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West Virginia Revenue Remains Squeezed On Low Oil/Gas Prices

West Virginia's severance tax collections continued to plummet in November, driven primarily by low oil and natural gas prices, which have also hurt personal income tax collections and helped to widen a projected budget deficit for fiscal year 2016.

Through November, the state budget office shows severance tax collections running $78.8 million below estimates for the current budget year, which started in July. The state collected $33.4 million in severance taxes in November, compared to $36.9 million at the same time last year. From July through November, actual collections have fallen 48% compared to the same period last year, going from $142.1 million to $74.3 million.

While revenue from coal has declined by about a third from last year, those collections are falling at a slower pace than other sources, such as oil and gas, which state officials have called a "huge" drop. Combined with a decline in other revenue sources, such as the personal income tax, lower commodity prices helped to forge a $114.4 million budget deficit through November.

Personal income tax collections, state budget office data shows, are currently running $22.1 million below estimates for the period through November. While they're slightly above last year's collections at $693.3 million, compared to $693.1 million, retrenchment in the oil and gas industry has cut those revenues, officials said. Personal income tax collections were down to $122.1 million in November, compared to $128 million at the same time last year.

In October, after a dramatic decline in severance tax collections through the first three months of the fiscal year, Gov. Earl Ray Tomblin announced a 4% across-the-board cut in funding for most state agencies (see Shale DailyOct. 6). The cuts were aimed at plugging a projected $250 million deficit for the fiscal year.

West Virginia's oil and gas severance tax collections more than doubled in FY 2015, going from $79.2 million in the prior year to $188 million (see Shale DailyApril 22). But while overall severance tax collections rose by 2% through the first nine months of FY 2015, they dropped 31% during the final three months, reflecting both coal's ongoing struggles and a drop in oil and gas prices. Shut-in gas that came online early in 2014 and higher prices at the time helped lift last fiscal year's collections.

Tomblin's administration has said natural gas severance tax revenues are expected to continue decreasing for the remainder of the year "because of significantly low prices."

Other energy producing states across the country also have seen significant declines in their revenue streams, with severance tax collections down in Texas, Oklahoma, Wyoming and North Dakota, among others (see Shale DailyNov. 2).

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