August State Revenue Report: Good News and Bad News
September 22, 2016
The latest Department of Finance (DOF) report shows good news for state revenues overall: August totals are $140 million above projections. Personal income tax receipts are the driver of this positive news, coming in $374 million (8.5 percent) above estimates. Proposition 63 requires that 1.76 percent of income taxes be transferred to the Mental Health Services Fund; these estimates will result in an additional $7 million transfer to this Fund.
However, it’s not all rosy. Other major General Fund revenues lagged estimates: sales and use taxes came in at $174 million (6.5 percent) below budget and corporation taxes are $54 million (43.8 percent) below forecast.
After several months of sagging revenues, the year-to-date totals for the current fiscal year are still below projections by $188 million (1.3 percent). Year-to-date personal income tax revenues are tracking above forecast by $92 million (one percent), while nearly all other major General Fund revenue sources are tracking below year-to-date estimates.
News about broader economic conditions is also a mixed bag. The statewide poverty rate decreased in 2015, and the statewide median income increased. 63,100 nonfarm jobs were added in August 2016, but the unemployment rate held steady at 5.5 percent (and remains higher than the national rate of 4.9 percent). Residential construction permits decreased when compared to both the previous month and to the same time period in the previous year; nonresidential construction fell on a month-to-month basis, but calendar year-to-date numbers are up significantly when compared to 2015. Single family home sales fell by 2.2 percent, and though the median home price remained high, it still has not yet hit the pre-recession peak.
It’s still early in the fiscal year, and the legislative machinations around budgets are many months away. However, with continued gubernatorial emphasis on fiscal prudence, it will be important to closely monitor financial information.