Revenue Tracker: May Collections Above Estimate But Revenues Still Lag Governor's February Projections

General Fund revenue collections exceeded estimate in May and remain ahead for the fiscal year with only one month to go. While this is good news, it appears that this year’s revenue surplus is unlikely to reach the $232 million forecast back in February by the Corbett administration. That would mean less available revenue to carry forward into the 2013-14 fiscal year, and could modestly reduce revenue projections for the next year. Both will make the 2013-14 budget more difficult.

Last month, the Pennsylvania Independent Fiscal Office (IFO) forecasted that the state would end 2012-13 with no revenue surplus. The slightly-better-than-expected May revenues point to a year-end surplus somewhere between the Corbett administration's February forecast and the more recent IFO estimate. Assuming May’s results carry forward to June, the General Fund would end 2012-13 with a revenue surplus of between $113 million and $151 million, 0.4% to 0.5% over estimate.

In May, General Fund revenues exceeded estimate by $35 million, or 1.8% — bringing the fiscal-year-to-date surplus to $102 million, or 0.4% above estimate. 

2012-13 Revenue Tracker

TOTAL REVENUE COLLECTIONS
Estimate to Actual, Fiscal Year 2012-13
  Dec 12 Jan 13 Feb 13 Mar 13 Apr 13 May 13
Estimate $2,329,200 $2,355,100 $1,677,200 $4,219,800 $3,557,900  $1,991,100
Actual $2,441,586 $2,336,332 $1,629.465 $4,150,358 $3,589,552  $2,026,237
Monthly Difference $112,386 ($18,768) ($47,735) ($69,422) $31,652 $35,137
Cumulative Difference $171,466 $152,698 $104,963  $35,521 $67,173 $102,310
Fiscal Year-to-Date Percent Difference from Estimate 0.4%
 
TOTAL REVENUE COLLECTIONS
Comparison to Fiscal Year 2011-12
  December January February March April May
Actual FY 2011-12 $2,270,389 $2,170,813 $1,703,244 $4,061,174 $3,421,816  $1,892,790
Actual FY 2012-13 $2,441,586 $2,336,332 $1,629,465 $4,150,358  $3,589,552 $2,026,237
Monthly Difference $171,197 $165,519 ($73,779)  $89,184  $167,736  $133,447
Cumulative Difference $582,973 $748,492 $674,713  $763,897  $931,633 $1,065,080
Fiscal Year-to-Date Percent Difference from 2011-12 4.3%

Download the Full 2012-13 Revenue Tracker

For the first time this fiscal year, sales tax collections exceeded estimate — by a whisker — $1.3 million, or 0.2% of the monthly target. Fiscal year to date, sales tax collections are $308 million, or 3.7%, lower than was estimated. Lagging sales tax collections have virtually wiped out surpluses from other tax collections. For the fiscal year, total General Fund tax collections are now $22 million, or 0.1%, higher than estimate.

Corporate taxes exceeded estimate by $30 million, or 29.1%, in May, which is typically not a significant month for corporate collections. For the fiscal year, corporate tax collections are $273 million, or a healthy 6.2%, ahead of estimate. Without action by the General Assembly, corporate collections will likely decline in 2013-14 as the capital stock and franchise tax, once the state’s second largest business tax, will be eliminated in 2014. 

Personal income tax (PIT) collections came in $10 million, or 1.2%, lower than estimate in May. For the fiscal year, PIT collections (the General Fund’s single largest revenue source) are $104 million, or 1%, higher than estimate. 

Non-tax collections, which include investment interest, fees, and transfers from other funds, are now $67 million, or 16.5%, higher than estimate. 

Comparing Major Revenue Streams
Actual 2012-13 to Estimate 

May 2013 Actual Estimate
Over/(Under) %
Sales Tax  $752,702 $751,400 $1,302 0.2%
Personal Income Tax  $825,881 $835,900 ($10,019) -1.2%
Corporate Taxes $134,776 $104,400 $30,376 29.1%
Inheritance Tax $99,950 $88,400 $11,550 13.1%
Realty Transfer Tax $29,432 $29,900 ($468) -1.6%
Other Taxes: Cigarette, Malt Beverage, Liquor, and Table Games  $132,434 $132,400 $34 0.0%
Total Tax Revenue  $1,975,175  $1,942,400 $32,775 1.7%
Non-Tax Revenue $51,062  $48,700 $2,362 4.9%
Total General Fund  $2,026,237  $1,991,100 $35,137 1.8%
 
FISCAL YEAR-TO-DATE Actual Estimate Over/(Under) %
Sales Tax $8,092,463 $8,400,400 ($307,937) -3.7%
Personal Income Tax $10,345,454 $10,241,700 $103,754 1.0%
Corporate Taxes $4,677,183 $4,403,800 $273,383 6.2%
Inheritance Tax $770,066 $790,100 ($20,034) -2.5%
Realty Transfer Tax $304,648 $284,800 $19,848 7.0%
Other Taxes: Cigarette, Malt Beverage, Liquor, and Table Games $1,292,840 $1,339,400 ($46,560) -3.5%
Total Tax Revenue $25,482,653 $25,460,200 $22,453 0.1%
Non-Tax Revenue $477,357 $397,500 79,857 20.1%
Total General Fund $25,960,010 $25,857,700 $102,310
0.4%

Revenues Grow From Prior Year But Slower Growth Likely Ahead

Compared to the prior fiscal year, General Fund collections are up over $1 billion, or 4.3%, with most tax types exceeding last year’s levels. While this seems like good news for revenues next fiscal year, a closer look indicates a more slowly growing economy. Growth in 2013-14 is not expected to keep up this pace — for several reasons.

PIT is exceeding last year’s collections by $540 million, or 5.5%. States across the country have seen growth in the personal income tax collections. Some of this growth is being attributed to people recognizing capital gains prior to federal tax changes. This acceleration in the recognition of income is a one-time event, meaning growth in PIT next year is not likely to be as robust.

Corporate taxes also showed significant growth from 2011-12, growing $364 million, or 8.5%. This is not surprising with corporate profits and stock prices doing so well. This, too, is not likely to carry over into 2013-14. With the upcoming elimination of the capital stock and franchise tax, total corporate tax collections are expected to shrink in 2013-14. In February, the Governor’s Budget Office projected that corporate taxes would shrink by $310 million, or 5.9%, next fiscal year. This still seems likely.

Sales tax is only $98 million, or 1.2%, higher than at this point in 2011-12 — and includes a partial year of sales tax collected from large online retailers that wasn’t collected previously. Sales tax collections are more responsive to changing economic conditions than many other taxes. As much of our economy is based on consumer spending, sales tax growth of only 1.2% shows that the economy is not flourishing.

Comparing Major Revenue Streams
Actual 2012-13 to 2011-12 

May 2013 2012-13
Actual
2011-12
Actual
Over/(Under) %
Sales Tax $752,702 $710,501 $42,201 5.9%
Personal Income Tax $825,881 $803,644 $22,237 2.8%
Corporate Taxes $134,776 $81,340 $53,436 65.7%
Inheritance Tax $99,950 $85,837 $14,113 16.4%
Realty Transfer Tax $29,432 $28,299 $1,133 4.0%
Other Taxes: Cigarette, Malt Beverage, Liquor, and Table Games $132,434 $131,471 $963 0.7%
Total Tax Revenue $1,975,175 $1,841,092 $134,083 7.3%
Non-Tax Revenue $51,062 $51,698 ($636) -1.2%
Total General Fund $2,026,237 $1,892,790 $133,447 7.1%
 
FISCAL YEAR-TO-DATE 2012-13
Actual
2011-12
Actual
Over/(Under) %
Sales Tax $8,092,463 $7,994,559 $97,904 1.2%
Personal Income Tax $10,345,454 $9,805,223  $540,231 5.5%
Corporate Taxes $4,677,183 $4,312,720 $364,463 8.5%
Inheritance Tax $770,066 $756,156 $13,910 1.8%
Realty Transfer Tax $304,648 $263,312 $41,336 15.7%
Other Taxes: Cigarette, Malt Beverage, Liquor, and Table Games $1,292,840 $1,353,081 ($60,241) -4.5%
Total Tax Revenue $25,482,653 $24,485,051 $997,602 4.1%
Non-Tax Revenue $477,357 $409,879 $67,478 16.5%
Total General Fund $25,960,010 $24,894,930 $1,065,080 4.3%

Conclusion

While the revenue results in May were positive, revenue collections are still likely to fall short of levels projected when the Governor’s budget plan was announced in February. This likely means less funding than initially projected for the 2013-14 budget or other administration priorities, such as tax cuts. To avoid deeper cuts to our schools and vulnerable citizens, the Legislature should delay any new tax cuts, including a planned cut in the capital stock and franchise tax for 2014.