Best Two Months Cash Flow Report Since 2006
There is bright news coming from the West Virginia State Budget Office August cash flow report. General Revenues collected in August are ahead of schedule, most likely due to increased sales in back-to-school purchases and improvements in business activity due to stimulus spending.
General Revenue collections were up $31 million dollars at the end of August 2010, 11% ahead of projections. During the first two months of the SFY2011 budget combined, West Virginia is currently 9% ahead of projections with a $55.2 million dollar surplus.
A big surprise in the WV State Budget Office cash flow report was the sudden turnaround in Severance Tax collections. While Severance Tax collections were initially down in July 2010 by $185,000, 3% less than expected, Severance Taxes have since rebounded and are now $12.5 million dollars ahead of schedule.
But perhaps the biggest surprise of all was the dramatic increases in Consumer Sales and Personal Income Taxes from the previous month. These two taxes are $21 million dollars ahead of estimates, up from $6 million dollars in July. West Virginia public and higher education schools began their 2010 fall semester and this partly explains the increase in Consumer Sales tax collections.
This is especially good news for two reasons: first, Consumer Sales taxes and Personal Income taxes are generally thought of as lagging indicators of the effects of a recession and second, these two taxes make up 70% of the states entire General Revenue collections. Previously, Consumer Sales and Personal Income taxes were $123 million dollars behind estimates at the end of SFY 2010. Maintaining a positive cash flow during the first two months of SFY2011 is good sign the state maybe avoiding the worst of the effects of the US recession.
The first two months of SFY 2010-2011, represented by the yellow bars in the graph below, represents the best two month start in the state’s fiscal year since SFY 2006-2007, the two red bars below.
Still, there are other bright spots in the cash flow report as well. Business & Occupation Tax revenue, Corporate Income and Business Franchise Tax revenues continued its path of remaining ahead of estimated revenues by $7 million dollars. These two revenues make up about 10% of the state’s total revenues, or $336 million dollars out of an estimated $3.741 billion dollars.
Assuredly, the state’s nascent recovery hasn’t made its way to reducing unemployment, but it has certainly not created a budget crunch for West Virginia. West Virginia was only one of four states in the country to have avoided cuts in services to its SFY 2010 budget. The other three states were Alaska, Montana, and North Dakota, all states with economies based largely on its natural resources like West Virginia.