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State falls $25.8 million short of tax collection estimates

CHARLESTON, W.Va. - With one month to go in the fiscal year, it appears the $28.2 million in spending cuts approved by the Legislature earlier this year might not be enough to stave off a deficit.

West Virginia tax collections fell $25.8 million short of estimates in May, according to the monthly revenue report released by the State Budget Office on Monday. Year to date, the state is $21.2 million behind in collections.

That means tax collections can drop as much as $7 million in June before West Virginia must end the fiscal year in the red. Deputy Revenue Secretary Mark Muchow said it's possible that "cushion" will hold, but it's also possible the state will find itself a few million short.

"We'll see how things turn out in June," he said.

Last month, a jump in income tax collections, along with a hiring freeze ordered by Gov. Earl Ray Tomblin and spending cuts passed by the Legislature, helped to partially close the state's budget gap. That's the difference in predicted and actual revenues since the state budget year began last July 1.

The gap, which stood at $49 million at the end of March, was about $13.9 million at the end of April.

Muchow said May's revenue report would have looked much worse, had it not been for the state's income tax reserve fund.

The reserve account, which contained $45 million at the beginning of the year, allows the state to pay tax refunds without touching its general revenue account. The state used $18.6 million of the account in April and the remaining $26.4 million in May.

Without it, May collections would have been $52.2 million below estimates, and year-to-date collections would have fallen $66.2 million behind projections.

Muchow said estimates are down because of contractions in the coal industry and low natural gas prices. Because of those factors, severance tax collections are down $37.62 million year-to-date.

Personal income tax collections were $20.5 million below estimates in May, due to sluggish wage and employment growth, as well as fewer high-paying jobs in the coal mining industry, Muchow said.

Year-to-date income tax collections are $43.7 million above estimates, at $1.59 billion, however.

Contact writer Zack Harold at 304-348-7939 or zack.harold@dailymail.com. Follow him at www.twitter.com/ZackHarold.

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