State Revenue Reality Check
State General Fund revenue for the two-year period that began in July 2013 (Fiscal Years 2014 and 2015) will be about $20.6 million (0.3%) higher than previously forecast, according to the latest report from the state’s forecasting committee. The general fund is the primary source of state funding for education, health care, public safety and corrections, and conservation and natural resources.
This small upward revision in the revenue outlook is due to an improved outlook for sales and personal income tax revenue, and comes in spite of a lowering of growth expectations for the state’s economy.
Sales tax revenue is expected to be $18.7 million higher than previously forecast, mostly due to “improved fuel price forecasts and higher projections for automobile sales,” according to the report. Personal income tax revenue is expected to be $23.2 million higher than previously forecast, mostly due to “updated tax data from the 2012 tax year and various technical adjustments.” Corporate income tax revenue, on the other hand, was revised downward by $18.8 million.
In case anyone out there still believes that income tax cuts increase revenue, it’s important to note that revenue from personal income taxes in FY 2014 is now forecast to be 9.3% lower than it was in FY 13. That’s a result of the income tax cuts passed by the 125th Legislature that took effect in January 2013.
Also, it’s important to understand the historical context of this revenue forecast. Although the outlook for general fund revenue over the current two-year budget period was revised upward by about $21 million, inflation-adjusted general fund revenue is still forecast to be no higher than it was in 1998-1999, and $600 million below what it was before the recession. The state economy and state revenues still have a long way to go to return to their 2006-2007 level, thanks to the worst recession since the Great Depression, a sluggish recovery, enormous income tax cuts that blew a greater than $400 million hole in the state’s budget, and a failure of state leadership to pursue counter-cyclical economic recovery and jobs creation through investment in transportation, education, workforce training, and research and development.