'Dramatic Decline' in State Severance Taxes Results in Mid-Year Cuts

A severe decline in the state’s severance tax revenues has Gov. Earl Ray Tomblin calling for yet another round of budget cuts for state agencies, as well as other cost saving measures. 

Tomblin announced the cuts through a press release Monday evening. 

The mid-year, across-the-board 4 percent agency cuts combined with a 1 percent decrease in state aid to public schools– a budget item typically protected from reductions– will help make up for the projected $250 million deficit expected during the 2016 Fiscal Year.

That deficit is largely due to a predicted $190 million shortfall in severance tax collections.

As of Sept. 30, the Governor’s Office says general revenues were short more than $60 million compared to the $12 million shortfall at the end of August. Tomblin’s office predicts that cycle will continue. 

“This is a difficult decision that results from several factors beyond our control,” Tomblin said in written statement. “While the cuts we’re enacting today will not be easy, we must maintain a balanced budget and this will help us do that.”

On top of the spending cuts, Tomblin intends to implement some smaller measures, like continuing the state hiring freeze officially put in place in January of 2013 and canceling his annual holiday parties. The more controversial measure, however, is Tomblin’s intention to use Rainy Day Funds to close the expected budget gap at the end of the fiscal year. 

“It’s not the way you want to go,” Sen. Finance Chair Mike Hall said Monday of utilizing the Rainy Day funds, “but everybody looks back to when those laws were enacted and that’s what they’re there for.”

Tomlin met with Hall and other legislative leaders Monday.

The fund, which contains more than $800 million, collects a portion of the surplus funds left in the state budget each year. Last year, Tomblin took some $14 million from the fund to balance the Fiscal Year 2015 budget. 

Pulling from the fund has been criticized by Republican lawmakers in the past, but Hall said it could be worse. 

“It’s not a happy place, but a lot of states have completely depleted their rainy day funds,” he said. “There’s a revenue shortfall and [we] have a reserve to fill the gap at this time rather than raising taxes.”

Hall believed even if money is taken from the emergency fund to balance the FY 2016 budget, there will be enough left to protect that state’s credit rating. Failing to make payments on major debts, like the state’s workers’ compensation or retirement system obligations, would affect the credit rating more immediately, he said.