CHARLESTON, W.Va. - Collections for West Virginia’s General Revenue Fund (GRF) surpassed $381 million in May, a figure that exceeded the monthly estimate by $44 million, or 13.2%. For the Fiscal Year to Date (FYTD), total GRF collections are $5.124 billion. This figure is $313 million, or 6.5%, above estimate and $181 million, or 3.7%, above the prior FYTD.
"These revenue numbers are another encouraging sign that West Virginia's economy is moving in the right direction,” said Governor Morrisey. “Strong collections in areas like personal income tax, consumer sales tax, and severance tax reflect growing economic activity across the state. Some of these trends may moderate in the months ahead, but we will remain focused on responsible budgeting, growing our economy, and creating the conditions for long-term prosperity."
Personal Income Tax collections, the largest individual GRF component, were $121 million in May, exceeding the monthly estimate by $25 million. For the FYTD, Personal Income Tax collections are the single-largest source of collections above estimate at $110 million (6.0%) and exceed the prior FYTD by $23 million (1.2%). Growth in Personal Income Tax collections is anticipated to begin slowing in the coming months as the new withholding tables published because of the Governor’s initiative to reduce personal income tax rates are adopted by employers throughout the State.
Consumer Sales Tax collections exceeded the monthly estimate by $16 million (10.0%), with total collections for May surpassing $183 million. For the Fiscal YTD, collections are 2.1% above estimate ($37 million) and $124 million (7.6%) above the prior FYTD. Part of this prior FYTD growth is due to the impacts of SB 615, which should fully phase in during June’s collections and will reduce this figure by approximately $40 million.
Severance Tax collections were $39 million in May, exceeding the estimate by $7 million. Severance Tax collections exceed their estimate by the second-largest amount for the Fiscal YTD, with $471 million in actual collections against an estimate of $365 million, a difference of $106 million. In addition, they have the second largest year-over-year growth, exceeding the prior FYTD by $124 million. Severance Tax collections going forward are difficult to forecast accurately due to a recent Supreme Court of Appeals ruling which will reduce collections from natural gas as well as ongoing hostilities in the Middle East.
Corporate Net Income Tax collections in May were nearly $10 million below estimate. May is typically a very slow month for collections, and, in addition, significant unanticipated refund activity occurred, which caused refunds to exceed collections for the month. For the Fiscal YTD, collections are within $1 million of the estimate.
Tobacco Products Tax collections failed to meet estimate by $1 million in May, continuing a significant downward trend in collections due to changing consumption patterns. For the Fiscal YTD, collections are $5 million below estimate and $6 million below the prior FYTD.
Interest Income continues to exceed estimates, with $11 million in May versus a $6 million estimate. For the Fiscal YTD, collections are $34 million, or 35.3%, above estimate. The short-term interest rate environment has remained elevated relative to expectations, leading to higher returns on the State’s short-term investments. Kevin Warsh recently replaced Jerome Powell as chairman of the Board of Governors for the Federal Reserve, but large-scale changes to Fed interest rate policy seem unlikely especially against the backdrop of recent upticks in inflation.