One-Time Revenue Causes April General Fund Collections to Surge, Revenue Surplus Continues For 2014-15
April is typically one of the more important months for tax collections in the General Fund. This year, April collections were better than expected – coming in $201 million, or 5.3%, higher than expected – due largely to one-time revenue. This pushes the fiscal-year-to-date revenue surplus to $569 million, or 2.3%, higher than expected. If this trend continues over the final two months of the commonwealth’s fiscal year, the additional revenue could help make it a little easier to negotiate a plan to balance the 2015-16 budget. By no means, does the temporary surplus "solve" the commonwealth's ongoing structural deficit.
The vast majority of April’s revenue surplus (just under $190 million) was due to higher than projected revenues from a change in the state’s unclaimed property law. This change, which shortened the waiting period before unclaimed property is turned over to the Pennsylvania Treasury, yielded a lot more revenue than was expected. While the unclaimed property money adds to the overall revenue surplus this year, this one-time revenue shouldn’t be expected in future years.
April tax collections also exceeded estimates, but only by $11 million, or 0.3%. Income, sales, and inheritance tax collections were higher than revenue targets for the month, while corporate taxes fell modestly short.
Compared to the prior fiscal year, both April collections and those for the fiscal year are showing strong growth. Collections in April 2015 grew by $588 million, or 17.2%, from the prior year. Tax collections grew by $277 million, or 8.5%. Much of this growth was in personal income tax payments, which increased by $228 million. The increase in payments of unclaimed property also caused non-tax revenues to increase substantially over the prior April.
For the fiscal year-to-date, General Fund collections are nearly $1.9 billion, or 7.8%, higher this year. Tax collections are up $1.2 billion, or 5.2%, during this same period – with increased revenues in every major category of tax. This is a sign of an expanding state and national economy (finally).
On Monday, May 4, the Independent Fiscal Office issued its official forecast for 2015-16. This is the first updated revenue forecast since the Governor’s budget proposal came out in early March, and is very modestly higher, $97 million. This forecast typically sets the bar for revenue expectations (not including revenue changes sought by either the administration or General Assembly) in the coming fiscal year for budget negotiations.
The IFO's slight increase in the 2015-16 revenue estimate indicates that the underlying structural deficit (where revenue grows more slowly than expenditures) remains. If lawmakers and the administration want to make good on their promise to increase education funding in a sustainable way, as well as fixing the commonwealth's ongoing fiscal issues, new revenues - like a severance tax on natural gas - are needed.
We've tried the cuts-first approach and it hasn't worked. New, sustainable revenue sources can help the state improve schools across the state, as well as invest wisely in jobs and communities.