General Fund revenue is $261.8 million below estimate

General Fund revenue is $261.8 million below estimate

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Pennsylvania’s revenue situation worsened a bit more in November as General Fund tax revenues came up $129 million short of estimates for the month.

However, thanks to some unexpected non-tax escheats revenue last month, total General Fund revenue collections were only $79.5 million, or 3.8 percent, short of expectations, pushing the year-to-date revenue shortfall to $261.8 million, or 2.4 percent below estimate.

During its annual economic and budget outlook briefing in November, the state’s Independent Fiscal Office forecast Pennsylvania would have a revenue shortfall of at least $500 million for the full fiscal year.

Through the first five months of Fiscal Year 2016-17, the state budget expected revenues to have grown by 3 percent, or $423 million, compared to the prior year through November.

However, compared to a year ago at this time, a new IFO report shows fiscal year-to-date revenues are approximately $160.9 million, or 1.5 percent, ahead.

As has been the case for much of the current fiscal year, Pennsylvania’s “big three” revenue generators continued to post weak results.

For November, the personal income tax (PIT) was $20.2 million, or 2.3 percent, less than estimates; the sales and use tax (SUT) was $51.9 million, or 6.3 percent, below expectations; and corporation taxes were $27 million, or 45.8 percent, less than anticipated.

According to the IFO, PIT revenues were 13.1 percent better in November 2016 compared to November 2015, largely due to a 13.7-percent increase in PIT-withholding, which was affected by a quarterly filer due date that occurred in October this year and November last year.

For the year, the “big three” are short of estimates, creating an overall shortfall of $260.3 million (about 2.7 percent less than anticipated). Year-to-date, the IFO shows PIT revenue 1.7 percent ahead of last year’s total through November, while the SUT is 0.6 percent ahead and total corporation taxes are behind by 7.4 percent. In June the IFO projected that in FY2016-16, PIT revenues would grow by 3.6 percent, SUT revenues by 3.5 percent and corporation tax revenues would contract by 2.3 percent.

Most of the state’s other revenue generators are off of their expected pace, for both November and the fiscal year thus far. However non-tax revenues are running $49.1 million better than anticipated – as mentioned earlier, they were above estimate in November by $49.5 million thanks to unexpected escheat revenue (unclaimed property) – helping to mitigate that weakness.

Of the other taxes, the state’s “sin taxes” are running closest to estimates, although still coming up short by approximately $8.1 million, or 1.1 percent, for the year, even with cigarette tax revenues – thanks to the tax hike as part of the 2016-17 budget – performing 35.4 percent better than last year through the five months of the fiscal year. For November, the tax revenue from such things as cigarette, other tobacco products, malt beverage and liquor sales, as well as table games, totaled $163 million, which was $23.1 million below estimate.

The Realty Transfer Tax (short $1.8 million in November) is $28 million, or 12.3 percent, below year-to-date expectations, while the state’s inheritance tax ($5 million short in November) is $14.5 million, or 3.8 percent, less than anticipated for the year thus far.