West Virginia's General Revenue 'Reversal of Fortunes'
West Virginia's combined cash flow for the first four months of FY 2011 resulted in $95.6 million dollars in surplus revenue, a significant reversal of fortunes from the same start in FY 2010. Figure 1 below shows the cumulative general revenue cash flow from the beginning of the fiscal year starting in July through the end of October during the past four fiscal years. This data represents the difference between actual and estimated general revenue projections.
West Virginia's fortunes have clearly turned for the better compared to the same period from FY 2010 when the state was reeling from The Great Recession. At the start of FY 2010, West Virginia's general revenues were running about $17 million dollars behind estimated projections.
The latest general revenue data identifies a $12 million increase in actual revenues over estimated projections in October 2010. Should this trend continue for the next eight months, West Virginia would end FY 2011 with a projected surplus of nearly $200 million dollars.
The table below reports the underlying general revenue source of West Virginia's surplus. Personal income tax collections have outperformed better than expected. To date, personal income tax collections account for one-third of the total surplus revenues. Corporate net income and business franchise taxes account for the next largest share of the state's surplus, 27.2 percent. Severance taxes make up 17.6 percent, consumer sales and use tax make up 13.8 percent while business and occupation tax make up a relatively small percent of the total surplus, 4.3 percent.
Personal income taxes and consumer sales tax make up a combined 70 percent of total general revenues and are highly sensitive to downward pressures in the economy. Therefore, surplus revenues from personal income taxes and consumer sales tax is a significant change in fortunes for West Virginia's budget outlook.
By comparison, FY 2010 saw a significant decline in personal income tax and consumer sales tax collections as a result of The Great Recession. West Virginia's fiscal year would have more bleak had it not been for severance tax collections.
Today's surplus in general revenues bodes well for West Virginia's future budget outlook. The new acting Governor, Earl Ray Tomblin has the benefit of surplus general revenues which should minimize the need for his administration to look for major cuts in government spending. The state needs all of its available revenue to help West Virginia's economy to continue moving forward.