Thanks to unexpected tax windfalls in April, many states expect to meet or beat revenue forecasts for the year.
“This year’s April surprise will likely help more states meet or exceed revenue projections for fiscal 2015, which ends on June 30th for 46 states,” NASBO’s Brian Sigritz writes in the blogpost. “However, most of the gains are due to an increase in income tax collections, partly from the strong stock market performance in calendar year 2014, and are viewed as one-time occurrences.”
Revenues have become increasingly volatile in recent decades, complicating state predictions, according to a recent report. Economists at Standard & Poor’s have also suggested that the rise in income inequality over the past several decades may have hurt state tax revenues over several decades. Growth to less-volatile sources, such as sales taxes, “remains somewhat sluggish,” NASBO reports.
Yet, since May 1, officials in Arizona, Arkansas, California, Illinois, Missouri, New Jersey, North Carolina and Pennsylvania have reported higher-than-forecast revenues. Strong April revenues are also expected to help Oklahoma and West Virginia weather the drag low oil prices have had on their state economies.
California’s revenue haul is already about $1.6 billion above Gov. Jerry Brown’s (D) earlier estimates. North Carolina expects to collect $400 million over expectations, while Arizona, Illinois, New Jersey and Pennsylvania each report beating expectations by $200 million or more.
Though revenues are up for many states, many other still face budget problems stemming from the “decline in oil prices, prior federal cuts, tax-related changes, mandatory spending pressures, and long-term liabilities,” NASBO reports.