Yesterday the legislature’s Fiscal Research Division shared a memo regarding their new revenue estimates for FY 2019-20, which holds important implications for the current fiscal year that started July 1.
Senate leader Phil Berger shared commentary from the memo in this article.
The memo in question focuses on what is traditionally the “April surprise” revenue collections. This refers to the amount of revenue collected from tax filers who owed additional taxes at the end of the year and paid the additional amount in anticipation of the April 15 deadline.
This year, in response to the Coronavirus, the state moved the tax deadline to July 15. This means that the traditional “April surprise” would be moved to July. Importantly, this means that the additional tax revenue traditionally collected in the current fiscal year would be shifted to the following fiscal year.
The May revenue forecast was projecting roughly $1 billion in revenue would shift from FY 2019-20 to 2020-21 due to the delayed tax deadline date.
According to yesterday’s memo, however, revenue collections for FY 2019-20 came in $457 million above projections, which means the expected $1 billion shift in revenue to the current fiscal year will likely be decreased by that amount.
The extra overcollections from last year may give the appearance of an added cushion going into the current fiscal year, but it would be a mistake to make any plans to spend it. The additional money being carried over will likely be offset by a lower tax shift to the July deadline, and fiscal research is still warning of a “$2 to $3 billion structural imbalance” in the budget.
Sen. Harry Browne, the Senate’s lead budget writer, warned that Gov. Cooper might try to treat this as “extra money.” Brown further cautioned “That would be outrageously irresponsible, reckless, and negligent. That same ‘spend now, pray later’ strategy resulted in teacher firings and salary cuts during the last recession.”
This report also serves as a reminder that five months after shutting down significant portions of the economy, Cooper has still not taken any reasonable measures to reduce spending in anticipation of the entirely predictable drop in state revenue.