by Timothy McQuiston, Vermont Business Magazine The state released good economic news Friday morning. Secretary of Administration Susanne Young reported Vermont’s tax revenue results for January 2019. With the vital Personal Income tax leading the way, receipts activity in the General Fund and Transportation Fund were above their monthly targets, while revenue collection in the Education Fund fell short of the target by $2.85 million.
What the state needs to keep an eye on is the performance of the consumer-related taxes. The Rooms & Meals tax, which has been very strong for several years and at times has carried the state as other taxes have clumped, failed to meet expectations. The Sales tax, which has been one of those slumping taxes, also came up short. The Rooms & Meals tax largely tracks tourist activity. The Sales tax results dragged down the Education Fund.
Economists also are concerned with how tax refunds could impact overall revenues as the state heads toward the tax filing deadline in April.
On January 22, 2019, the Emergency Board met and approved a new consensus revenue forecast as presented by the State and Legislative economists. The consensus forecast was updated with new monthly and cumulative targets that were used to evaluate January receipts and will be used as the measure through the rest of the fiscal year.
General Fund tax revenues collected for the month totaled $139.28 million, or 0.92% above the monthly consensus revenue target. Year-to-date, fiscal year 2019 General Fund revenues are $1.27 million, or 0.17%, above expectations.
“General Fund performance slightly exceeded the official forecast adopted by the Emergency Board in January,” Young said. “That target was upgraded by $11.2 million and it is encouraging news that the that January revenues met the higher expectation.”
January marks the seventh month of fiscal year 2019.
The Transportation Fund collected $20.97 million for the month of January, or $0.21 million above target. Year-to-date, fiscal 2019 Transportation Fund revenues were 0.13% above target. This result incorporates the consensus forecast upgrade of $0.9 million for the Transportation Fund in FY 2019.
The Education Fund collected $53.43 million for the month; -$2.85 million below target. Year-to-date, fiscal 2019 Education Fund revenues were -0.90% below target. This result incorporates the consensus forecast upgrade of $1.6 million for the Education Fund for FY 2019. “The performance below target is primarily attributable to the Sales and Use Tax,” noted Young, "and because of the updated forecast, reflects only the impact of January performance. We will continue to carefully monitor the performance of this revenue source.”
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. Adjusting these changes, for comparison purposes only, the year-to-date fiscal 2019 revenues represent increases of 7.44%, 1.67%, and 4.10% for the General Fund, Transportation Fund, and Education Fund, respectively, from the corresponding first seven months of fiscal 2018. Personal Income tax revenues - the largest component of the General Fund - are 3.52% higher than the corresponding period in 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.
