Vermont Business Magazine Tax revenue collections for the month of June, the final month of Fiscal Year 2020, as anticipated, were below the forecast in all three funds due to the economic impact of the COVID-19 pandemic and the delay in tax filing deadlines. All major revenue sources also were down year-over-year except for the sales tax, despite the closure of retail operations. This is explained by online sales picking up much of the slack.
However, the state reported this week that overall, the FY20 General Fund surpassed economists' expectations by $25 million as late tax filings revealed a windfall from a robust 2019 economy. Filers were given until July 15, instead of April 15, in which to file because of the pandemic. The total FY20 carryover will be $109 million, or about half the expected pandemic-related shortfall for the new fiscal year, which started July 1.
The Legislature will return later in August to resume the budget process. So far, only the first quarter FY21 budget has been set.
Overall, General Fund tax revenues collected for the month totaled $121.20 million, or -$20.61 million below the June consensus cash flow expectations.
For the year, General Fund revenue collections were lower than forecasted by -$135.45 million, or -8.49%. Year-over-year, the GF was -$145.58, or -9.07%.
“As expected, results were significantly lower than the economists’ consensus forecast adopted by the Emergency Board in January 2020 due to the economic impact of the COVID-19 pandemic and the associated delay in tax filing deadlines. Tax obligations normally due prior to fiscal year-end, that are now being collected in July and August, will reduce the difference between collections and forecasts to some degree,” said Secretary of Administration Susanne Young. “To what degree will be determined once the final data on FY20 revenues shifted to FY21 is available in early August.”
“Thanks to a combination of strong public health actions to moderate the impact of COVID-19 in Vermont – and strong fiscal discipline from the Administration and the Legislature – the General Fund will likely end fiscal 2020 in solid financial shape after deferred fiscal 2020 tax receipts are recognized on a modified accrual basis. Vermont is also benefiting from the relative strength of our economy reflected in 2019 personal and corporate tax earnings,” continued Young. “The outlook for FY21 remains grim and the latest operating estimates foreshadow a revenue downgrade of over $200 million when the Emergency Board meets in August.”
The Transportation Fund collected $28.14 million for the month of June, or -$1.89 million be-low target. For the year, Transportation Fund collections were -$20.39 million, or -7.17%, be-low expectations. For the year, all Transportation Fund sources, including fuel taxes and fees, ended below their respective cumulative consensus targets. Stronger than expected June revenue receipts helped reduce the spring expectation that the fund would underperform by an estimated -$31.5 million.”
The Education Fund collected $48.19 million for the month, or -$1.89 million below the monthly target. For the year, Education Fund collections were -$21.33 million, or -3.83%, below the cumulative consensus forecast. Secretary Young noted that, as with General Fund and Transportation Fund, stronger than expected June revenue receipts in the Education Fund has reduced the spring expectations for a larger underperformance in that fund.
The Emergency Board will meet on Wednesday, August 12, 2020 to receive the consensus revenue forecasts for Fiscal years 2021 and 2022 from the Administration and Legislative economists.
Note: Adjusting for redirection of certain healthcare-related taxes under Act 6 of 2019 and re-distribution of the meals and rooms tax under Act 76 of 2019, for comparison purposes only, in the accompanying General Fund tables, fiscal year 2020 revenues represent changes of -9.07%, -5.90%, and +2.04% for the General Fund, Transportation Fund, and Education Fund, respectively, from FY 2019.
Source: Montpelier, VT - Secretary of Administration 7.24.2020