Strength in state revenues continues as “Budget Sunday” approaches

February 13, 2020

Members of the “money committees” have been meeting in informal workgroups this week in advance of the House Appropriations Committee and Senate Finance and Appropriations Committee reporting their respective budgets on Sunday afternoon.  A strong revenue report issued by the Governor this week may offer some additional flexibility in budget negotiations, although some uncertainty remains about income tax refunds that may be required to be paid later in the fiscal year, as well as a potential slowdown in income tax nonwithholding as taxpayers adjust to changes in the federal tax code enacted in 2017.

Secretary of Finance Aubrey Layne reported that total General Fund (GF) revenues increased by 8.7 percent in January, and on a fiscal year-to-date basis, revenues are up by 8.4 percent, comfortably outpacing the annual forecast of 1.9 percent growth.  Individual income tax withholding, a mainstay of GF revenues, grew by 5.2 percent in January and by 5.7 percent on a fiscal year-to-date basis.  Non-wage withholding collections, which tend to be a volatile revenue source, increased by 18.6 percent in January relative to January 2019, and have grown by 18.1 percent on a fiscal year-to-date basis; the annual forecast projects a 7.7 percent decline.  Sales tax collections in January (reflecting December sales) increased by 9.9 percent and have grown by 8.4 percent on a fiscal year-to-date basis (ahead of the forecasted 6 percent increase).

In a February 12 article in the Richmond Times-Dispatch, Secretary Layne attributed the continued growth in sales taxes to increases in collections related to online transactions.

VACo has been working with members of the money committees and their staff, partner organizations, and locality representatives to ensure that county priorities are considered as the committees’ budgets are assembled, and will be reporting on the key elements of the House and Senate proposals in future editions of Capitol Contact.

VACo Contact: Katie Boyle

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