BRADENTON, Fla. - Rising coal and gas prices coupled with conservative fiscal management have helped West Virginia weather the economic downturn so far, according to state officials, but at least one expert believes the state is on the verge of recession due in large part to job losses.
"Severance tax collections are going to keep West Virginia in the black" in fiscal 2009, Department of Revenue deputy secretary Mark Muchow said at the Annual West Virginia Economic Outlook Conference in Charleston yesterday.
While the state is seeing a significant surplus in severance collections, he cautioned that severance taxes are also highly volatile.
Muchow said overall tax revenues supporting the state budget were down in the first quarter of 2009, but second-quarter results were 2.4% above estimates. He attributed the state's solid financial position to fiscal policies instituted during better times when elected officials concentrated on paying down one-time debts.
"With a more conservative spending pattern West Virginia is better able to handle slower growth," Muchow said.
Taking a tougher view, George Hammond, associate director of the Bureau of Business and Economic Research, said West Virginia's economy just barely grew during the past year. He said the state is forecast to lose 4,800 jobs from 2008 to 2009, and the state unemployment rate is expected to climb from 4.9 % in this year to 6% in 2009.
"Overall, the state downturn is likely to be less severe than nationally, and state growth is expected to turn positive again in 2010," Hammond said. "However, the current downturn may be more severe than similar episodes earlier this decade and in the early 1990s."
In addition to the slowing economy and job losses, officials learned recently that they face a loss of $2.5 billion in the state's investment portfolio, which will affect the budget in fiscal 2010.
West Virginia had $744.8 million of general obligation bonds and $1.74 billion of revenue bonds outstanding at the end of fiscal 2008. The GOs are rated AA-minus by Fitch Ratings and Standard and Poor's, and Aa3 by Moody's Investors Service.
