Revenue Growth Continues to Look Strong Compared to 2010-11
The Department of Revenue issued a new monthly report on tax collections this week, and the numbers look pretty good. Although revenue growth slowed a bit in May, to 3.4% over the comparable month of 2011, tax collections for the first 11 months of the fiscal year are still up by 4.2%, which is good news.
More specifically, individual and corporate income taxes have both grown by 4.3% for the first 11 months of 2011-12, sales and use tax collections are up 4.8%, while excise tax revenue has dropped by 2.2%.
The new figures make me guardedly optimistic that Wisconsin won’t fall short of the projected revenue figures for the biennium, which were revised upwards by DOR in early May. Those figures reflect estimated tax growth of 3.7% in the current fiscal year, which ends in two weeks, followed by a slowdown in growth to 2.1% in the second year of the biennium.
As we noted in a previous post, if tax collections do grow by 3.7% during the current fiscal year, the Department of Administration will be required to transfer a portion of the increase, about $45 million, into the “rainy day” fund. Even after subtracting that amount, the state would finish the biennium with a General Fund balance projected to be $80 million higher than was assumed when the biennial budget bill was enacted almost a year ago.
The bad news is that the increase in the closing balance projected in May (for the end of the 2011-13 biennium) is primarily attributable to $78 million in increased “savings” from debt restructuring. That might sound like a positive thing, but it actually reflects a significant boost to the interest and principal payments on bonds that are being delayed until future years, and which will actually cost the state more in the long run. We’ll take a closer look at that largely unreported issue in a future blog post.