Governor Northam announced late last week that the state appears to have concluded FY 2019 with a General Fund revenue surplus of approximately $778 million. The additional revenues are largely attributable to growth in nonwithholding income tax collections, which increased by 14.5 percent. In contrast, revenues from payroll withholding – traditionally the mainstay of the state General Fund — appear to have lagged the forecast of 3.8 percent growth, with 3.6 percent growth. Sales tax collections similarly underperformed the forecast of 3.7 percent growth, increasing by 3.4 percent.
An estimated $450 million of the additional revenues will be set aside for one-time individual income tax refunds of up to $110 for single filers and $220 for joint filers. These payments are intended to mitigate the effects on Virginia taxpayers of changes to the federal income tax code that encouraged use of the standard deduction rather than itemization in filing federal income tax returns; Virginia’s standard deduction is less generous than the federal standard deduction, but must be claimed if a filer claims the standard deduction on his or her federal return. Refunds are planned to be issued in October 2019.
The Governor will be providing more detailed information on FY 2019 revenues to the “money committees” on August 20. It is anticipated that the Governor may also offer at that time some preliminary indications of items that will be priorities for the Administration in compiling its proposed 2020-2022 biennium budget, which the Governor will propose in December. Virginia received a welcome accolade earlier in the week with the announcement that it had returned to the top ranking in CNBC’s annual “America’s Top States for Business” report. Virginia had held the top spot in 2007, 2009, and 2011, and was ranked third in 2018. The state scored “A” or “A-Plus” rankings in the categories of workforce quality (weighted most heavily in the rankings), education levels, and overall business friendliness.
Unemployment remains low in Virginia, although it increased by 0.1 percentage point in May (from 2.9 to 3.0 percent), according to the Virginia Employment Commission. Total nonfarm employment declined slightly between April 2019 and May 2019 (by 0.1 percent, representing 3,200 jobs), but increased by 32,000 jobs (0.8 percent) between May 2018 and May 2019. National jobs figures bounced back in June after a disappointing May; the Bureau of Labor Statistics reported an increase in total nonfarm payroll employment of 224,000 in June, with the national unemployment rate at 3.7 percent. At the June meeting of the Federal Reserve’s Federal Open Market Committee, members voted to make no changes to the federal funds rate, but signaled an openness to a rate cut in the future, which is anticipated to take place at the Committee’s meeting at the end of July, according to news reports. The Committee’s June statement pointed to general positive economic trends in job growth, unemployment, and household spending, but noted that “indicators of business fixed investment have been soft.”
VACo Contact: Katie Boyle