Essential reporting in volatile times.

Not a Subscriber yet? Click here to take advantage of All access digital limited time offer $2.99 per month EZ Pay.

Interested in Donating? Click #ISupportLocal for more information on supporting local journalism.

Like no one saw that coming.

A stress test performed by Moody’s Analytics shows West Virginia’s state government tax collections could fall by 39.4% in the third quarter of this calendar year if the economic downturn caused by business closures and cutbacks in response to the coronavirus continues.

West Virginia and other states that depend heavily on natural resource extraction are particularly vulnerable to downturns caused by coronavirus measures, according to a recent article in the Charleston Gazette-Mail.

Those measures coupled with an increase in Medicaid costs as more West Virginians enroll in Medicaid could leave the state with a $1.98 billion budget shortfall in the 2020-21 fiscal year, according to the Moody’s report.

The scenario Moody’s envisions as most likely has travel and business restrictions continuing into July at least. Unemployment would peak at 17%. The state’s gross domestic product — the sum of all economic activity — would decrease by 14%.

“Could” is such a nice fudge word. It sounds an alarm for an event that might happen, or might not. It gives the person who uses the word room to say, “I told you so” if the dire event comes to pass, and it gives the person room to say, “I didn’t say ‘would’” if it doesn’t.

But let’s step back from the known unknowns and look at what we do know.

The West Virginia State Budget Office should report soon on tax collections for the month of April. From the report issued for March, we can see that some problems are at hand now.

The big three revenue sources for state government’s general fund are sales taxes, personal income taxes and severance taxes. In March, sales taxes were $300,000 ahead of budget estimates. Income taxes were $9.7 million ahead and severance taxes were $3 million ahead. Overall tax collections were $12 million above estimates.

But for the first three quarters of the fiscal year, things were different. Sales taxes were up $3.9 million, but income taxes were $33.8 million behind and severance taxes were $43.1 million below expectations. The overall general fund collections were $6.4 million behind.

April will have been — most people hope — the only full month in which the state economy will have been in lockdown mode and people were asked to stay home. Surely personal income tax and sales tax collections will take a hit. Delaying the 2019 income tax filing deadline until July also will affect the state’s cash flow.

Then there are severance taxes. The market for metallurgical coal is down, and some power plants already had several months worth of coal stockpiled before electricity demand fell because of the lockdown.

The state’s current fiscal year began July 1, 2019, and ends June 30. State government officials expect a budget shortfall of at least $350 million this fiscal year, according to the Gazette-Mail. Gov. Jim Justice says early numbers for April show this month won’t be as bad as expected, thanks to several manufacturers and essential businesses continuing to operate during the shutdown.

In short, state officials will probably have to make cutbacks somewhere. They probably want the economy to get back to normal just as much as people whose lives have been upended. Safety will be important, of course, but just as households need money, so does the government.

To use an overused phrase, many households and businesses have had to tighten their belts since the coronavirus response began. Now we see how far government is willing to go and whether it will make the same sacrifices it has expected of the rest of us.