LFB Projects Modest Revenue Growth in 2013-15 Budget Period
Today’s Report Contains Mixed News, with Higher 2013-14 Balance
New projections from the Legislative Fiscal Bureau (LFB) show that revenue growth in the upcoming 2013-15 biennium will be pretty modest, even without subtracting the amounts that the Governor has talked about using for an income tax cut and a transfer into the Transportation Fund. Based on current tax laws, the LFB projects tax growth of just 2.4% in 2013-14 and 3.6% in the second year of the biennium. Those aren’t terrible numbers, but they are nothing to crow about.
The new LFB report estimates that tax collections will be about $296 million less in the coming biennium than the Department of Administration (DOA) estimated in late November. The biggest chunk of that decline comes as no surprise – the loss of $219 million in state estate tax revenue that the state would have collected in 2013-15 if the fiscal cliff legislation hadn’t blocked the automatic restoration of our estate tax. (See our Jan. 4th blog post. ) Compared to the November DOA projections, the new LFB estimates call for more individual and corporate income tax revenue, but $103 million less during the biennium from the sales tax and almost $82 million less from tobacco taxes.
The bad news for the next biennium is partly offset by the projections for the current fiscal year. The LFB projects a closing “net balance” on June 30 of almost $420 million (after the $65 million statutory reserve has been subtracted). That’s an improvement of more than $136 million from the November DOA estimate, thanks to the following changes in the current fiscal year: $37 million more tax revenue, $35 million more from departmental revenues, and $64.5 million less General Fund spending – because of lower-than-expected expenditures for debt services (-$25.5 million), SeniorCare (-$18 million), and refundable tax credits (-$19 million).
I’m very pleased that the state will finish the current biennium with a strong closing balance. However, care needs to be taken not to use that one-time surplus for ongoing commitments in a way that isn’t sustainable. My colleague Tamarine Cornelius discusses that issue and some of the alternatives for the coming biennium in another blog post today: