The biggest reason Governor Justice and lawmakers are sweating out the budget for next fiscal year is that coal and natural gas severance tax collections have plummeted. According to the state budget office In fiscal year 2014, those industries paid $489 million into the state’s General Revenue Fund. Two years later, the amount collected had fallen to almost half ($276 million).
The Governor and lawmakers would have a much easier time coming to agreement on a budget if those industries bounced back (or the state had substantial growth in other areas). Now we’re seeing some positive signs in the state’s economy.
The Monthly Mountain State Business Index (MSBI) issued by WVU’s Bureau of Business and Economic Research (BBER) reports the state’s economy is recovering after a long and painful downturn and moderate growth is expected over the next several months.
Brian Lego, BBER research assistant professor, says the coal numbers were off slightly in May, but “coal production activity has improved measurably since late last year.” Southern West Virginia coal production is up ten percent from this time a year ago.
Just last week, Alpha Natural Resources announced it is openinga metallurgical coal mine in Raleigh County. “Recent improvement in the market has created more demand for our coal,” said Alpha Vice President of Operations Charlie Bearse. This week, Corsa Coal announced a coal mine opening near Pittsburgh. There’s no economic benefit to West Virginia, but it is still a positive sign for the industry.
Natural gas production is also trending upward. “The state’s natural gas industry has emerged from a sustained period of weakness,” said Lego, “and though its performance is not anywhere close to what was observed in 2014, several firms have increased drilling activity and four activity rigs have been added since the beginning of the year.”
The improvements in coal and gas are bringing in more tax dollars to the state. Severance tax collections have reached $274 million dollars through May. That’s 17 percent higher than projections with still one month left in the fiscal year. Additionally, new hires will increase payroll tax collections and employed workers have money to spend, helping the local economy.
National Mining Association President and CEO Hal Quinn now sounds more optimistic about the future of his industry. “A change in the fortunes of U.S. coal is on the horizon with recent changes in politics, policy and markets,” Quinn wrote. “For U.S. coal, some of the headwinds blowing against us in the past few years now appear to be filling our sails.”
West Virginia is badly in need of those favorable breezes. Right now it just feels like a puff, but even that is enough to get the ship moving in these becalmed waters. If the trend continues, the economic growth will make the state’s budget problems much more manageable.
See the article here.