Virginia’s general fund tax collections lag behind the state’s official forecast through the first quarter of the fiscal year after an unexpected September revenue drop, Gov. Bob McDonnell’s administration reported today.
Total general fund revenue collections fell 0.7 percent in September compared to the same month last year, largely due to a significant decrease in corporate income tax revenue. Corporate tax receipts plummeted by 17.7 percent in September, a drop the administration attributed to weak estimated payments by large corporations.
For the first three months of the year, state general fund tax collections have increased by 1.3 percent. That trails the 2.9 percent growth rate embedded in the state budget. The state is projected to collect $16.3 billion in general fund revenue in this fiscal year, which ends June 30, 2013.
“September’s decline in revenue is a stark reminder of the tenuous recovery our nation and our Commonwealth is undergoing,” McDonnell said in a statement released by his office. “While Virginia continues to fare better than most other states in this difficult economy, we must remain vigilant in our efforts to encourage business investment and job growth, and foster economic activity whenever possible. We must keep taxes low, streamline regulations, and put in place policies that help the private sector to help get our economy back on track.”
McDonnell also has voiced worries about the impact that automatic federal spending cuts could have on Virginia’s economy if they go into effect next year. The federal budget “sequestration” — which would include deep cuts in defense spending – will occur unless Congress and the White House can agree on a deficit reduction plan by the end of the year.
“More than 250,000 Virginians are still out of work—an unacceptable statistic that hits home throughout the state,” McDonnell said. “Uncertainty on the federal level—especially in terms of the future of our national defense budget—only adds to this insecurity and makes our recovery more fragile. We continue to contend with federal policies that are detrimental to private-sector job creation and which continue to make any recovery more difficult. We need to take every possible step to help the private sector grow and expand and innovate, and in the process create more good-paying jobs for our citizens. That is how we will get Virginians back to work.”
In a letter to the governor, Secretary of Finance Ric Brown reported that individual income taxes that are withheld from paychecks fell by 0.7 percent in the first quarter of the fiscal year, trailing the projected growth rate of 3.5 percent. Sales tax revenue has increased by 10.4 percent, partly due to the partial repeal of the state’s accelerated sales tax program.
Brown said the Joint Advisory Board of Economists met Wednesday to assess recent economic developments and the outlook for the remainder of the two-year budget cycle and the next biennium. The Governor’s Advisory Board on Revenue Estimates will meet in November to evaluate the economists’ recommendations and revenue collections through October. McDonnell will present a revised state budget to state lawmakers in December.
The revenue data in Brown’s report can be found here.
– Michael Sluss