The General Assembly’s Fiscal Research Division late last week released its consensus forecast for state revenues for the remaining of the current fiscal year as well as the fiscal year that starts July 1.
The new forecast predicts a shortfall of $1.6 billion for the remainder of the current fiscal year, and $2.6 billion for the coming fiscal year.
To be clear, this is a very preliminary and uncertain estimate. Actual revenues could turn out to be significantly worse, or possibly better, than what they are projecting at this time. The Fiscal Research Division plans to re-visit revenue estimates in early August.
Most of this year’s shortfall can be attributed to the dramatic fall in April revenues, which fell by $1.3 billion compared to last year, a drop of 35%. A similar fall in May revenues may necessitate a more immediate revised estimate.
Making matters worse for the current fiscal year is the fact that the state followed the federal government’s lead in delaying the tax deadline from April 15 to July 15. According to Fiscal Research, this may have shifted $1.01 billion in revenue from the current fiscal year to FY 2020-21.
The good news, at least for the short term, is that a decade of responsible budgeting has enabled the state to build up $1.2 billion in its rainy day fund. Another $1.6 billion in unspent funds from the current fiscal year will also help bridge the budget gap.
But that’s not sufficient to cover the $4.2 billion budget hole for the biennium.
Legislators have not yet assigned appropriations for $1.9 billion of the $3.5 billion the state received from the national CARES Act, however. Legislators are holding out hope that Congress will amend the act to allow states flexibility to use the funds to backfill budget shortfalls – the original bill mandated that the CARES act funds be used for new, coronavirus related purposes only.
But waiting on a dysfunctional Congress to come to an agreement doesn’t sound like a very promising financial plan.
The latest consensus revenue forecast confirms what we knew was coming since the minute Gov. Cooper issued his Executive Order shutting down “non-essential” businesses on March 27: state revenues will fall dramatically.
Its been two months, still Cooper has done next to nothing to proactively cut spending in order to help ensure the budget balances.
His only action was for his budget office to issue a memo “requesting” state agencies “reduce unnecessary General Fund expenditures for the rest of this fiscal year.” If the expenditures are unnecessary, why are they in the budget in the first place? Moreover, the memo focuses on limiting purchasing, travel and training, hiring and pay – but allows for plenty of exceptions. In other words, the memo is toothless, and will make virtually no difference.
How can Cooper continue to be so irresponsible?