CHARLESTON, W.Va. - A drop in coal and natural gas severance tax collections was the No. 1 cause for West Virginia's $90.6 million year-end deficit, budget officials said.
Late last week, Gov. Earl Ray Tomblin approved a $17.7 million cut from the state's Medicaid reserve fund to help make up for that shortfall and avoid ending the fiscal year with a budget deficit, which is forbidden by state law.
The state also emptied its $45 million income tax reserve fund and the Legislature passed $28.3 million in budget cuts in an attempt to make up the deficit.
The state ended fiscal year 2013 with $4.05 billion in tax collections, far below the predicted $4.149 billion.
Deputy Revenue Secretary Mark Muchow said a drop in severance tax collections largely drove that shortfall.
The state collected $409.7 million in severance taxes over the last year, although the state revenue department had predicted $461.5 million in collections.
Muchow said coal sales dropped by more than 15 percent, causing production to drop about 20 million tons from 2012. Natural gas didn't make up for those losses, as the price of gas trended downward over the last fiscal year.
Congress also extended "bonus depreciation" for another year, which led corporation income and business franchise taxes to come in under estimate. Muchow said the state expected to collect $248 million last year. But after Congress extended the tax breaks, which allow businesses to write off half the cost of new equipment for one year, collections actually came in at $238 million.
Sales taxes also suffered. Muchow said the state expected Congress to phase out its temporary payroll tax reduction. Instead, federal lawmakers let the tax break abruptly expire Jan. 1, leading to smaller paychecks nationwide.
"That had an impact on sales tax collections. Less money in my pocket means less ability to spend," he said.
Muchow said he expects the state will have a slightly easier time meeting its budget in the coming fiscal year. He said the state would need 1.9 percent revenue growth to make ends meet.
"It's within reason," he said. "It's a reachable target. But I don't expect this to be a banner year in terms of growth."
The state will lose at least one revenue source for the coming fiscal year: the state's food sales tax expired on Monday, costing the state about $174 million a year in collections.
Muchow said that would not affect budget projections, however, because the state didn't include food tax collections in its 2014 projections.