It was Christmas in July for state revenue collections, thanks to a July 15 deadline to file state income taxes — pushed back from the normal April 15 filing date — along with an infusion of more than $2 billion of federal stimulus payments to state residents from April through June.
For July, the first month of the 2020-21 state budget year, state revenue collections of $483.96 million topped estimates by $44.49 million, according to data complied Monday by the Senate Finance Committee
In a teleconference Monday, Revenue Secretary Dave Hardy said those numbers are a far cry from projections in early April, when budget analysts feared the economic impact of the COVID-19 pandemic would cause the state to close out the 2019-20 budget year on June 30 with a nearly half-billion dollar shortfall.
Instead, the budget year ended with a $28 million surplus, he said.
“We feel like on the back end, we’re healthier today than we were a year ago,” he said.
Personal income tax collections of $276.4 million included about $138 million of deferred payments because of the extended filing deadline, according to the department.
Likewise, corporate net taxes of $60.38 million topped estimates by $25.38 million, with more than 90 percent of payments being deferred from April.
The most pleasant surprise for the month, Hardy said, was that sales tax collections “just blew off the roof” from projections for the month and from July 2019 collections.
Sales tax collections of $89.85 million topped estimates by $7.85 million, and were $9.35 million better than last July.
Hardy said an estimated $2.25 billion of federal stimulus payments to individuals — including $1,200 payments to persons with incomes of $75,000 or less, and additional $500 payments per child — along with nearly $1 billion in enhanced, $600 per week unemployment benefits undoubtedly contributed to the upturn in consumer spending.
The enhanced federal unemployment benefits ran out last week.
“I think we’d all agree the stimulus money has had an effect. It has to,” he said, saying it’s impossible to quantify the exact impact on state tax collections.
Gov. Jim Justice said the stimulus money helped “phenomenally,” but said, “In addition to that, the economy has just kept percolating, and percolating, and percolating along.”
Severance tax collections in July came in at a negative $6.69 million — but that was less than the projected losses of $13.2 million.
In July, the state makes annual severance tax transfer payments to energy producing counties, and that transfer frequently drops state severance tax collections for the month into the red. The reduced amount of transfer payments — equal to a tax rate of 0.35 percent — this July reflects plunging coal production and natural gas prices in 2019-20.
“We have the lowest severance taxes coming in, in forever almost, if not forever,” Justice, a coal mine operator, said of the downturn in the energy sector.
Justice and Hardy both disputed a report by the National Conference of State Legislatures projecting that West Virginia will have a downturn of revenue collections of $646 million and an increase of $100 million in Medicaid costs in the 2020-21 budget year.
“We have a chance of coming out of this in better shape than when we entered this from an economic viewpoint,” said Justice, who said he’s optimistic another round of federal stimulus payments will be approved by Congress in the near future. The legislation is currently deadlocked in the U.S. Senate.
“I think West Virginians should prepare for the absolutely best year we could ever have, because of what’s still coming in the pipeline,” he said.
Nonetheless, Justice said he has parked $673 million of the state’s $1.25 billion in CARES Act funding in an unemployment insurance trust fund, noting, “It’s an insurance policy for the first six months of the (budget) year.”