West Virginia ends Fiscal Year 2025 above estimates, but lower than previous year

CHARLESTON, W.Va. (WOWK) – West Virginia ended its fiscal year with a larger General Revenue Fund Cumulative than expected, but the number was still lower than the previous year, according to Gov. Patrick Morrisey.

According to the governor’s office, the General Revenue Fund Cumulative collections for Fiscal Year 2025 totaled $5.519 billion. Morrisey says this number is $254.8 million above the estimate for the total.

“As we expected, Fiscal Year 2025 will end in a surplus –  and that’s a good thing for West Virginians,” said Morrisey. “However, looming federal actions and an increase in state mandatory spending requires us to make smart, fiscally conservative decisions as we begin the new fiscal year. As Governor, I submitted and approved a balanced budget for Fiscal Year 2026, but the state still has fiscal challenges for 2027 and beyond.”

Morrisey says state officials attribute the surplus to “better than expected income tax collections, a late year surge in severance tax receipts and higher than estimated interest income related revenues,” and that, collectively, these were more than $279 million above their estimates.

However, according to the governor, that number is still 3.3% lower than the receipts from Fiscal Year 2024, which saw the General Revenue Fund Cumulative collections total $5.71 billion.

He attributes the decline from last year to a combination of “personal income tax rate reductions beginning in the middle of the fiscal year and a new refundable tax credit for certain local property taxes paid.”

According to the governor’s office, the FY25 Personal Income Tax collections totaled more than $2.126 billion, which is $103.1 million above officials’ estimate, but still 5.1% lower than the previous year. Morrisey says the state exceeded the estimates because of a larger-than-anticipated increase in annual tax return payments in April.

Morrisey says the Personal Income Tax collections are lower than FY24 because of a gradual phase-in of a nearly 5.9% reduction in tax rates that started Jan. 1, 2025, and other tax base reductions such as the car tax credit. The governor also says monthly tax rates were $10.8 million above the estimate and 12.1% below FY24. He also says that refund payments were $18 million higher this June than in June 2024, and he anticipates higher refunds to continue in the coming months due to car tax credit claims that have not yet been made.

The governor’s office says the Consumer Sales Tax collections for FY25 fell short by $19.8 million than expected. The total for FY25 was $1.821 billion, according to Morrisey.

Morrisey says the shortfall of Consumer Sales Tax collections is due to a monthly shortfall in June of $31.3 million, which the governor says is attributed to new legislation that removed a requirement that some taxpayers accelerate payments normally due in July. He says not adding in this shift, the adjusted collections for the year were around 2.4% higher than last year, and says this amount is “roughly equivalent to the rate of inflation.”

The Corporation Net Income Tax also exceeded their estimates while still falling short of FY24’s numbers. Morrisey says the $376.2 million was about $58.2 million more than anticipated, but 19.2% lower than the previous year. He says they were expecting the number to be lower, but an unexpected phase-down of certain tax reductions brought the number back up. According to the governor, this phase-down happened because Congress did not enact an extender bill last year that would have prevented phase-downs of bonus deprecations and other allowable corporate tax deductions.

The Tobacco Excise tax was also below estimates, according to the governor’s office. He says lower cigarette sales brought the total to $137.9 million, down $9.7 million from the estimate and 10% lower than FY24’s total.

The state’s Severance Tax, on the other hand, was not only $32.7 million above the estimate, but the FY25 total of $439 million was 19% above FY24’s total. Morrisey says this is due in part to June’s collections being $32.9 million above the monthly estimate and 142% above June 2024’s total, even after a recent law change to move the due date for severance tax payments from June 15 to June 30.

According to the governor, the increase in the Severance Tax collections comes from natural gas and steam coal revenues improving significantly in recent months as they replenished their inventories following the colder-than-average winter. Morrisey says the average natural gas prices are nearly double the previous year since the beginning of Calendar Year 2025, and while average coal prices are down, the volume of steam coal sales since the start of the calendar year is up by more than 25%.

The Insurance Premium Tax followed the same trend, according to the governor. Morrisey says FY25 saw collections of 133 million, up not only $13 million from the estimate, but 10.2% from FY24. He says this is due to continuing inflation in the auto and home insurance markets.

According to the governor, the Interest Income for the year was $186.8 million, and $61.8 million above estimates. However, this was 17.5% lower than FY24. The governor also says the state added a one-time $23.4 million transfer of interest accrued from the American Rescue Plan Act’s State and Local Fiscal Recovery Funds that, when combined with the total collections for the year, brings the overall total to $85.2 million above the estimate.

Morrisey says the Interest Income is lower due to declining short-term interest rates, and while they estimate more reductions to short-term interest rates this coming year, they don’t know the timing of when this could happen.