October 2017
November 01, 2017 | Revenue & Economic Update
In August, the Independent Fiscal Office (IFO) released monthly projections for the fiscal year (FY) 2017-18 revenue estimate published in June 2017.1 Through the first four months of FY 2017-18, total General Fund revenues were $9.6 million (-0.1 percent) below the IFO’s official estimate. Tax revenues were $27.4 million (-0.3 percent) below estimate and non-tax revenues were $17.8 million (29.8 percent) above estimate.
As shown in the table below, two of the three largest sources of General Fund tax revenue, personal income tax (PIT) and sales and use tax (SUT), were below estimate through October. PIT revenues were $16.8 million (-0.4 percent) below estimate, driven by quarterly payments that were $34.9 million (-7.0 percent) below estimate. SUT revenues were $35.9 million (-1.0 percent) below estimate, largely due to a motor vehicle tax shortfall of $21.0 million (-4.2 percent). However, fiscal year-to-date SUT revenues were $106.3 million (3.2 percent) higher than the first four months of last fiscal year. October non-motor vehicle sales tax collections did not increase from the prior year, and that revenue source remains a concern.
Corporate net income tax (CNIT) revenues and non-tax revenues have been relatively strong through October compared to estimate. CNIT revenues were $16.5 million (2.5 percent) above estimate through the first four months of FY 2017-18. Non-tax revenues were $17.8 million (29.8 percent) above estimate, largely driven by escheat revenues, which were $11.5 million (66.1 percent) above estimate.
Various national and state data suggest that taxpayers shifted income out of calendar year 2016 in anticipation of a significant federal income tax rate cut. The IFO’s official estimate assumed that most of that income would be reported in 2017, and would have a positive impact on FY 2017-18 revenues. Currently, it is unclear if federal income tax cuts will be enacted. If they are not or uncertainty remains, then General Fund revenue projections for this year will likely be revised downward in future estimates.