State Budget Issues Could Potentially Impact University Operations

Daily Athenaeum - West Virginia University may soon feel the heat of the alarming budget shortfall the state is experiencing, largely due to market forces at work in the energy sector coupled with tax cuts made nearly a decade ago. Read

In October of last year, Governor Earl Ray Tomblin announced a 4 percent budget cut across-the-board for all state agencies—which includes West Virginia University—due to an unexpected drop in the state's severance tax collections.

A severance tax is a tax imposed on the removal of nonrenewable resources and is imposed on the producer of the operations in the imposing state. Both the coal industry and natural gas industry pay a 5 percent rate in the state of West Virginia.

While it's widely known that the southern coalfields of West Virginia are in an economic free fall—and are a large contributor to the state's financial woes—the hidden economic downfall at work comes from the rising production of natural gas, coupled with its low price.

"A lot of what has happened—not just in West Virginia, but other states, and of course what's going on globally with the oil market—it does seem to be an over-abundance of natural gas produced, which is grinding prices down and resulting in these budgetary problems," said Sean O'Leary, senior policy analyst for the West Virginia Center on Budget and Policy.


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