by Timothy McQuiston, Vermont Business Magazine Consistent with last month and Vermont Business Magazine expectations, tax revenue collections for the month of April 2019 continue to exceed targets. April marks the 10th month of Fiscal Year 2019 and is an important month for net tax revenue collections as tax returns peak and refunds are calculated. The vital personal income tax had another strong month more 22 percent above its target for the month and nearly 6 percent ahead of year-to-date targets. General Fund tax revenues collected for the month totaled $248.69 million, or $44.69 million above the April consensus target. Year-to-date, fiscal year 2019 General Fund revenues are $50.06 million, or 4.58 percent, above expectations. Until the last two months, tax revenues had been very close to targets, if even a little below.
“General Fund collections in the areas of personal income tax and corporate income tax were significantly above consensus expectations and more than offset under-performance in the insurance premium tax, the estate tax, and the property transfer tax.” noted Administration Secretary Susanne Young. “This strong April performance is reminiscent of this time last fiscal year when we were in the final stages of budget discussions and found ourselves with over $55 million in surplus one-time funds. Whether this translates into a revenue upgrade in the general fund revenue forecast for FY20 won’t be clear until the Emergency Board meets in July.”
While personal income is the most important revenue source, other important taxes showed mixed results.
The sales & use tax (which now goes into the Education Fund) continued its struggles and was down 3.65 percent and is slightly below its target YTD. Gasoline tax revenues increased 1.63 percent, but gasoline prices also rose which naturally increases taxes. With YTD revenues already just below targets and gasoline prices expected to fall soon, the Transportation Fund very likely will finish the fiscal year (ending June 30) below targets. The disappointing numbers are also due to a decline in motor vehicle purchases. If vehicle sales continue to fall, it would suggest an overall negative economic trend, as automobile purchases tend to reflect consumer confidence.
The Transportation Fund collected $25.22 million for the month of April, or $0.13 million above target. Despite the positive month, year-to-date, fiscal 2019 Transportation Fund revenues are -$1.68 million, or -0.73%, below target.
The Education Fund collected $45.27 million for the month, or -$0.67 million below target. Year-to-date, fiscal 2019 Education Fund revenues are -$2.32 million, or -0.53%, below target. The largest factor in the Education Fund performance is sales and use tax, which year-to-date is - $2.42 million, or -0.69%, below target.
However, the rooms & meals tax, which largely tracks tourism activity, had another good month. Expectations for tourism and thus the rooms & meals tax have been high for several years and continue to be strong. The R&M factors into both the General and Education funds.
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, according to Secretary Young. Adjusting for these changes, for comparison purposes only, the year-to-date fiscal 2019 revenues represent increases of 7.19%, 1.44%, and 4.07% for the General Fund, Transportation Fund, and Education Fund, respectively, from the corresponding first ten months of fiscal 2018.
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% 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.