Legislative economist Russ Guindon told the Economic Forum on Thursday the state’s General Fund revenue picture was about the same as it was when reviewed in December.
Then it was $27.8 million below the forecast used to build the budget. Now, it’s about $22.9 million under.
He pointed out in the overall scheme of things, that’s a tiny part of the $7.29 billion General Fund budget — a fraction of a percent.
That shortfall, however, would likely disappear, according to Guindon, because he doesn’t expect the more than $78 million in tax credits available to companies such as Tesla to all be taken this fiscal year.
Some $42 million of those credits is still unclaimed and Guindon said he expects as much as $30 million to still be “out there” when the final numbers from this fiscal year are tallied. That would, in effect, be a windfall for this year, erasing the shortfall entirely.
While the total was similar, the problem areas are different now than they were six months back.
The Sales and Use Tax shortfall has grown over the past six months from $4.3 million to $15.3 million. And the Modified Business Tax has gone from $2.24 million to the good to nearly $2 million under expected collections.
That, however, is being offset by a dramatic improvement in gaming tax revenue. That category, the General Fund’s second largest revenue generator, was behind $10.4 million in December but was above projections by $2.26 million.
The Insurance Premium Tax has also made a turnaround in the past six months, going from $9.3 million down to $4.76 million ahead of projections. And the Real Property Transfer Tax went from just $1.5 million up to $4.2 million up.
The casino Live Entertainment Tax was $9.6 million above forecasts in December but has since dropped to $2.5 million ahead of projections.
Two revenue streams that are far below projections are the Non-gaming Live Entertainment Tax and the Cigarette Tax. The entertainment tax was primarily aimed at events like Burning Man and Electric Daisy Festival, which avoided some of the cost by selling tickets before the new tax took effect.
But Guindon also pointed out the tax applies to escort services that haven’t exactly been willingly paying it.
Forum member Matt Maddox said that’s “probably an invoice issue” — a reference to the fact those who provide escort services aren’t likely to report the income any more than their customers are willing to report the expense.
But Guindon said the tax is beginning to stabilize and, from $13 million low in December, has improved to just $11 million down.
Lawmakers raised the cigarette tax a full dollar per pack and expected that would drive some people to quit smoking. That revenue stream was forecast to generate a total of $175 million but has brought in just $112 million with just three months left to report this fiscal year.
Part of the problem is similar to the non-gaming entertainment tax. Distributors, seeing the per-pack increase coming, bought large numbers of cigarette stamps at the old, lower price before the tax kicked in.
A long list of other, smaller revenue sources, however, are doing better than expected so the overall shortfall for those revenue collections has fallen from $19.9 million in December to $14.3 million.
The forum will meet again in October to review actual collections before the December meeting to project revenues for the 2018-19 biennium. Those projections must be used by the executive branch and the Legislature to build the state budget.