Members of the Economic Forum were told on Thursday less than half way through Fiscal 2016, General Fund revenues are $27.8 million below the forecast used to build the state budget.
Fully half of that deficit is in the cigarette tax category.
Legislative Counsel Burearu Economist Russ Guindon told the panel legislation raising the cigarette tax from 80 cents a pack to $1.80 per pack took effect in July last year. He said a large number of wholesalers bought large numbers of cigarette stamps in May and June before the increase hit, raising 2015 collections to $92.8 million, $15 million above that year’s forecast. As a result, those wholesalers haven’t had to buy as many stamps as expected so far this fiscal year.
With just the first quarter of the year counted, the shortfall is $13.4 million.
Most of the rest of the shortfall comes from the state’s largest revenue generators: gaming, sales taxes and the insurance premium tax.
So far this fiscal year, General Fund revenues were supposed to be just more than $1 billion. Despite that shortfall, the May 1 forum projections adjusted for the nearly $1.2 billion in tax increases approved by lawmakers were just 2.7 percent off.
Sales taxes generate more than $1 billion a year, gaming taxes about $700 million a year and $325 million annually.
Forum member Marv Leavitt said he was concerned abou those three major state resources. Despite being $4.3 million down, he said he was least concerned about the sales tax because, “sales tax is so dependent on what happens this Christmas market.” He said strong retail sales for Christmas could erase that shortfall.
Guindon agreed with him on the gaming tax collections, which are $10.4 million below projections.
With seven months left to report this fiscal year, he said, “it’s going to be a hard one to make up.”
The insurance tax collections, however, are $9.3 million and 10.7 percent below projections. Guindon said they don’t have the details necessary to figure out what’s going on there but because more than $3 million in collections from 2013 was reported late in the first part of 2014, the actual shortfall was more like $6 million.
Those shortfalls, however, were offset by collections that came in well above projections in several other categories.
The gaming Live Entertainment Tax brought in $9.5 million more than expected so far this fiscal year, the Modified Business Tax is up $2.2 million and the Real Property Transfer Tax nearly $2 million more than forecast,
Guindon told the forum the wildcard his staff is facing this interim is predicting the actual impact of a laundry list of tax credits approved by the governor and Legislature. If every dime of those credits is taken, it would cost the state $155.8 million in revenue over the biennium. Thus far in Fiscal 2016, businesses have claimed only $12.4 million of those tax credits.
The forum meets next in the summer to again review the status of their projections and the state General Fund budget. It’s charged with projecting the seven major revenues and more than 70 minor sources that make up the General Fund. Lawmakers and the governor are legally bound to build their budgets using those projections or, as they did in the 2015 session, pass revenue increases to cover the total they want to spend.
The forum didn’t make any new projections. The December meeting in the odd numbered year is just to update members on the status of General Fund revenue collections.