A $470-million surge in April tax collections could push the state budget surplus to more than $700 million.
Barry Boardman, chief economist for the General Assembly’s nonpartisan Fiscal Research Division, in a Monday, May 6, email alerted legislative leaders of both parties, House, and Senate budget writers.
He called it extraordinary, unexpected revenue.
Final individual income tax payments exceeded projections by $395 million and were 46% higher than April of last year.
“This is the largest year-over-year increase in payments since 2005, when payments increased by 52%,” Boardman wrote.
Wage and salary income withholding have tracked close to forecast, so the growth in final income tax payments is almost entirely the result of higher non-withholding income such as capital gains and dividends, he said.
April’s corporate income tax collections grew 42% over last year and exceeded April’s projection by $75 million.
Combined with prior surplus revenue collections, the total is now close to $700 million. Other states are experiencing similar results, Boardman said.
The numbers are preliminary, Boardman said. Fiscal staff is awaiting a final accounting of April’s tax collections from the state Department of Revenue to determine how much of the money is a one-time collection, and how much of the tax growth can be expected to recur in future years.
That will be a key in revising the state’s consensus revenue forecast. That mechanism determines how much money is available for the current budget and guides spending decisions on programs and services. The revenue forecast also gauges how much money could be diverted to the state’s rainy day fund, a savings reserve created to buffer against economic downturns and the need to raise taxes.
The information also will play a role in the two-year budget now being debated in the General Assembly. The House has passed a $23.9 billion spending plan, and sent it to the Senate.
If the surprise revenue is a one-time event, lawmakers might be wise to plug it into savings, or reduce unfunded pension and State Health Plan liabilities rather than fund salary increases or expand programs and services in upcoming budgets, said Joe Coletti, senior fellow at the John Locke Foundation specializing in budget and fiscal policy.
If it is all recurring revenue, or a combination of recurring and one-time funds, budget writers may decide to split it between savings and programs, but could still consider plowing it all into savings.
The budget the House sent to the Senate contains $600 million in unappropriated funds. With the addition of $470 million in unanticipated revenue, senators now will have a decision on how to handle more than $1 billion that is not designated for a specific use.