A jump in income tax collections, along with a hiring freeze and spending cuts, is helping the state to close its budget gap.
The gap, which stood at $49 million at the end of March, now is about $13.9 million. Deputy revenue secretary Mark Muchow said the drop mostly was driven by increases in income tax collections.
The state collected $546 million in income taxes through the end of April, about $35 million more than expected and 24 percent higher than in April 2012.
Muchow said we can thank the U.S. Congress for this one-time surge. Federal lawmakers spent the end of last year trying to come up with a solution to the so-called “fiscal cliff,” and many were worried Congress would allow Bush-era tax cuts to expire. That scared lots of businesses and investors into speeding up some long-term investments, selling off assets, paying bonuses, even shifting payroll schedules to fall under the 2012 tax schedule.
“Because of that we ran a surplus in April collections. The surplus greatly eliminated most of our deficit,” Muchow said.
A temporary hiring freeze, initiated by Gov. Earl Ray Tomblin in March, as well as spending cuts by the Legislature also will save the state $28 million by the end of the fiscal year on June 30. Although said he expects tax collections will fall short of estimates in May and June, Muchow said the budget gap will disappear completely before July.
“We can afford to be another $15 million short for May and June and still be okay,” he said. “We’ll close the gap.”