State collects $2.8 billion in December General Fund revenues

State collects $2.8 billion in December General Fund revenues

Author: Jason Gottesman/Wednesday, January 3, 2018/Categories: News and Views

The Pennsylvania Department of Revenue and the Independent Fiscal Office each reported this week that state General Fund revenue collections for the month of December rang in at around $2.8 billion.

 

However, that’s where it appears agreement stops between two of the Commonwealth’s top fiscal forecasters.

 

According to the Department of Revenue, while total tax collections for FY 2017-2018 have exceeded estimates by $62.5 million—including over $15 million in December alone—General Fund collections for the month were under estimate by $30.1 million bringing year-to-date General Fund collections $4.1 million below estimate out of $14.2 billion collected so far this year.

 

Those estimates were based off of the certified revenue estimate made in November 2017 at the conclusion of the state budget process following the passage of a budget-balancing revenue plan.

 

The Independent Fiscal Office, however, saw the $2.8 billion General Fund collections as coming in at $67 million above estimate, brining year-to-date General Fund collections to $95 million above estimate.

 

The IFO based their estimate off of its pre-Christmas-revised monthly projections that recalculated its previously-made state revenue projections based on the revenue package passed by the General Assembly in late October.

 

Despite the divergence on what the revenue numbers mean in terms of overall projections and whether the state is in the red or the black on its estimates, both the Department of Revenue and the IFO agree that revenue collections have been led by stronger-than-anticipated year-to-date collections in terms of the sales and use tax and the personal income tax.

 

Corporate taxes, according to both offices, have fallen short of estimates somewhat offsetting gains in those two area.

 

In terms of the higher-than-anticipated numbers from personal income tax collections and the below-estimate collections for corporate taxes, the Independent Fiscal Office prognosticated that the two might be related to recently-enacted federal tax reform legislation and could correct through the remainder of the fiscal year.

 

"Recently enacted federal tax legislation had a material impact on December revenues. For CNIT, it is likely that estimated payments reflect a shifting of income out of tax year 2017 into tax year 2018 due to the significant federal rate reduction. Firms may have also accelerated deductions in the opposite direction to reduce 2017 tax liability. The IFO projects a similar impact on the final payments that will be remitted in April and May," read a report from the IFO accompanying their December monthly trends report.

 

"For PIT, the December estimated payment was very strong as many taxpayers likely remitted payments early to qualify for the uncapped state and local tax deduction. It is also possible that some taxpayers overpaid their tax liability because the overpayments are currently deductible, but the same payments may not be deductible next year. Hence, this large revenue gain will likely be reversed through the remainder of the fiscal year."

 

In analyzing the collection data put out for the month of December, the Democrats on the House Appropriations Committee, led by minority chairman Joe Markosek (D-Allegheny), put out information stating that upcoming events could provide a boost to the revenue forecast.

 

"Looking ahead, January holds large sales tax revenues as retailers remit collections from the holiday shopping season, as well as a quarterly personal income tax payment," the analysis read.

 

"The Gaming Control Board will begin to auction Category 4 casino licenses under gaming expansion Jan. 10, with a second round Jan. 24. These fees are part of the revenue package to balance the General Fund."

 

As the governor prepares to deliver his budget address on February 6, 2018, before a joint session of the General Assembly, both the Independent Fiscal Office and the governor’s budget office have forecasted a surplus at the end of the current fiscal year. However, the IFO has projected a nearly $1 billion deficit for the FY 2018-2019 budget.

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