State General Fund revenues continued to follow a positive trajectory in May and appear to be on target to meet the FY 2019 forecast. Governor Northam announced last week that May collections were up 22.5 percent relative to last May, and have grown 7.9 percent on a fiscal year-to-date basis. In his briefing for the House Appropriations Committee on June 17, Secretary of Finance Aubrey Layne explained that most of the growth is attributable to strong nonwithholding income tax collections. Withholding collections are slightly ahead of the forecasted growth of 3.8 percent on a year-to-date basis, growing 3.9 percent through May. Sales and use tax collections turned in a strong performance in May, growing by 9.7 percent, and year-to-date growth of 4 percent is ahead of the annual forecast of 3.7 percent growth. Secretary Layne noted that there has been an almost 14 percent increase in payments resulting from use taxes, which would include remote sellers who will be required to collect and remit these taxes beginning July 1 under legislation enacted this session in response to the Wayfair decision.
The annual forecast for total GF revenue growth contained in the budget signed by the Governor in May is 3.3 percent; however, as part of its response to federal tax policy changes enacted in the Tax Cuts and Jobs Act, the 2019 General Assembly directed that individual income tax refunds of up to $110 for individuals and $220 for married filers be issued in October 2019. In order to provide the full amount of these refunds, GF revenue growth must generate an additional $450 million above the 3.3 percent growth in the forecast. May’s strong revenue numbers suggest that the state is on track to meet these estimates. Prior to the issuance of the refunds, the Governor is required to certify the amounts collected that are attributable to the individual tax policy changes in the Tax Cuts and Jobs Act to the General Assembly on or before September 1; if amounts are not sufficient to cover the full amount of the refunds, the refunds will be pro-rated. The Department of Taxation expects to issue the refund checks between October 1 and October 15.
Key economic indicators for Virginia continue to show positive signs, as Virginia’s seasonally-adjusted unemployment rate remained low at 2.9 percent in April, according to the Virginia Employment Commission, and Virginia’s seasonally adjusted total nonfarm employment increased by 1.1 percent in April relative to April 2018. In conversation with the Appropriations Committee members, Secretary Layne emphasized the importance of investments in access to broadband as a way to ensure that all regions of the Commonwealth can share in the state’s overall prosperity.
The most recent national jobs report was somewhat disappointing, as the Bureau of Labor Statistics reported earlier this month that total nonfarm payroll employment grew by 75,000 jobs in May after a much stronger showing in April; however, the national unemployment rate remains low at 3.6 percent. Key areas of uncertainty include tensions in the trade arena and questions about how the federal debt ceiling limit will be addressed later this year.
VACo Contact: Katie Boyle