by Timothy McQuiston, Vermont Business Magazine With strong numbers from the personal income tax, Vermont General Fund revenues exceeded their targets by nearly 7 percent in October. PI is the most import GF revenue source and it well offset a poor showing by the corporate income tax. Corporate tends to be less predictable but is still ahead of expectations for the fiscal year-to-date. Rooms & Meals, the second largest GF revenue source, edged ahead of its target. R&M has been a consistently strong revenue source the last several years and for the most part reflects tourism activity.
Transportation Funds also exceeded their targets by over 17 percent as both gasoline and motor vehicle sales revenues far exceeded their targets, both by nearly 30 percent. The TF had been below fiscal year targets before the October numbers came in.
The Education Fund was the only major fund which failed to meet expectations. The Ed Fund counts largely on the sales tax, which continues to struggle, as it has since the Great Recession (December 2007 to June 2009). Losses to Internet sales are factored into the current targets developed by the state economists.
Overall, General Fund tax revenues collected for the month totaled $100.13 million, or $6.48 million above the monthly consensus revenue target, according to Secretary of Administration Susanne Young.
“General Fund performance, particularly in the personal income tax, continues to be very strong through October,” stated Secretary Young in a press release. “Year-to-date, fiscal year 2019 revenues are $21.84 million, or 5.73 percent above forecast. Whether these results are sustainable through the 2019 fiscal year and into fiscal 2020 is the key question; especially given the under-performance of the corporate income tax this month.”
Corporate income tax collections were below forecast by – $4.76 million for the month of October but remain above forecast by $7.63 million for the year-to-date.
The Transportation Fund collected $28.34 million for the month of October, or $4.15 million above target. The Fuel Tax receipts, including the Gas Tax and Diesel Tax, and the Motor Vehicle Purchase and Use Tax, exceeded monthly projections for October – offsetting lower-than-expected collections in September, which may be attributable to end-of-month timing of collections in September. This fiscal year-to-date, the Transportation Fund is above target by $1.41 million, or 1.47 percent.
The Education Fund collected $46.77 million for the month, or -$1.52 million below target. For the year, the fund is -$4.56 million, or -2.52 percent, below forecast.
“As we noted last month, under-performance in the Sales and Use Tax, which is now directed one hundred percent to the Education Fund, may be attributable to a slower than expected e-commerce sales tax collections required by the June 2018 US Supreme Court decision in the Wayfair case. We will continue to monitor performance in the Sales and Use Tax,” Young said.
The state’s three largest funds, in the aggregate, are above the consensus forecast by $18.69 million over the first four months of fiscal year 2019. On a year-over-year basis, after adjusting for legislative changes noted below, the three funds in aggregate continue to reflect solid gains in a broad range of tax categories.
Of note, Act 11 of 2018 made several key changes to existing state revenue and expenditure distributions effective July 1 and implemented in the current fiscal year. The most significant changes were the shift of the entirety of the Sales and Use tax and 25 percent of the Meals and Rooms tax from the General Fund to the Education Fund offset by the elimination of a lump sum annual transfer of General Fund dollars to the Education Fund.
Adjusting these changes, for comparison purposes only, the year-to-date fiscal 2019 revenues represent increases of 14.31 percent, 3.53 percent, and 2.12 percent for the General Fund, Transportation Fund, and Education Fund, respectively, from the corresponding first four months of fiscal 2018.
Personal Income tax – the largest component of the General Fund – increased by 11.49 percent over the corresponding period in fiscal 2018.
