Budget Blog

Most States End Fiscal 2023 with a Budget Surplus as Revenues Exceed Forecasts

By Brian Sigritz posted 08-01-2023 05:00 PM


Most states ended fiscal 2023 with a budget surplus as tax collections once again came in above projections. Entering fiscal 2023, states assumed smaller revenue levels following double-digit growth in tax collections in both fiscal 2021 and fiscal 2022. While year-over-year revenue collections grew at record high levels of 16.6 percent in fiscal 2021 and 16.3 percent in fiscal 2022, states forecasted fiscal 2023 revenues would decline 3.1 percent in their originally enacted budgets. States forecasted less revenue growth in fiscal 2023 due to several factors, including the high baseline established in fiscal 2022; the impact of both recurring and one-time tax policy changes; the assumption of slower economic growth, weaker capital gains, and modest declines in consumption; and consumer behavior shifting towards spending more on services (less often taxed) rather than goods. As fiscal 2023 progressed, many states saw higher than projected growth in tax collections and revised revenue forecasts upward for the remainder of fiscal 2023. Whereas original forecasts projected a 3.1 percent decline in revenue in fiscal 2023, revised forecasts assumed only a 0.3 percent annual decline, according to the Spring 2023 Fiscal Survey of States.

To date, the vast majority of states who have reported full-year fiscal 2023 tax collections have come in above original forecasts, with many also seeing revenues above revised forecasts, leading to a third consecutive year of surpluses. While most states have reported budget surpluses, the amount in nearly all cases has been less than the substantial surpluses seen in fiscal 2022. States are examining the best use of these smaller surpluses, including further building up rainy day funds, reducing unfunded pension liabilities, paying down debt, investing in education and other spending priorities, and providing tax relief, while also focusing on ensuring one-time revenues are not used for ongoing obligations.

As states prepared to move into fiscal 2024, they were anticipating a small decline in tax collections partly due to economic uncertainty at the time revenue estimates were adopted. Recommended budgets for fiscal 2024 are based on general fund revenues totaling $1.17 trillion, which would represent a slight decline of 0.7 percent compared to estimated fiscal 2023 levels. In recent years states have taken steps to prepare for a slowdown in tax collections through actions including using one-time funds for one-time purposes, paying down debt, making supplemental pension payments, and increasing the size of rainy day funds to record levels.


Forty-six states ended the fiscal year on June 30. Below is a sampling of revenue totals from states that have published preliminary data for the full fiscal year and descriptions of how some states are using fiscal 2023 budget surpluses:

Arkansas’s revenue collections were $126.5 million above a May forecast, and the state ended fiscal 2023 with a budget surplus of $1.2 billion. All major categories of tax collections were above forecast for the year. Arkansas noted it experienced another year of strong gains in sales tax collections, and less declines than expected from income taxes due to tax rate reductions and unusually high capital gains, bonuses, and earnings reported in fiscal 2022. Overall, revenues declined $292 million, or 3.9 percent, from fiscal 2022. The governor has discussed using part of the state’s surplus to invest in education and lower income taxes.

Connecticut ended fiscal 2023 with a general fund surplus of $745.9 million and a special transportation fund surplus of $260.2 million. The surplus is less than an earlier forecast due to a $323.9 million decrease in revenue projections (primarily from eliminating the use of American Rescue Plan Act funding) and a $530.1 million increase in projected expenditures, both resulting from the passage of the state’s fiscal 2024-2025 budget, which also made adjustments to fiscal 2023. The state’s comptroller noted the state ended the year with a surplus even after previously passing the largest tax cut in state history. The comptroller also added that approximately $2.1 billion will be available to reduce unfunded pension liabilities.

Georgia ended fiscal 2023 with a surplus of approximately $4.8 billion as revenues exceeded projections. Overall, fiscal 2023 tax collections increased $40.3 million, or 0.1 percent, compared to fiscal 2022. The governor’s office discussed using the state’s one-time funds in a strategic, fiscally responsible way that does not commit short-term revenue gains to long-term obligations.

Idaho had a surplus of $99.1 million in fiscal 2023 as revenues came in stronger than expected and agencies spent less than what was budgeted. The governor’s office noted the surplus will go to property tax relief following passage of a measure during the 2023 legislative session that provided $205 million in property tax relief as well as directed surplus revenue to further property tax reductions.

Illinois’ fiscal 2023 general revenues were $50.7 billion, $373 million above last year’s level. The state ended the year with a surplus of $726 million as revenues exceeded the most recent estimate adopted in May. The governor noted he would be cautious in spending one-time revenue and would like to direct it to items such as paying down debt.

Indiana collected $21.1 billion in general revenues in fiscal 2023, $25 million, or 0.1 percent more than expected, and $133 million, or 0.6 percent, less than fiscal 2022. The state’s comptroller also said Indiana ended fiscal 2023 with $2.9 billion in state reserves. The governor noted Indiana has been able meet the needs of Hoosiers, pay down debt, and maintain a healthy reserve. The state did not collect enough to trigger an automatic taxpayer refund partly due to one-time spending in the new budget.

Kansas ended fiscal 2023 with tax collections of nearly $10.2 billion, which exceeded the state’s revised estimate by $25.9 million. Overall, the state collected $402 million more than fiscal 2022 with income taxes increasing 6.4 percent and sales taxes growing 1.3 percent. The governor attributed the better-than-expected revenue collections to her administration’s work to attract businesses, expand the workforce and broaden the state’s economy, and added she hopes to partner with the legislature to provide Kansans with tax relief.

Kentucky’s fiscal 2023 general fund receipts totaled $15.1 billion, exceeding estimates by $1.4 billion. Individual income taxes, sales and use taxes, and corporate income taxes all came in above forecast for the year. Overall, general fund collections grew 3.0 percent in fiscal 2023 compared to fiscal 2022. The governor highlighted Kentucky’s economic strength, while also noting the state has recently lowered income and property taxes.

Mississippi’s fiscal 2023 tax collections were $303.3 million, or 4.1 percent above fiscal 2022, and were $699.6 million, or 10.1 percent, above forecast. Sales and corporate taxes were both above fiscal 2022 levels, while individual income taxes were below. However, sales, individual income, and corporate taxes all exceeded estimates. The governor said the revenue report is proof of the state’s economic strength and the effectiveness of conservative budgeting practices, and called for returning excess revenue to taxpayers.

Missouri’s fiscal 2023 tax collections increased 2.7 percent compared to fiscal 2022, rising from $12.9 billion to $13.2 billion. Individual income taxes increased 0.1 percent for the year, sales and use tax collections rose 7.2 percent, and corporate income and corporate franchise tax collections grew 16.4 percent.  

Nebraska’s fiscal 2023 general fund tax receipts exceeded projections by $3 million. The surplus will be transferred to the state’s Cash Reserve Fund. The governor noted the surplus bodes well for the stability of the state’s economy as Nebraska continues to provide tax relief and work with state agencies to constrain spending.

New York’s state comptroller said revenues from April to June were $450.8 million higher than projected, although they were $6.8 billion lower than the same quarter last year (New York began fiscal 2024 on April 1).

Ohio’s fiscal 2023 general fund tax revenue was $28.9 billion, which was $994.2 million, or 3.6 percent, above estimate. Personal income taxes accounted for most of the surplus due to stronger than anticipated withholding performance. Fiscal 2023 tax receipts were $763.2 million, or 2.7 percent, above last year’s level.  

Pennsylvania ended fiscal 2023 with $44.9 billion in general fund collections. The total was $1.3 billion, or 3.1 percent, above estimate. Sales tax receipts were 1.5 percent more than anticipated and corporate tax collections were 19.8 percent above estimate, while personal income tax revenue was 2.9 percent below estimate.

South Dakota closed fiscal 2023 with a surplus of $96.8 million. State government spent $79.7 million less than appropriated in fiscal 2023, while revenues were $17.1 million above forecast. By law, the surplus was transferred to the state’s budget reserves. The governor said South Dakota’s economy continues to thrive because the state has kept government small, taxes low, and spends within its means.  

Virginia’s fiscal 2023 tax collections exceeded the official forecast included in the Appropriation Act by $3.0 billion as well as exceeded the updated December forecast by $1.5 billion. The official forecast originally assumed general fund revenues would decline 14.0 percent following fiscal 2022’s extraordinary growth in individual income tax nonwitholding payments related to capital gains, but revenues instead only declined by 3.5 percent. Fiscal 2023 revenue totals were also impacted by a significant tax relief package passed last year . The governor said Virginia ended fiscal 2023 with $5.1 billion in excess resources, and called for additional tax relief as well as continuing to invest in shared priorities.

West Virginia’s fiscal 2023 revenues came in $1.8 billion above estimate, resulting in the state’s largest single-year surplus. Total tax collections were approximately $6.5 billion, 10 percent higher than fiscal 2022 adjusted collections. All major sources of tax collections experienced growth in fiscal 2023, despite a recent reduction in personal income tax rates. By law, a portion of the surplus must be transferred to the state’s rainy day fund, leaving approximately $454 million unappropriated. 

Wyoming’s fiscal 2023 revenues exceeded the state’s January forecast by $176.1 million (11.1 percent). General fund revenues outpaced projections by $55.3 million, or 4.3 percent, mainly due to the strength of sales and use taxes, severance taxes, and pooled income from dividends and interest. In addition, earmarked severance taxes to the state’s Budget Reserve Account are $24.0 million, or 13.2 percent above projections, and federal mineral royalties are $96.9 million, or 29.3 percent, above forecast. The governor said the state should continue to be conservative with recent windfalls, be vigilant in ongoing spending, and recognize the potential of future challenges.