West Virginia tax collections continued falling through the first three months of the fiscal year in a trend that state officials again attributed to weak commodity prices, which have negatively impacted the oil and natural gas industry.

Collections were down $81.2 million from projections over the last three months, West Virginia Department of Revenue Secretary Robert Kiss said during a monthly briefing this week. The shortfall could mean more budget cuts for state agencies, a withdrawal from the state’s Rainy Day fund or the use of one-time funds as the state could face a budget deficit.

Severance tax revenues came in $195 million below projections for 2015 (see Shale Daily, July 11). At this time last year, Gov. Earl Ray Tomblin announced a 4% across-the-board funding cut on falling tax revenue (see Shale Daily, Oct. 6, 2015). But the revenue department said September severance tax collections came in at $26.2 million, or slightly above projections.

Overall tax collections in September of $367.1 million were $32.3 million short of estimates. Officials said income taxes were down 15% mostly because of a steep decline in nonresident withholding taxes that dropped on lower royalty payments. Corporate taxes also declined in September.

Natural gas production in the state has been on the rise, with conventional and unconventional producers reporting 1.04 Tcf in 2014 (see Shale Daily, March 9). Production increased again slightly last year to 1.3 Tcf, according to the West Virginia Department of Environmental Protection. But while gas prices have firmed in recent months, Appalachian basis differentials have remained wide.

State officials noted during the briefing that the energy sector continues to play a key role in the state budget. Declining severance taxes last year led to a deficit and a short budget impasse that was fixed with $137.8 million in budget cuts, $98.6 million from the Rainy Day fund and reallocation from other funds.

Kiss said his department would again work with the Tomblin administration to figure a way around this year’s shortfall and said it was too early to determine what the budget deficit might be. Since the fiscal year began in July, the state has collected $914.8 million in taxes, about $15 million less than over the same period last year.