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State Revenues on Track as General Assembly Begins Consideration of Governor’s Budget

Secretary of Finance Stephen E. Cummings briefed members of the House Appropriations Committee on January 15 on December revenues and is scheduled to provide a similar update to the Senate Finance and Appropriations Committee on January 16.  Secretary Cummings reported that state General Fund revenues are in line with the forecast embedded in the Governor’s budget proposals, with fiscal year-to-date General Fund revenues 2.8 percent, or $363.2 million, ahead of projections.  Setting aside nonwithholding collections and refunds, year-to-date revenue collections are $85.8 million ahead of the forecast.  As Secretary Cummings summarized the situation in his remarks, revenues are outperforming the forecast, but the extent of the overperformance is between $85.8 million and $363.2 million, with the uncertainty largely due to the timing of payments and refunds under the new Pass-Through Entity Tax.  This mechanism allows certain business owners to elect to pay state income tax at the entity level (rather than the entity’s income being passed through to the business owner and the owner paying individual income taxes on that income) and then to receive a corresponding refundable income tax credit.  On a fiscal year-to-date basis, individual income tax collections are up 6.4 percent, and are ahead of projections by $436.6 million, while sales and use taxes are slightly below projections.

Secretary Cummings noted that the revenue forecast incorporated into the Governor’s budget proposal is intentionally conservative due to uncertainty surrounding domestic and foreign economic conditions.  House Appropriations Committee Staff Director Anne Oman suggested that given the ongoing strength in FY 2024 revenue collections, a mid-session revenue reforecast might be possible, depending on January revenue collections; if the forecast were revised, that update would take place in February, in time for legislators to incorporate it into budget deliberations.  January collections will provide additional information on holiday season sales tax collections, as well as withholding and nonwithholding income tax collections.

Following Secretary Cummings’s presentation, the House Appropriations Committee staff provided an overview of the introduced budget; the presentation may be found at this link.  The Senate Finance and Appropriations Committee staff will provide their budget briefing on January 17.  The process of proposing amendments to the introduced budget is underway; legislators’ deadline to submit amendments to the Governor’s budget was January 12, and the full text of all members’ amendments will be released later this week.  VACo is working on a set of amendments to address county priorities, and will provide details in a future edition of Capitol Contact so that members can assist in advocating on behalf of these requests.

VACo Contact:  Katie Boyle

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