For much of the fiscal year, which ends June 30, the state was collecting less in revenue than it did the previous year. But a strong month of March in terms of corporate income tax collections and a strong month of April in terms of personal income tax collections have reversed that trend.
Gov. Phil Bryant, who has been forced to make four rounds of budget cuts this fiscal year because of the sluggish revenue collections, said he is encouraged by the strong March and April collections.
“I think we are moving in the right direction,” he said recently.
According to the April revenue report, completed this week by the staff of the Legislative Budget Committee, total collections, consisting primarily of general tax revenue, such as the sales tax on retail items and personal and corporate income tax revenue, are $56.8 million or 1.3 percent more than the amount collected during the same time period the prior year.
But when other funds are factored in, the state has collected $146.5 million or 3.3 percent more than it did during the same time period the prior year. The other factors include one-time contributions to the general fund, such as transfers from the rainy day fund by the governor to prevent from having to make additional cuts.
The largest chunk of additional revenue comes primarily from legislation passed in the 2016 session to sweep into the general fund fees and assessments that originally had been enacted to fund specific endeavors. But now those fees and assessments – totaling $91.8 million thus far this fiscal year – are being swept into the general fund for the first time and those items previously funded through the fees and assessments are being funded, if seen fit by the Legislature, through general fund revenue.
It appears likely that revenue collections, when including the sweeps of the fees and assessments, will outpace the amount collected last year. What is less clear is whether general tax collections revenue will exceed the amount collected last year.
While at the current time, general tax collections are $56.8 million or 1.3 percent above the amount collected during the same time period last year, those numbers are based solely on the unusually strong showings in March and April.
The key is whether the strong showing in income tax collections in April was because a portion of the revenue normally collected in May was collected in April. If that did occur, it could result in an unusually poor month of May, negatively impacting the state’s revenue collections.
The monthly revenue reports reveal two key factors. They are:
• How actual collections compare to the official estimate.
• How collections compare to the amount collected the previous year.
Meeting the official estimate is important because it reflects the amount of money appropriated by the Legislature. If the collections are below the estimate, mid-year budget cuts often have to be made as the governor has been forced to make four times this year.
With the strong March and April collections, revenue is now $175.2 million or 4 percent above the estimate when the sweeps of the fees and assessments also are included.
At this point, if revenue collections remain above the estimate, legislators will be in a much a better position in terms of cash on hand when the new fiscal year begins July 1.
During the past two years, legislators and the governor have had to enact budget cuts because of the sluggish revenue collections.
Multiple tax cuts passed by the Legislature in recent years are projected to remove at least $325 million from general fund revenue for the current fiscal year. The negative impact on the general fund of the tax cuts, which will continue to be phased in over the next 10 years, is projected to grow significantly.
Legislators are depending on the sweep of the fees and assessments to partially offset the revenue lost from the tax cuts. Plus, the Republican leadership also has expressed hope that the tax cuts eventually will spur economic growth, leading to an increase in tax collections.
Time will tell whether revenue collections in March and April represent the beginning of that growth.