Muchow said the state faces energy headwinds, with coal production down by more than 7 percent so far this year and mining employment down by more than 5,000.
Although natural gas production rose 37 percent in 2011 and is up another 15 percent this year, the natural gas sector of the state economy is much smaller than the coal sector.
Speaker and Muchow both stressed the important role exports play in the state's economy. Muchow said coal exports are slowing as other economies around the globe slow down. He also pointed out that 15.4 percent of the coal-fired power generation capacity in West Virginia is being retired.
The state faces numerous financial challenges, Muchow said. "One third of the state budget comes from federal revenues," and it is widely anticipated that the federal government is going to cut back funding of some programs.
As for state revenues, Muchow pointed out that lottery revenue peaked in 2007 and the state faces increasing competition from neighboring states like Maryland, where voters agreed earlier this month to allow table games.
The state's general revenue fund also is expected to take a hit as energy-related revenues decline, Muchow said. For example, the amount of severance tax collected during the four months ended Nov. 1, 2012, totaled $197.5 million. The amount collected during the four months ended Nov. 1, 2012, was $153.2 million -- 22.4 percent less.
For 17 years, George Hammond presented the state economic outlook. But earlier this year Hammond took a position at the University of Arizona. Muchow recalled that at the end of his presentations, Hammond enjoyed characterizing the outlook on a scale with ice cream at one end and a stiff drink at the other.
Muchow said that in keeping with Hammond's tradition, he would characterize the outlook this year.
"I'd go with a stiff drink," he said.More information about the outlook is posted on the College of Business and Economics' website at http://be.wvu.edu/bber
Contact writer George Hohmann at busin...@dailymail.com or 304-348-4836.