West Virginia does not yet need to consider increasing taxes or eliminating tax credits to fill a budget gap of more than $250 million ahead of the 2015 fiscal year, state budget officials said Thursday.
The head of the West Virginia Center on Budget and Policy, a left-leaning West Virginia think tank, believes the state should at least examine its tax levels and current tax credits.
Revenue Secretary Bob Kiss sent a letter Monday to state agencies asking them to prepare two budgets for 2015: one with no cuts, and one with a 7.5 percent budget reduction. If implemented, it would be the second straight year the state has required a 7.5 percent cut.
Gov. Earl Ray Tomblin ordered the cut last year, but Wednesday his spokeswoman Amy Shuler Goodwin said this year's request is a precaution. State Budget Office Director Mike McKown said agencies should expect the cut.
McKown and Deputy Revenue Secretary Mark Muchow said Thursday the state can handle the budget hole without considering tax hikes or eliminating more tax credits.
"If I had to balance the budget today, we could manage it," McKown said.
The state faced a $390 million budget gap last year. Officials took the $75 million from the 7.5 percent cut, $88 million from a previous budget surplus and monies not appropriated from state accounts to fill the gap.
The state made a few last-minute moves to balance the 2013 budget. Days before the end of the budget year, the state cut $17.7 million in Medicaid reserve funding and emptied $45 million from a special account used for paying income tax returns.
McKown said similar accounts could be swept if such a situation arises at the end of the current fiscal year.
The gap facing the state for the 2015 budget year is hovering around $265 million right now. Muchow and McKown expect another $75 million from the 7.5 percent cut.
Muchow said rising natural gas production and prices for natural gas should mean increased revenue from severance taxes associated with the industry too.
For July, the first month of the 2013 budget year, the stated collected $45.8 million in severance taxes. That's 33 percent more than the same time period last year.
There's no guarantee severance tax collections will remain high, and they repeatedly fell below expectations during the last fiscal year. In his letter, Kiss said he doesn't expect revenues to keep pace with the cost of state programs, blaming "the recent sluggish national economy and a slowdown in the mining of coal."
He also points to the additional $100 million the state anticipates it's going to need to fully fund Medicaid, a problem budget officials faced last year as well.