Tax revenues still ahead of projections after revision, but less so

Vermont Business Magazine Secretary of Administration Susanne Young today released Vermont’s revenue results for January 2021. General Fund revenues came in above target, while the Transportation and Education Fund revenues came in below target.

On January 19, 2021, consensus revenue expectations for the state were upgraded substantially for fiscal year 2021. Because this is the first month of results following the revised forecast adopted by the Emergency Board, the year-to-date results for all funds are the same as the January monthly results.

Compared to the revised estimate, the State’s General Fund, Transportation Fund, and Education Fund receipts were a combined $12.1 million, or 4.8% above the consensus expectations, although revenue collections were still below pre-pandemic expectations.

The personal income tax, which is the most important revenue source, and the corporate income tax both continue to carry the General Fund.

Meanwhile, the sales tax fell below expectations after the revision. The sales tax has been performing well during the pandemic, which also led to an increase in expectations.

General Fund revenues collected for the month totaled $183.6 million, $15.1 million or 9.0%, above monthly consensus revenue expectations.

Secretary Young said: “General Fund revenues from January represent a positive start to the second half of the fiscal year relative to the January consensus forecast revision, particularly in light of recent economic data indicating a slowdown in the national and Vermont economic recoveries.”

Receipts in the Transportation Fund were $1.6 million, or 8.1%, below consensus expectations for the month, bringing in $18.4 million. Secretary Young stated: “It appears that some of the weakness in the fuel tax components of the Transportation Fund receipts may have been related to fuel price rather than below-expected fuel consumption behaviors.”

The Education Fund revenues were $1.4 million, or 2.2%, below the monthly consensus target, having collected $61.3 million for the month. The largest portion of the below-target revenue performance was driven by receipts activity in the Sales and Use Tax and the Motor Vehicle Purchase and Use Tax components, which together were $1.3 million below monthly consensus expectations. Secretary Young noted: “It appears that the weakening economic recovery held back consumption expenditure activity relative to expectations during the month as the recent surge of coronavirus cases limited consumer activity.”

According to Secretary Young, “Although receipts underperformed in Education and Transportation Funds, the magnitude of the gap was smaller than the above-target performance of the General Fund. Additionally, all three funds are now measured against significantly upgraded consensus revenue expectations adopted as a result of the stronger than expected performance in the first six months of fiscal year 2021.”

Source: Montpelier, VT - Secretary of Administration 2.17.2021