by Timothy McQuiston Vermont Business Magazine The Personal Income Tax, the state's most vital revenue source, lagged last month, as it often did last fiscal year. General Fund (GF) revenues totaled $83.94 million for November versus the monthly target of $87.02 million, -$3.08 million or -3.53 percent short. The shortfall was due primarily to the Personal Income Tax category. Personal Income Taxes of $37.74 million fell below target by -$3.96 million or -9.50 percent, while Corporate Income Taxes of $1.90 exceeded target by +$2.90 million. The November results caused a back slide in cumulative year-to-date General Fund receipts. However, cumulative total of $538.89 million remains slightly above the Y-T-D target by +$1.11 million, or +0.21 percent. Y-T-D November revenue receipts for FY 2016 exceed the prior year (FY 2015) results by +$27.45 million, or +5.36 percent.
Administration Secretary Justin Johnson said, “While the GF receipts were lower than expected in November, we remain ahead of both our cumulative Y-T-D target and the prior fiscal year results.” November is the fifth month of FY 2016. The fiscal year revenue targets were adopted by the Vermont Emergency Board on July 27, 2015.
The weakness in PI tax withholding dragged down fiscal expectations last year (FY2015), requiring the state to twice reduce revenue targets. Eventually, a windfall of revenue in the spring produced a record month in April and allowed the state to finish with a small surplus above the revised revenue targets. The windfall, which economists had predicted, was due to personal taxable income not accounted for in regular withholding (year-end bonuses, dividends, etc), as businesses generally had a profitable year.
The Transportation Fund (TF) dedicated receipts for November, of $18.44 million, fell just shy of the monthly target by -$0.44 million, or -2.32 percent, resulting in cumulative year to date receipts of $108.88 million, exceeding the cumulative target by +$0.13 million, or +0.12 percent. Compared to the prior fiscal year (FY 2015) the current cumulative results for TF are +$106.54 million, or +2.20% ahead. As predicted, November continued with the residual catch up processing from October.
Revenues related to motor vehicle sales were strong, but gasoline revenues continue to suffer as gas pump prices continue to fall. The Legislature is expected to consider raising the gas tax to adjust to the combination of lower prices and more fuel-efficient vehicles.
The Education Fund (EF) receipts were +$14.74 million, or +0.43 percent ahead of the monthly target of $14.31 million, driven largely by the above target Lottery transfer (+$0.72 million, or +46.01%). The EF cumulative results through November improved to -$0.33, or –0.42 percent below the Y-T-D target but, +$2.97 million, or +3.94% ahead of the prior fiscal year (FY 2015).
The sales tax portion of the EF was down considerably, perhaps reflecting more online sales. The strong US versus Canadian dollar could also be dampening cross-border sales, as visitors from Quebec are now paying a premium for US goods and services.
Johnson concluded, "Vermont continues to have “steady as you go” economic growth, allowing for month-to-month variation, we remain on track to meet the full year FY 2016 revenue targets."
