West Virginia imposing 4 percent cuts after coal, gas revenues drop

Associated Press

West Virginia's coal industry is shrinking and its natural gas sector is booming, but both pots of state severance revenue are dropping because natural gas prices are down.

CHARLESTON, W.Va. (AP) — Gov. Earl Ray Tomblin is cutting most spending from state agencies by 4 percent, canceling holiday parties, continuing a hiring freeze, and limiting state travel to balance out a dwindling pot of cash coming in from coal and natural gas production.

In a news release Monday, Tomblin said the immediate cuts were mostly due to "unexpected and unprecedented" drops in dollars from the severance tax on unearthing resources such as coal and natural gas.

West Virginia's coal industry is shrinking and its natural gas sector is booming, but both pots of state severance revenue are dropping because natural gas prices are down.

Tomblin said the cuts are based on trends from the first three months of the budget year that are expected to continue this budget year.

"While the cuts we're enacting today will not be easy, we must maintain a balanced budget and this will help us do that," Tomblin said in the news release.

Tomblin says the 2016 deficit currently exceeds $250 million, due to a $190 million shortfall in severance tax collections.

The cuts will total $100 million, and the governor also will use one-time money to cover the difference.

Using the state's Rainy Day Fund reserves is possible, but Tomblin said use of those dollars should be limited.

State public school aid will see a 1 percent reduction, money Tomblin says has been held harmless from cuts in recent years.

Coal production is down 15 percent compared to last year. Natural gas sales are up about 30 percent, but prices have dropped.

Severance tax revenues dropped by 31 percent in the final three months of the last fiscal year and plummeted 36 percent during the first two months of this budget year.

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