Federal Stimulus Likely Behind FY 2021 Yearend Figures
This month the Legislative Fiscal Analyst (LFA) and the Governor’s Office of Planning and Budget (GOPB) released their Revenue Snapshots for the final, year-end of FY 2021 as well as first quarter of FY 2022, based on the TC-23 Revenue Summary reports from the Utah State Tax Commission. When compared to the preliminary data published in July, Fiscal Year 2021 ended on a slightly higher note than was originally reported, with collections adding another roughly twenty million to total $10.72 billion for the year. The combined growth rates for the General, Education, and Transportation funds tempered slightly from 38.7 to 36.6 percent according to final collections. The year-over-year (YoY) comparisons for the Transportation Fund in the last two periods of the Fiscal Year show accelerated growth, which is perhaps not surprising when considering that these figures are in contrast to the first months of the pandemic when travel was extremely limited. The staggering growth rates for all three state funds can likely be attributed to a combination of federal stimulus dollars, delayed income tax collections, and pent-up demand due to economy closures.
Despite Appearances, FY 2022 Off to a Good Start
The irregularities that plagued last year’s comparisons (including federal stimulus payments and delayed income tax filing deadlines) appear to linger on, as October’s Revenue Snapshot (including activity from July, August, and September) reports a -15 percent growth rate in the Education Fund collections. On target with the February consensus forecast, the Individual Income tax collections posted a -33 percent growth rate when compared to Q1 of FY 2021. As you’ll recall, the income tax filing deadline was pushed from FY 2020 into FY 2021, meaning that the seemingly negative October YoY comparison for income tax collections is based on these inflated numbers from last year. Other sources to the Education Fund are above target, with Corporate Taxes posting a 24.4 percent YoY increase, at $77 million above the projected range.
In the first three months of the fiscal year, General Fund collections outpaced the forecasted growth rate sevenfold. While most of the 22.0 percent YoY growth is attributed to sales tax, performance from sources, such as severance tax collections, also outpaced projections. As with any fiscal year, revenue collections are typically volatile in the first quarter and caution should be exercised when interpreting these early-year reports. It should also be noted that collections lag economic activity by up to four months depending on the tax type. In the coming weeks, economists from LFA, GOPB and the Utah State Tax Commission will meet to revise their consensus revenue estimates for Fiscal Year 2022 based on the latest economic indicators.
The reports referenced in this post are available at the links below:
Final Yearend Revenue Snapshot FY 2021
First Quarter Revenue Snapshot FY 2022
Tax Commission Revenue Summary/TC-23 (Yearend, FY 2021)
Tax Commission Revenue Summary/TC-23 (Period 3, FY 2022)