Right on Schedule: Yearend Revenues align within Consensus Forecast

July 14, 2023

On Thursday, July 13, the Tax Commission released its preliminary year-end Revenue Summary report detailing collections through 12 months of the fiscal year. Simultaneously, the Legislative Fiscal Analyst and Governor’s Office of Planning and Budget produced their monthly Revenue Snapshot which compares collected revenue to the consensus forecast. As of July 10th, revenue to all sources held steady with FY 2022’s collections, as statewide revenues posted 0.8% growth year-over-year (YoY). General and Income Tax collections grew by 0.3%, making collections around $100 million short of consensus estimates (less than 1%) in this latest report.

As with last month’s reports, collections reflect a moderating economy absent significant intervention by the federal government. Discretionary state revenues are lower than budgeted though well within projected ranges. Financial contingencies put into place by appropriators are playing out according to plan. A piece of the savvy budgeting employed during the 2023 General Session was accelerated payments to the state’s debt service (above and beyond the required payments, which are under quite favorable terms) and a set aside for future buildings. Revenues that were considered “high risk,” (meaning they were considerably above trend) were used for highway debt and to build the State Building Infrastructure Fund. The concept being that these appropriations could be reversed if higher priorities (or any deficits) presented themselves. The cushion afforded by this strategy covers any deficits in the current fiscal year and also provides some flexibility for next year’s budgeting cycle, to the tune of $565 million one-time and $335 million ongoing.

Collections to the General Fund were up slightly compared to last month’s report, at +5.8% YoY. Unchanged were the top performers of Investment Income (up 1,000% YoY) and Oil and Gas Severance Tax (up 48% YoY). A handful of sales and severance tax earmarks had not posted as of this month’s TC-23, suggesting General Fund deposits could be adjusted down slightly in coming weeks. Income Tax Fund collections fell by as much as 4.8% compared with this time last year. Withholding tracked the General Fund due to a strong labor market and rising wages, growing 4.9% over FY 2022. However, final income tax payments paled in comparison to last year, down almost 30% due to lower capital gains. The Transportation Fund has benefitted from travel season, along with the increased fuel tax rate implemented in January of this year, rising 7.2%.

As always, the close out period (Fiscal Period 13) requires a few months to finalize, and could increase or decrease these latest reported figures. LFA will post the final yearend report in October, along with the first revenue report of FY 2024.

The reports referenced in this post are available at the links below:
July Revenue Snapshot (FY 23)
Tax Commission Revenue Summary (Preliminary Yearend/Period 12, FY 2023)
Revenue Publications Archive