Tax revenues fall again as expected, behind over $100 million

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Tax revenues fall again as expected, behind over $100 million

Fri, 06/19/2020 - 5:10pm -- tim

Vermont Business Magazine Secretary of Administration Susanne Young released Vermont’s revenue results for May 2020 with collections in the General Fund, Transportation Fund and Education Fund significantly lower than their respective pre-COVID monthly targets for a second month. This of course was expected as Governor Scott closed down much of the economy in March and April as mitigation efforts sought to stave off the worst of the pandemic. Much of the economy has since returned to work, but the recovery is far from over and many of the economic limits continue.

The state budget is expected to find a way to cover shortfalls the rest of this fiscal year, which ends on June 30, but FY21 is looking at upwards of a $400 million deficit.

May is the second full month of revenue collections since a State of Emergency was declared by Governor Scott on March 13, 2020, and the subsequent mitigation “Stay Home Stay Safe” Order was issued on March 24, 2020 to slow and suppress the spread of COVID-19. May revenues collected were once again predictably and dramatically below the pre-COVID consensus forecast established in January 2020.

All major General Fund revenue sources performed below their expectations for the month of May. General Fund revenues collected totaled $80.39 million, or -$14.25 million and -15.05% below the monthly target. However, the personal income tax, the most important revenue source, was only off 4.02 percent for the month.

Year-to-date, General Fund collections underperformed by -$114.84 million, or -7.90%.

As with April’s revenues, the largest factor in this performance is the delay in tax filing deadlines from April 15 to July 15.

As identified last month, the deferrals granted for COVID-19 impacted taxpayers in the bar, restaurant, lodging and retail businesses are reflected in consumption taxes. The portion of the Meals and Rooms directed to the General Fund were -$5.24 million, or -60.90%, below May expectations and -$15.41 million, or -12.15%, below year-to-date projections. The portion of that tax directed to the Education Fund is -$1.86 million and -$5.33 million year-to-date behind target, -60.41% and -11.97% respectively.

Sales and Use Tax collections, 100% of which are directed to the Education Fund, were -$3.15 million, or -9.79% below the May consensus expectations and, -$8.88 million, or -2.20% below year to date tar-gets.

“These results are not unexpected in light of the extension of filing deadlines into July, as well as the restrictions on businesses for most of the month of May,” said Agency of Administration Secretary Young. “May revenues were poor but did perform slightly better than expected in the May 15 consensus revenue estimate adjusted for fiscal year 2020 in light of the pandemic. The federal stimulus money provided in the CARES Act is critical to helping individuals and businesses successfully reopen, rehire and recover so the revenues the State relies upon to provide critical services to Vermonters continue to improve,” said Young. “Advancing a comprehensive and realistic economic recovery package to pas-sage by the Legislature is essential to the economic security of individuals, businesses and the overall economic health of the State.”

The Transportation Fund was -$11.06 million, or -42.60%, below its target for the month, bringing in $14.90 million. Year-to-date, Transportation Fund revenues are -$18.50 million (-7.27%) below expectations. All major Transportation Fund revenue sources performed below their expectations for the month.

The Education Fund was -$8.21 million, or -19.81%, below its monthly target, having collected $33.21 million for the month and was -$19.44 million, or -3.83%, below year-to–date expectations. All state-wide revenue sources attributed to this fund performed below expectations.

Note: Adjusting for redirection of certain healthcare-related taxes under Act 6 of 2019 and redistribution of the meals and rooms tax under Act 76 of 2019, for comparison purposes only, in the accompanying General Fund tables, the year-to-date revenues for April 2020 represent changes of -8.06%, -6.60%, and +2.07% for the General Fund, Transportation Fund, and Education Fund, respectively, from the same period in FY 2019.