State General Fund revenue collections continued to perform well in February, growing by 10.9 percent. Total revenue collections are up 6.2 percent on a fiscal year-to-date basis, ahead of the projection of 3.4 percent growth. Individual income tax paid through payroll withholding, which generates the lion’s share of General Fund revenues, continues to be an area of particular strength, growing 11.8 percent relative to last February, and increasing by 5.6 percent on a fiscal year-to-date basis, ahead of the forecast of 3.5 percent growth. Nonwithholding income tax collections dropped by 8.6 percent in February, but February is not considered a significant month for this source of revenue.
Sales tax collections appeared to rebound after a somewhat disappointing December and January. February collections, which include January sales, grew by 3.6 percent. On a fiscal year-to-date basis, sales tax is slightly outpacing the forecast of 3 percent growth, with growth of 3.2 percent.
Although Secretary of Finance Aubrey Layne pointed out several indicators of a healthy state and national economy in his February revenue report to the Governor, it is likely that the Administration will continue to take a cautious approach to the state’s revenue picture. In his announcement of the February collections, the Governor noted “continuing uncertainty coming from Washington” in addition to the continuing budget deliberations at the state level as reasons for proceeding with care. In a previous presentation to the “money committees” during the session, Secretary Layne suggested that he would like to examine a year’s worth of revenue collections to determine the effect of the recently-enacted federal tax legislation, as it is difficult to determine whether some of the growth the state has experienced, particularly in non-withholding in December, is due to tax planning strategies or attributable to “wealth events” such as the sale of a business. Secretary Layne noted in his report that state staff will be monitoring tax refunds as part of this review.
Secretary Layne’s revenue report is available here.
VACo Contact: Katie Boyle