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State General Fund Collections Continue Growth in August

Governor Northam announced on September 12 that state General Fund (GF) revenue collections increased 4.5 percent in August relative to August 2017. Individual income tax payroll withholding, a mainstay of GF revenues, grew 5.1 percent in August. On a fiscal-year-to-date basis, payroll withholding collections are flat relative to the same time period the year before, but this apparent underperformance is likely attributable to a quirk in the July calendar. In his presentation to the money committees in August, Secretary of Finance Aubrey Layne explained that the timing of the July 4 holiday had likely pushed some July withholding payments into June, so they were captured in the previous fiscal year. Sales and use taxes turned in an unusually strong performance, growing 7.5 percent for the month, and also 7.5 percent on a fiscal-year-to-date basis.

During his presentation to the House Appropriations Committee on September 17, Secretary Layne suggested that September revenues will provide a clearer picture of how Virginia’s economy is performing, since estimated nonwithholding payments are due in September, and sales tax collections (reflecting August sales) will allow an analysis of sales over the summer tourism season, but he was optimistic that revenues would meet the annual estimate. He sounded a note of caution later in his presentation, when he outlined the list of expected commitments and demands on the state budget in the upcoming session, including promised economic development incentives, costs to unwind the state’s relationship with its former IT contractor, Northrop Grumman, and state costs to respond to Hurricane Florence (some of which are expected to be reimbursed by the federal government). Dr. Jennifer Lee, Director of the Department of Medical Assistance Services, discussed another possible claim on the state budget in her presentation on the potential for the federal government to claw back Medicaid funds spent at Piedmont and Catawba hospitals over a dispute about how the facilities should be categorized with respect to Medicare and Medicaid.

After the September revenue report, the Joint Advisory Board of Economists (JABE) will meet in October to review the economic outlook for FYs 2019-2022, followed by a meeting of the Governor’s Advisory Council on Revenue Estimates (GACRE) in November. Governor Northam is scheduled to present his budget proposal to the money committees on December 18.

Secretary Layne’s revenue report is available at this link and his presentation to the House Appropriations Committee is available at this link.

VACo Contact: Katie Boyle

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