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

By Brian Sigritz posted 07-30-2018 11:36 AM

  

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 end fiscal year 2018 with a $127.3 million general fund surplus. Receipts were $103.3 million (+1.4%) above the revised estimate.
  • 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.
  • Louisiana’s treasurer is anticipating a surplus above $300 million after the state closes the book for fiscal 2018.
  • 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.
  • Maryland ended fiscal 2018 with a $503.8 million surplus, consisting of a $339.3 million revenue surplus and lower spending of $144.5 million.
  • 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 the state will have a $110 million surplus in fiscal 2018; approximately $55 million will be directed to the rainy day fund, with most of the remaining surplus being directed to financing improvements for state buildings.
  • Missouri is reporting a year-ending surplus of $350 million for fiscal year 2018 driven mostly by collecting $9.47 billion in general fund revenues compared to the revised estimate of $9.19 billion.
  • 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.
  • New Mexico’s August 2018 revenue update estimates that general fund reserves will grow by over $600 million to $1.1 billion at the end of fiscal 2018, reflecting 18 percent of annual spending. Revenue growth of 14.6 percent were led by gross receipts, personal income and severance taxes, all which have been bolstered by record oil production.
  • North Carolina ended fiscal 2018 with a revenue surplus of $440 million, driven mostly by growth in non-withholding income such as business and investment income. The state’s unreserved general fund balance increased by $523.8 million as reported by the state Controller.
  • 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 will deposit $381.6 million into its rainy day fund, its first deposit in four years. Personal and corporate income tax revenues were 17% above budget.
  • Pennsylvania made a $22 million deposit in its rainy day fund, its first deposit into the account since 2009.
  • South Carolina reported a $177 million surplus in fiscal 2018 with higher revenues generating nearly all of it.
  • 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 has a $303.7 million general fund revenue surplus over the established budget estimate and $276.4 million above the November 2017 revised estimate. The franchise and excise tax revenues exceeded estimates by $170.6 million, sales taxes by $81.4 million.
  • Texas fiscal year 2018 ended in August. Revenues were up 10.5 percent over the prior year and $2.5 billion over the original budgeted estimate. In July 2018, due to better than expected economic growth, the state comptroller increased the revenue estimate from last October. This was the first time in 30 years the agency has updated the estimate for a reason other than a legislative session. The comptroller estimates that the rainy day fund will have a balance of $11.9 billion at the end of fiscal 2019, the largest balance in the fund’s history.
  • Utah revenue collections for its general and education funds for fiscal 2018 exceeded estimates by about $252 million (4.0%). The annual revenue growth rate was 11.3%. After depositing $102 million in various reserve accounts and other adjustments, the remaining available surplus amount is $158 million.
  • 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 $555.5 million above projections (3.1%); 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 revenue collections exceeded the budgeted estimate by $314.2 million. Most of the surplus revenue ($267.9 million) was from realized capital gains on the Permanent Wyoming Mineral Trust fund, along with sales tax receipts that were $38 million above the estimate.