Secretary of Finance Stephen E. Cummings briefed members of the Senate Finance and Appropriations Committee on state revenues on Wednesday, February 14. In contrast to the cautiously upbeat tone of previous presentations, Secretary Cummings expressed concern about the performance of state revenues in January. Although overall general fund revenues are up 5.3 percent on a fiscal year-to-date basis, and are 4.6 percent above the December forecast, revenues declined in January due to a large drop in individual income tax non-withholding collections. This unexpected reduction has prompted concern about the degree to which it might signal similar declines in nonwithholding payments that are traditionally concentrated in the last quarter of the fiscal year. In some years, a mid-session revenue reforecast makes an upward adjustment to revenue projections, providing more flexibility in developing a budget, but that will not be the case this session; due to concerns about nonwithholding revenues, as well as a disappointing Virginia employment report in December, the Administration is not recommending adjustments to the revenue forecast at this time.
Individual income tax withholding continues to perform well, increasing by 4.5 percent on a fiscal year-to-date basis and running ahead of the forecast by $401.4 million. Nationally, employment growth has remained strong, although Secretary Cummings noted a “concerning downward trend” in average hours worked, suggesting that firms are continuing to hire and retain workers, but controlling costs by limiting hours. Of concern, Virginia employment fell in December for the first time in 14 months, representing a loss of 11,800 jobs, a report the Administration received only recently and is attempting to further understand. Sales tax collections are down 1.6 percent on a year-to-date basis, generally in line with projections ($11 million ahead of the forecast).
The “money committees” will be reporting their respective budget proposals on Sunday. Typically, these presentations cover major spending and savings items in the committee budgets, with the text of budget amendments released on Tuesday ahead of floor votes on Thursday. Thursday’s floor vote begins the process of placing the two budget proposals in conference. VACo will be reporting on key budget items that are announced on Sunday early next week and will provide a more detailed analysis once the full budget documents are released.
Secretary Cummings’s slides are available at this link and the revenue report memorandum is available at this link.
VACo Contact: Katie Boyle