Governor Spanberger recently released August figures for state General Fund revenue collections, which are slightly ahead of the forecast. Total General Fund collections grew by 2.8 percent ($58 million) in August, and revenues are up 5.4 percent ($236.5 million) on a fiscal-year-to-date basis. Total General Fund revenues are 1.8 percent ahead of the forecast through August. In summarizing the revenue report, the Governor said, “Revenue remains generally in line with our forecast through the first two months of the fiscal year, though continued national economic uncertainty means we must stay vigilant.”
Key indicators for August are withholding and sales and use tax collections, as August is not a significant month for collections of other state revenue sources. Sales and use taxes performed well, growing by 4 percent ($17 million) in August, and are up 9.1 percent ($77.3 million) fiscal year-to-date, outpacing projections by 5.6 percent ($49.2 million). Net individual income tax collections (representing 70 percent of General Fund revenues), fell by 1.2 percent in August relative to last year; although fiscal year-to-date collections are up 2.1 percent, collections are lagging the forecast by 0.7 percent ($22.4 million). In his memorandum transmitting the August revenue report to the Governor, Secretary of Finance Mark D. Sickles noted that withholding collections, although 2.5 percent below the forecast, were still “well within expectations” given monthly variations in collections.
Secretary Sickles’s memorandum pointed to several concerning data points, noting that Virginia lost 9,600 jobs in July, with most losses concentrated in local government (5,800 jobs) followed by professional and business services (3,400 jobs), although somewhat offset by gains in the leisure and hospitality and financial services sectors. The state’s unemployment rate dropped from 3.8 percent to 3.7 percent, although the state’s labor force participation rate also dropped slightly, from 63.1 percent to 63 percent.
Secretary Sickles noted in his memorandum that the Consumer Price Index increased slightly in August, while the Federal Reserve’s preferred inflation measure, Core Personal Consumption Expenditures (which excludes energy and certain food purchases), remained at 3.7 percent, above the Federal Reserve’s target of 2 percent. The Federal Reserve’s Federal Open Market Committee met on September 16 and unanimously voted to increase the federal funds rate by a quarter percentage point, as had been widely anticipated. The Committee’s statement noted that inflation remains elevated while the national economy is generally healthy (“Economic activity is expanding at a solid pace. While uncertainty remains elevated owing, in part, to geopolitical developments, domestic spending has been resilient. Productivity growth is strong, and capital investment is robust. Job gains have kept pace with the workforce, and the unemployment rate has changed little.”) and declared, “The Committee will deliver price stability.”
Secretary Sickles is scheduled to brief the Senate Finance and Appropriations Committee on August revenues on September 23. The state’s budget development process is underway; state agencies’ budget proposals were due September 14, and the Joint Advisory Board of Economists, which helps develop the economic projections underpinning the Governor’s proposed budget, is scheduled to meet on October 14.
VACo Contact: Katie Boyle