On June 12, Governor McAuliffe announced that the state has finished FY 2017 with a $132 million revenue surplus, according to preliminary data. Detailed information will be presented to the “money committees” in August, but initial reports suggest that income tax withholding and corporate income tax were major contributors to the surplus, with income tax withholding growth of 5.2 percent outpacing the forecast of 3.6 percent growth and corporate income tax growth of 8.1 percent beating the forecast of 3.8 percent growth. Sales tax collections continue to lag forecasted growth, weakness that Secretary of Finance Richard D. Brown attributed in part to consumers’ increasing preference for online shopping over purchases at bricks-and-mortar stores, according to the Richmond Times Dispatch.
Budget language requires half of the surplus to be placed in a revenue reserve, after any required deposits to the Revenue Stabilization Fund and the Water Quality Improvement Fund. However, according to the Richmond Times-Dispatch, several members of General Assembly leadership have advocated for placing the entire surplus in the revenue reserve as a hedge against future economic pressures, citing the need to protect the state’s strong bond rating. Earlier this year, Standard and Poor’s placed a negative outlook on Virginia’s AAA bond rating due to concerns over whether the state’s reserves are adequate to absorb future economic shocks, such as federal spending cuts.
Final year-end figures will be available in the Governor’s presentation to the money committees on August 21.
VACo Contact: Katie Boyle