Tax Department will have to dip into a reserve account to cover income tax refunds.
State Deputy Revenue Secretary Mark Muchow says the move is being made because state revenue collections continue to fall behind estimates this fiscal year. The state brought in $14 million less in taxes in March that it had projected. Collections have missed estimates by $49 million following nine months of the budget year.
Muchow says the Income Tax Refund Reserve Account was last used in 2009 but was quickly refunded when coal had a strong finish in that fiscal year. There is currently $45 million in the fund.
Most of the state’s revenue troubles are connected with its heavy dependency on coal and natural gas production. Severance tax collections are off estimates by $34 million in the current fiscal year.
Muchow says the low price of natural gas has resulted in more tax refunds than the state thought it would pay out.
“Lower energy prices means lower incomes and lower incomes ultimately get reflected on the personal income tax return,” Muchow said.
There are three months left in the fiscal year and the current $49 million revenue collection deficit could grow to $60 million or more according to Muchow.
Natural gas prices are expected to rebound some next fiscal year but coal production will likely continue to drop. Muchow says natural gas will be a key.
“We are projecting higher prices in the coming months and think there’s evidence recently that prices are picking up a little bit. But we’ll need the higher natural gas prices next fiscal year to help maintain revenue estimates next year,” Muchow said.
Gov. Earl Ray Tomblin ordered a hiring freeze for most state agencies earlier this year. It’s in effect until the end of June.
