The Revenue Picture is Bad, But Not as Bad as Expected

By Dick Hall-Sizemore

The state’s May revenue report has been released today.   As one would have expected, the May 2020 general fund (GF) revenues were down significantly from May 2019 and the year-to-date GF revenues are running behind the annual forecast.

However, on the somewhat bright side, the administration is now saying that it expects the decline in GF revenue for the fiscal year to be less than previously predicted.  In last month’s report, Secretary of Finance Aubrey Layne predicted that the shortfall in FY 2020 GF revenue would be $1 billion.  Now, he anticipates that “fiscal year 2020 revenue collections will be less than $ 1 billion below the official forecast.”   Layne told the Richmond Times-Dispatch that total GF revenues for the year were down about $800 million and he expected that the state would make some of that up in June.  He summarized by saying, “We’re going to end the fiscal year in a better position than being $1 billion down. I don’t know how much it’s going to be, but the good news is what we have projected and told people — we’re going to be well within that.”

Looking at the details, the GF revenues for May 2020 were about 21 percent lower than May 2019.  As for the year-to-date GF revenue, the state has taken in 1.2 percent less than in the comparable period last fiscal year.  (An increase of 3.1 percent would be needed to meet the forecast.)

The effect of the pandemic, with stay-at-home orders and closure of businesses, was evident in the 13 percent decline in revenue from the withholding of individual income taxes and a 12.5 percent decline in sales tax revenue, both compared to May 2019.  A 34.6 percent decline in the revenue from nonwithholding taxes and estimated payments was partially due to the movement of the payment date from May 15 to June 1.  Those are the sources from which Layne expects to make up some of the loss in June.

Transportation revenue continued to take a hit.  The total transportation revenue declined by 22.6 percent for the month, compared to the prior year.  With revenue from the  motor vehicle sales and use tax revenue down by a third and revenue from motor fuel taxes off by a quarter, it was saved from a larger overall decrease by “only” a 11.6 percent  decrease in the state sales and use tax revenue, the largest component of the transportation revenue.  For the year-to-date, transportation revenue is about $65 million ahead of this time last fiscal year, but is about $88 million short of what had been projected.

In summary, state GF revenues in the current fiscal year will be significantly less than originally projected.  However, the shortfall will not be as large as once feared and, due to actions taken in anticipation, the state is in a good position to deal with it.  Furthermore, it will probably also be in a better position going into the next fiscal year than had been anticipated.

(Here is the address of the website on which the transmittal letter and detailed tables could normally be found.  I say “normally” because the website has been acting erratically, with the May reports being available only sporadically.)

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7 responses to “The Revenue Picture is Bad, But Not as Bad as Expected”

  1. Nancy_Naive Avatar

    Neither. The glass is over-engineered.

    1. VDOTyranny Avatar

      Whats in the glass? Water? Franklin County’s Finest?

  2. Nancy_Naive Avatar

    Neither. The glass is over-engineered.

  3. LarrytheG Avatar

    wait….wait.. The “incompetent” and “bumbling” Northam administration has somehow managed to dodge fiscal Armageddon?

    Good lord!

    How can that be? Coonman who has been depicted as equal parts of lawless dictator and economy-kiling dufus , .. is .. also a successful fiscal conservative or… someone is lying their proverbial butt off?

    Holy moly – what the hey is going on?

    1. Steve Haner Avatar
      Steve Haner

      Layne’s a Republican (or at least was when I first met him….)

      Looking better than I expected but the personal income tax numbers won’t be known until the quarterly filings. I’m late with looking at this because we went out shopping, and I have to say more folks were at that mall than I expected. The feds have flooded people with cash (if you could get your unemployment processed) and relieved many of them of pesky nuisances such as rent or electric bills. so they are spending. Somewhere Keynes is smiling.

      1. LarrytheG Avatar

        Well then, give Northam credit for putting responsible conservative folks on this team! Pretty sure Layne is also the architect of VDOT’s Smart Scale which has pretty much killed boondoggle projects.

        Yep – people are out and about – less of them wearing masks and some are a little on the surly and rude side.

      2. Nancy_Naive Avatar

        I created a false economy for them. I don’t do withholding on anything. I just drop one estimated payment in the 1st quarter equal to 112% of last year’s tax burden. If they’re counting on another three just like it, they’re in for a disappointment.

        I’m amazed that people waste time filing out the worksheets in the 1040ES and the 760ES. I did it once. Much easier to just give them the minimum to avoid penalties and interest and be done with it.

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