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2014-15 1st Quarter Review

2014-15 1st Quarter Review

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Published by Nick Reisman

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Published by: Nick Reisman on Jul 31, 2014
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08/27/2014

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OFFICE OF THE STATE COMPTROLLER
Thomas P. DiNapoli, Comptroller
Comptroller’s Fiscal Update: Revenue Trends through the First Quarter, State Fiscal Year 2014-15
July 2014
Summary
The State’s All Governmental Funds tax collections through the first quarter of the 2014-15 State Fiscal Year (SFY) were $1.3 billion higher than projected in this year’s Enacted Budget Financial Plan, primarily due to increased business tax and Personal Income Tax (PIT) collections. Overall tax collections were higher than expected in both May and June. While PIT collections through June fell 9.1 percent in comparison to the same period last year, the quarterly results reflect a sharp drop in such receipts that occurred in  April. This decline was incorporated in the Enacted Budget Financial Plan released in May. PIT collections in both May and June were lower than collections from the same months in the previous year, but exceeded projections. In addition to stronger-than-anticipated tax collections, the State received $785 million in financial settlements, $510 million more than anticipated in the Enacted Budget Financial Plan for the year. Other tax categories are growing at a pace more in line with expectations through the first quarter of the fiscal year. Sales tax collections increased 2.7 percent through June 30. Collections in other taxes have increased 9.9 percent through the first quarter. Miscellaneous receipts increased 22.3 percent, primarily due to unanticipated financial settlements and the timing of payments from the State Insurance Fund, partly offset by the timing of bond proceeds. Higher-than-expected audit collections in business taxes, settlement receipts and other factors contributed to a General Fund balance of $5.1 billion at the end of June, $2.6 billion higher than anticipated. Another $2.2 billion in settlement proceeds from BNP Paribas was received July 20 (during the second quarter of the fiscal year), and an additional $1.4 billion from that settlement is expected in the months ahead. The Financial Plan released in May projected real U.S. gross domestic product (GDP) growth of 2.5 percent for calendar 2014. This projection is now substantially above the 1.6 percent consensus projection included in the July edition of Blue Chip Economic Indicators and the latest projection of 1.7 percent from IHS Global Insight, both of which reflect more recent GDP estimates from the U.S. Bureau of Economic Analysis.
 
Page 2
Tax Collections
Through the first quarter of the fiscal year, All Funds tax collections declined relative to the previous year by 3.3 percent, or $632.3 million, with the entire decline coming from lower PIT collections, offset by increases in other tax categories. Consumption and use tax collections increased 1.7 percent, including sales tax growth of 2.7 percent. Business tax collections increased 20.7 percent, primarily in bank taxes and largely because of audit collections. The decline in total collections relative to last year was less than expected. As of June 30, All Funds tax collections exceeded projections by over $1.3 billion, led by business tax collections. Figure 1 compares April, May and June actual results for SFY 2012-13 with Enacted Budget Financial Plan projections for SFY 2013-14 and actual results for SFY 2013-14.
Figure 1 All Funds Tax Collections
(in millions of dollars)
Sources: Office of the State Comptroller; Division of the Budget.
$8,575$4,007$6,766$7,031$3,233$7,119$7,118$4,071$7,528
$0$2,000$4,000$6,000$8,000$10,000AprilMay JuneSFY 2013-14 ActualSFY 2014-15 PlanSFY 2014-15 Actual
 
Page 3
Personal Income Tax
 All Funds PIT collections through the first quarter totaled $11.7 billion, a decline of $1.2 billion, or 9.1 percent, compared to last year. This drop primarily reflects the fact that April 2014 settlement collections, an important element of quarterly and even annual totals, were significantly lower than those in April 2013. The vast majority of the decline is due to estimated payments on prior year liabilities in April – which had been exceptionally high in 2013 as taxpayers responded to federal changes in the tax law in January 2013 – a factor that would not affect collections in the remainder of the year. The largest component of PIT – withholding – increased 4.7 percent through the first quarter. Figure 2 compares monthly PIT collections through the first quarter of SFY 2014-15 with the same period last year – illustrating the significant decline from April 2013 to a year later – as well as projections from the Enacted Budget Financial Plan.
Figure 2 Personal Income Tax Collections
(in millions of dollars)
Sources: Office of the State Comptroller; Division of the Budget.
 
PIT collections, as reported in financial statements and the Financial Plan, are made up of gross collections from taxpayers less refunds to taxpayers. PIT refunds totaled $3.6 billion through the first quarter, representing a decline of $221.7 million, or 5.8 percent, over the same period last year. This is primarily due to prepaid refunds made
$6,657$2,387$3,827$5,304$1,729$4,160$5,353$2,102$4,245
$0$1,000$2,000$3,000$4,000$5,000$6,000$7,000
AprilMay June
SFY 2013-14 ActualSFY 2014-15 PlanSFY 2014-15 Actual

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