Today’s official revenue forecast increases projections for the 2019-2021 biennium by $2.1 billion and $2.2 billion for 2021-2023. That effectively adds back nearly half of the $8.8 billion reduction in expectations made in the June forecast. The increase was widely expected following three consecutive months of revenue collections coming in well above the June projections.
The following chart shows the new fiscal year projections.
The Economic and Revenue Forecast Council writes,
While the COVID pandemic has had a significant negative impact on state revenues, the impact has not been as bad as forecasted in June. Cumulative major General Fund-State (GF-S) revenue collections from June 11 through September 10, 2020 came in $963 million above the June forecast. Even though collections were above the June forecast, however, collections for February 11 through September 10 were $840 million less than forecasted in February.
The real estate market has been much stronger than expected. While taxable activity was depressed from April through July, by August activity was above its year-ago level. Because of this, real estate excise tax (REET) collections since June came in $103 million higher than expected. REET collections for the current biennium are now forecasted to be $281 million higher than forecasted in June.
Supported by federal relief spending, retail trade activity was also stronger than expected, resulting in cumulative Revenue Act collections since June that were $846 million higher than forecasted. Since most of the first round of federal support has expired and any support forthcoming for the rest of the biennium is expected to be greatly diminished, a slowdown in the rate of retail trade recovery is now expected. Nevertheless, forecasted Revenue Act receipts for the current biennium are now $1.7 billion higher than forecasted in June.
The September GF-S revenue forecast has been increased by $2.1 billion in the current biennium and $2.2 billion in the next. The forecast of GF-S revenue for the 2023-25 biennium has increased by $2.5 billion. This still leaves the GF-S forecast $2.4 billion lower than the February 2020 forecast for the current biennium, $2.1 billion for the next biennium and $2.0 billion for the 2023-25 biennium.
As the last bullet makes clear, the state still faces a budget challenge, but one that has become more manageable. Again, the ERFC cites considerable uncertainty regarding the projections.
There’s always a lot of good information in the ERFC presentations. We recommend it. Here’s the concluding slide.
Good news for budget writers.