West Virginia Revenue Secretary Dave Hardy told legislators there are no plans to make mid-year budget cuts at this time.
The Joint Standing Committee on Finance heard 2020 fiscal year budget issues and the possibility of eliminating the business inventory tax in Monday morning’s committee meeting.
Hardy told the committee that although December is only halfway over, numbers for the month are looking better after a rough November. Currently for December, the state is over estimates, Hardy said. However, the state is still about $29 million under estimate for the fiscal year.
“What happened in November is the last business day was Wednesday, November 27,” Hardy said. “We came in below estimates for November. The first week of December, revenue did come in.”
Previously, Hardy said the governor asked the Department of Revenue to consider making $100 million in cuts from General Revenue. However, there were no concrete plans in what, if any, cuts needed to be made. In Monday’s meeting, Hardy said there are no plans to do mid-year budget cuts, with the official mid-year point about two weeks away.
“Overall, the fiscal year is on target,” Hardy said. “This is a $4.7 plus billion budget and 1% of that budget is $47 million. We are two-thirds of a percentage point away from being exactly on target.”
Deputy Revenue Secretary Mark Muchow said November’s numbers were about what he expected but looked worse because of the way the calendar ended, as opposed to previous years.
“We should make that up a bit in December,” Muchow said.
Sales tax, corporate income tax, and insurance taxes were not as negatively affected by the timing. However, personal income tax, which still saw some positive growth, along with withholdings, and business and occupation taxes, were affected.
Tobacco taxes were also below estimates in part because of the timing. However, Muchow said one of the big reasons for the decline is because of a trend in substituting traditional tobacco products with other products.
Overall, November’s collections were at $322.9 million and were $7.2 million below estimate, and $40.3 million below estimate year-to-date. For the General Revenue budget, Muchow said he is hopeful to have a 1.1% decline rate this year.
“If we get to that level, we will be on estimate and be on budget,” Muchow said.
The committee also heard from the West Virginia Manufacturers Association and the West Virginia Development Office on the possibility of eliminating the tax on manufacturing inventory, machinery, and equipment.
Rebecca McPhail, president of the West Virginia Manufacturers Association advocated for a bill to eliminate the tax over an undetermined amount of time, and to provide protections for schools and municipalities by providing replacement revenues each year.
She and Michael Graney, executive director of the West Virginia Development Office, said they believed eliminating the tax would make West Virginia more competitive, especially with surrounding states. Both cited that West Virginia is one of seven states that has a business inventory tax and is one of two states without an opportunity to waive the tax.
