State Tax Revenues Lag Projections for Key Month
April 29, 2016
April is a critical month for state revenue projections when incomes taxes are filed. Unfortunately, the LAO is reporting that collections are failing to meet estimates by nearly $1 billion. Tracking this month is closely watched not only for the 2015 calendar year but also 2016 because high-income filers make estimated payments for current calendar year.
The LAO suggests that it’s unlikely, though not impossible, for income tax revenues to meet projections. The final days of collection will need to be especially strong to make up for short-falls to date.
The cause of the lower-than-expected revenues is not yet clear and will require deeper analysis once the final numbers. It’s important to note that below-projected April revenues wouldn’t automatically throw the state revenues into the red, thanks to a strong budget position and certain automatic fiscal triggers like calculations related to school funding, state reserves, and debt payments. Also, the fiscal landscape has changed since the Governor released his budget in January. For example, the Managed Care Organization (MCO) fix, state employee labor agreements, and minimum wage items have all been passed by the Legislature and signed by the Governor since the budget was initially proposed. The May Revision, which is anticipated to be released May 12 or May 13, will take all these changes into account.