May 1, 2012

Independent Fiscal Office: FY 2012-13 Revenue $1 Billion Higher Than Governor's Office

The Independent Fiscal Office said Tuesday its estimate of FY 2012-13 General Fund revenues is $1.02 billion higher than the estimate by the Governor's Office-- $28.16 billion versus the Governor's proposed budget of $27.14 billion.
            IFO and Governor's Office were closer in their estimates for the current FY 2011-12 fiscal year.  The IFO said the state would collect $27.05 billion in General Fund revenues in the current fiscal year and the Governor's Office estimated $27.095 billion.

            A copy of the IFO estimate is available online.  A copy of the Governor's budget is also available.
            Here's the summary of General Fund revenues discussion from the Independent Fiscal Office report issued today:
            General Fund
            The General Fund includes tax and non-tax revenue sources.  For General Fund tax revenues, the initial revenue estimate for FY 2011-12 is $27.05 billion, an increase of $585 million (2.2 percent) over FY 2010-11.  For FY 2012-13, the initial revenue estimate is $28.16 billion, an increase of $1.11 billion (4.1 percent) over the prior fiscal year.
            Five tax levies comprise roughly 90 percent of General Fund tax revenues: corporate net income, gross receipts, sales and use, cigarette and personal income.  For FY 2012-13, the revenue estimate projects relatively strong growth for personal income tax collections (5.1 percent) due to the economic forecast’s projection of  Pennsylvania wage income (4.5 percent) and solid growth for business net income and capital gains and dividends.  The revenue projection for sales and use taxes (4.4 percent) is motivated by the continued economic expansion, improving consumer confidence and continued strength in motor vehicle sales.  
            Cigarette tax collections (-0.4 percent) remain flat because they are levied on a per pack basis and generally do not respond to macroeconomic conditions.  Gross receipts taxes (3.2 percent) are affected by timing issues related to the remittance of estimated and annual payments.  
            Corporate net income taxes (19.9 percent) increase significantly due to higher profits, the reversal of a previous investment incentive (100 percent bonus) and the add back of a current investment incentive (50 percent bonus).  
            Additional detail  regarding the modeling of major tax revenues can be found in the methodology section of this report.
            General Fund non-tax revenues can be decomposed into three parts: (1) liquor store profits, (2) fines, penalties and interest and (3) licenses, fees and other miscellaneous revenues.  
            Due to one-time transfers into the General Fund for FY 2010-11, the revenue estimate projects that non-tax revenues will decline by $541 million (-52.2 percent) for FY 2011-12 and decline again in FY 2012-13 by $7 million (-1.4 percent).  Additional detail for non-tax revenue can be found in the tables that accompany this section of the report.