Pennsylvania has passed the halfway point of its fiscal year and right now things, revenue-wise, aren’t looking too bad for the state.
The Commonwealth in December brought in $101.2 million more last month than it did in December 2014, which pushed the state’s year-to-date General Fund revenues $168 million, or roughly 1.3 percent, ahead of the Independent Fiscal Office’s expectations for the first six months of Fiscal Year 2015-16.
In July, the IFO suggested FY2015-16 revenues would grow by only 0.6 percent, or about $182 million, over the total revenues collected for the prior year.
Despite the current run of revenue performance, in its December 2015 Five-Year Outlook report, the IFO revised its overall General Fund revenue growth projection only slightly, to 0.7 percent from its prior 0.6-percent growth estimate.
So it’s possible, given the IFO projections – and assuming state lawmakers don’t come to some type of an agreement to raise a few taxes – the next six months won’t be much of an improvement over the second half of FY2014-15.
As for last month’s collection of more than $2.7 billion in General Fund revenue, it was helped in large part by better-performing personal income (an increase of $47.1 million, or 4.6 percent, compared to December 2014) and sales and use ($20.1 million, or 2.5 percent, better than last year) taxes.
For the fiscal year so far, both the PIT and SUT continued to perform better than last year, but the SUT remains short of the IFO’s July official revenue estimate for FY2015-16, while the PIT is currently right on the money, no pun intended: in July, the IFO expected a 3.5-percent growth rate for the SUT, but so far it’s only up by 2.9 percent six months into the fiscal year; the PIT is matching the IFO’s projected 4.8-percent growth rate. In its revised outlook released last month, the IFO held to its 4.8-percent PIT revenue growth rate and revised upward – to 3.7 percent – the growth rate for SUT revenues, so Pennsylvania consumers are going to have to do a lot more buying over the next six months.
As noted by the governor and others on Monday, this year marks the final phase-out of the state’s Capital Stock and Franchise Tax (it brought in $24.2 million last month). And while it brought in more last month than it did in December 2014, the ongoing CSFT phase-out has helped to reduce incoming tax revenues from Pennsylvania businesses. Two years ago it brought in $161.7 million through the first half of the fiscal year, but for the current FY2015-16, it has delivered $87.2 million.
However other corporation taxes – primarily the Corporate Net Income Tax (CNIT) – underperformed compared to last year, leading to total corporation taxes coming up $35.6 million, or 6.3 percent, short of December 2014’s total.
While business tax revenues for the current fiscal year have come up short of where they were six months into last year, the difference isn’t quite as significant: $25.4 million, or 1.8 percent, less than midway through FY2014-15.
That isn’t completely unexpected, as the IFO has been projecting a retreat of the state’s corporate tax revenues compared to last year, although that retreat right now is worse than had been anticipated. In July, the IFO projected a 1.6-percent decline in total corporation taxes compared to FY2014-15. In its December 2015 updated revenue outlook, the IFO did ratchet-back expectations for the state’s primary business tax, the CNIT, for FY2015-16 from its July projection, to a revenue decline of 1.3 percent compared to the original estimate of a 1.1-percent decline.
All the state’s other revenues – from such things as the inheritance tax, the realty transfer tax, and the various “sin taxes” – collectively delivered revenue last month that was slightly higher than what those taxes produced in December 2015 ($257.5 million versus $255.4 million), but the current year-to-date totals are approximately 2.5-percent lower ($35.9 million) than they were at the halfway point of FY2014-15.
The drop-off is still largely due to the inheritance tax last year, in October, getting a one-time, nearly $100 million revenue windfall from one estate.
However, the collective revenues of the state’s other taxes could be better than they appear, thanks to what looks to be an improvement in Pennsylvania’s real estate market. The IFO in its new quarterly report for the second quarter of FY2015-16 suggests the realty transfer tax, which is already $32.4 million (or 15 percent) ahead of FY2014-15 revenues six months into last year, might actually be doing even better.
“News reports indicated that some counties may have withheld funds [realty transfer tax revenues] during the budget impasse. If this occurred, the reported results understate the strength in this category,” the IFO reported.
And, like the realty transfer tax revenues, it’s possible the collective strength of the state’s tax revenues – as they relate to overall General Fund revenues – is likewise being understated, given the disparity between FY2014-15 and FY2015-16 regarding non-tax revenues.
Helped by one-time revenues last year, Pennsylvania’s non-tax revenue was $376.8 million at the halfway pole through FY2014-15, which was nearly $270 million (247 percent) more than the first six months of FY2013-14. For the current FY2015-16, non-tax revenues midway through the year total $144.1 million, which is 61.8-percent less than where they were a year earlier.
Total tax revenue – not the larger General Fund revenue figure – halfway through FY2015-16 is 2.6 percent ahead of the tax revenue generated at the midway point of FY2014-15. The IFO in July projected 2.5-percent growth of tax revenue for all of FY2015-16.