Lower receipts could mean early belt-tightening

State officials have already made it clear that West Virginia will have to tighten its financial belt for the next fiscal year beginning July 1, 2013. But last week produced the first tentative hints that budget cuts in state government may be necessary as early as Jan. 1, halfway through the current budget year. These hints were the result of lower-than-expected state revenues for the first two months of the current fiscal year.

General fund receipts for August of $287 million were $14 million less than expected — still far less than the results for July where the number was $2.5 million below the estimated amount. Violent storms that did so much damage in the state in late June are considered the major reason for these lower figures.

One of the two categories is personal income tax receipts for August that reflect money collected by businesses during July. The state received $13.9 million less than expected in August because many businesses temporarily shut down for a period in July because of the devastating storm in late June. This caused an 8 percent drop in employer withholding tax receipts for July that were reported and paid in August.

Another key factor was the decline in coal production that resulted in only $36 million of coal severance tax receipts in August. That amount was 46 percent less than the yield in August of 2011 and $9 million less than the earlier estimate for August of 2012.

However, there are some positive numbers during the first two months of the current budget year. Consumer sales tax collections in August were $96.4 million, or $4.1 million more than predicted. And the corporate net income tax receipts in August were $4.1 million — $1.6 million more than predicted.

State officials who track the budget revenues have made it clear that September’s results — the end of the first quarter in the current fiscal year — will be the crucial barometer of whether the state will need to start tightening its budget belt on Jan. 1, 2013.

As Deputy Revenue Secretary Mark Muchow told a reporter last week, September is the month when corporations file their first estimated quarterly tax reports and also when those corporations file their final 2011 income tax returns. This is also when those who are self-employed and individuals who don’t have taxes withheld from their earnings turn in their first quarterly payments.

The two months of sagging state budget figures has prompted the expected political implications. Republican gubernatorial nominee Bill Maloney has accused incumbent Democrat Gov. Earl Ray Tomblin of leading the state into a “fiscal crisis.” Tomblin’s spokesperson has responded that the governor is “balancing the budget while cutting taxes.”

It would probably be overly optimistic to hope that September can produce $16.5 million more than the predicted receipts for the month so that the state’s general fund would end the first quarter of the budget year in a break-even condition. But any amount that at least reduces that $16.5 million shortfall created the first two months would be a good sign.

Meanwhile, it was not afforded much publicity, but West Virginia’s ranking as the state with the lowest labor force participation in the United States had to come as a surprise to many of those who listened to this panel discussion at the recent annual business summit meeting at The Greenbrier, sponsored by the West Virginia Chamber of Commerce.

Dr. Tom Witt, professor emeritus of the West Virginia University College of Business and Economics, made this startling declaration in a statistical analysis prior to the panel discussion involving WVU President Jim Clements, two other college presidents, the president of a national educational alliance and a Charleston attorney.

Witt must have stunned many of those present when he said recent figures indicate West Virginia has the lowest labor force participation in the nation — a startling 53.7 percent. He couldn’t resist adding that people who say “we have hard-working West Virginians are wrong. Hardly working is more like it.”

And of course, the primary reason for this ranking is the lack of education among many residents of this state. The more startling statistic, though, is that by 2020 when more than half of the jobs in this state will require a career certificate or college degree, just slightly more than one in every four adults in this state — an estimated 28 percent — will have those qualifications.

Finally, recent reports in the Charleston Daily Mail indicate that retired Cabell County Circuit Judge Dan O’Hanlon now earns $120,000 a year as vice chancellor of the Higher Education Policy Commission in addition to his lucrative judicial pension of about $95,000 a year. And he has also charged taxpayers for thousands of dollars in travel expense in his new job.

O’Hanlon began his job as vice chancellor of technology with the Higher Education Policy Commission on Nov. 1, 2010 — the day after he retired as a circuit judge. And since January, 2011, O’Hanlon has charged the state about $11,500 for travel between the HEPC headquarters in Charleston and the Morgantown offices of WVNET, the state agency that provides Internet services to college campuses. He considers published reports of his retirement income as valid, which also includes state-funded travel such as a $3,800 trip to Las Vegas. He insists he’s providing a “good deal for the state” because he is actually working dual jobs that saves a $120,000 annual salary for a separate WVNET director.

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