States Target Surpluses to Rainy Day Funds, Other Priorities after Fiscal 2018 Revenues Exceed Estimates

By Brian Sigritz posted 17 days ago


Most states saw stronger revenue growth in fiscal 2018 led by unusually high income tax payments from non-withholding income sources along with continued growth in the national economy. Specifically, states saw a significant uptick in their personal income tax collections in the last eight months. Information from NASBO’s Spring Fiscal Survey of States shows that 39 states were seeing fiscal 2018 revenues above projections at the time of data collection, with that figure expected to rise when updated data is collected in the fall. As a result of revenues coming in above forecast, many states ended fiscal 2018 with a budget surplus. NASBO’s 2015 Budget Processes in the States report details states’ use of general fund budget surpluses in Table 16. Common uses of general fund budget surpluses include: transfers to budget stabilization or rainy day fund (32 states), remaining in general fund (39 states), refunded to taxpayers (7 states), earmarked (6 states), paying down outstanding debt (10 states), and one-time expenditures (14 states).

Below is a listing of state revenue totals and examples of how some states are using fiscal 2018 budget surpluses, after 46 states ended the fiscal year on June 30th:

  • Arizona general fund revenues were $238 million (2.4%) above the enacted budget forecast reflecting a 6.4% annual increase. Much of the revenue gain is likely a one-time resource; about two-thirds of the of the individual income tax gain was related to estimated and final payments.
  • Arkansas ended fiscal 2018 with $41.7 million (0.8%) more than anticipated in net revenue. The additional revenue will basically zero out what was spent by state agencies.
  • California reports that preliminary general fund revenues were $1.5 billion (1.1%) higher than the budget forecast, an 11% increase over the prior year.
  • Colorado’s strong revenue growth may require it to return approximately $200 million to taxpayers over the next three years as part of the Taxpayers Bill of Rights (TABOR).
  • Connecticut individual income tax estimated and final payments above a certain threshold and amounts needed to resolve a fiscal 2018 general fund deficit will be deposited into its budget reserve fund. The state comptroller is estimating a transfer of $779.4 million to the reserve fund, bringing it up to $992.3 million, or 5.25% of the fiscal 2019 general fund budget.
  • Florida general revenue collections were $205.2 million (0.7%) over estimate for the year. More than half of this surplus was associated with one-time events.
  • Georgia tax collections increased 4.4% in fiscal 2018, strong enough growth to place excess revenue into a reserve account.
  • Idaho ended the fiscal year with $100.7 million (2.8%) more tax revenue than anticipated, an 8.2% growth over the prior year compared to a 5.3% growth estimate. Under Idaho’s surplus eliminator law, half of the surplus will go to the Budget Stabilization Fund and half will go to a fund for state and local road and bridge projects.
  • Illinois actual receipts exceeded the official estimate by just over 1%, despite large impacts from rate adjustments and uncertainties related to federal tax changes.
  • Indiana ended the year with a surplus of approximately $100 million, allowing the state to place additional funds in its reserve accounts.
  • Iowa preliminary year-end general fund receipts slightly exceeded budgeted estimates.
  • Kansas general fund receipts for fiscal 2018 were $267 million (3.8%) above the estimate. The bulk of the revenue overage came from the individual income tax.
  • Kentucky ended fiscal 2018 with $120 million (1.1%) more in revenue than anticipated. The additional revenue will allow $82 million to be returned to the Budget Reserve Trust Fund.
  • Maine reports a general fund surplus of approximately $101 million, $82.1 million from higher-than-projected income and sales tax revenue (2.3%) and $19 million in unspent budgets. The budget law allocates the surplus, 80% ($76.2 million) to the budget stabilization fund and 20% for tax relief.
  • Massachusetts collected $1.1 billion more in tax revenue than estimated.  Capital gains taxes were $1.7 billion, of which $514 million will be transferred to the state’s rainy day fund, of which 90% ($463 million) remains in the Stabilization Fund, 5% ($26 million) each goes to the State Retiree Benefits Trust Fund and the Commonwealth’s Pension Liability Fund. The governor is asking that part of the additional revenue be directed towards school security.
  • Minnesota general fund receipts for fiscal 2018 are preliminarily estimated to be $348 million (1.6%) more than projected. Individual income taxes made up $330 million of the revenue surplus. The report states that it is likely that non-wage income, particularly capital gains, grew faster in tax year 2017 than the forecast anticipated.
  • Mississippi is estimating that fiscal 2018 revenues will exceed projections by $88 million (1.6%); typically, the state uses leftover funds for capital improvements and the rainy day fund. Insurance premium taxes and settlements comprise much of the $88 million amount.
  • Montana ended fiscal 2018 with an $111 million surplus. Of that amount, $45.6 million will be deposited into the state’s new budget stabilization reserve fund and $20 million will be provided to state agencies to partially offset cuts in the fiscal 2019 budget.
  • Nebraska general fund receipts for fiscal 2018 were $62 million (1.4%) above the budgeted forecast. Over $50 million was from the individual income tax.
  • New Hampshire preliminary year-end revenues for its general and education funds exceeded fiscal 2018 estimates by $127.9 million (5.2%). Most of the revenue surplus came from its business profits and business enterprise taxes.
  • North Dakota was able to place $58.8 million in its Legacy Fund, which is derived from 30% of oil and gas tax revenue.
  • Ohio general revenue tax receipts were $574.2 million (2.6%) above estimate. Individual income tax revenues were $433.8 million above estimate. Ohio placed an additional $657.5 million into its rainy day fund, bringing its overall total to $2.7 billion.
  • Oklahoma is expecting to deposit $370 million into its rainy day fund, its first deposit in four years.
  • Pennsylvania made a $22 million deposit in its rainy day fund, its first deposit into the account since 2009.
  • South Dakota had a $16.9 million surplus in fiscal 2018; $6.2 million (0.4%) from revenues above estimate and $10.7 million in lower spending. The additional revenue was placed into the state’s reserve account, bringing its overall total to $176.4 million.
  • Tennessee’s revenues through June are 2.7% more than the budgeted amount and 2.3% higher than the revised forecast. June is the eleventh month of fiscal 2018 for Tennessee since its revenues are on an accrual basis.
  • Utah revenue collections for its general and education funds for fiscal 2018 exceeded estimates by about $230 million (3.4%). The annual revenue growth rate was 10.9%.
  • Vermont general fund revenues exceeded the fiscal 2018 target by $65.3 million (4.4%), led by personal income and corporate income taxes. The report states that not all of the revenue growth is likely to repeat itself in fiscal 2019.
  • Virginia revenues were $551 million above projections; the governor and legislature earlier agreed to place any additional funds into the Revenue Stabilization Fund or a new cash reserve.
  • West Virginia general fund collections were $20.2 million (0.5%) ahead of estimate. The last time the state finished a budget cycle with a surplus, without mid-year budget cuts, was six years ago.
  • Wyoming general fund and budget reserve account revenue collections through June 2018 are $56.5 million (4.4%) ahead of estimates.