New state revenue projections for the current fiscal year, which ends June 30, show income could be as much as $100 million short — in the red.
Or, the tax collections could see a surplus of $85 million, a group of executive branch and legislative branch economists told legislative leaders Tuesday afternoon.
Of course, lawmakers hope for the later.
But they may be wise to plan for the former, with the most likely averaging projection being around $15 million below estimates made during the 2016 Legislature.
Those are the ranges of the General Fund and the Education Fund – fueled by the state sales tax and personal and corporate income taxes.
The state’s Transportation Fund, gassed mainly by the gasoline/fuel tax, could be $5 million below estimates to $15 million above.
Even a $100 million shortfall wouldn’t be disastrous in a $14 billion budget.
But that would mean the 2016-2017 budget, which starts July 1, would start with a deficit and the $100 million would have to be made up in some manner, since it is way too late to trim any budgets this fiscal year – never a good thing.
Already GOP Gov. Gary Herbert and legislative leaders are talking about another summer special session –where a projected shortfall could be looked at after the fiscal year ends in June.
Or there’s a chance a minor shortfall could be made up with unspent monies and what are called “unlapsing” balances – money allocated to state departments but not spent during the fiscal year for any number of reasons.
Members of the Executive Appropriations Committee – leaders of the House and Senate, both political parties – were told that possible $100 million shortfall could come mainly in weak corporate income tax collections.
Corporate income tax actually came in 3 percent under what was believed to happen late last year.
Also, personal income tax refunds were larger than anticipated on April 15. In fact, refunds came in 17 percent higher than previously believed – more money out, less money in than anticipated.
In recent years, the 4.7 percent state sales tax has also been weak, with less money being collected than estimated.
However, the new estimates say sales tax is growing slightly more than was estimated in mid-February, the last time the state’s financial revenue picture was updated.
Finally, everyone knows that Utah’s oil and natural gas production have dropped through the floor as oil prices have fallen for months now.
For years – and again during the 2016 Legislature – much worrying and complaining about Utah not getting more than $180 million in lost online retail sales taxes that are owed by Utahns, but not paid by them.
However, state economists say, the current slight increases in state sales tax collections is not because of lower online sales (online sales remain robust).
Rather the driver “behind sales tax growth moderation are low inflation (slowing growth by $38 million), abnormally weak business investment ($35 million), and relatively subdued wage growth ($32 million).
“Growth in online sales comes in after these three at $16.0 million for FY 2016. Looking towards the 2016 calendar year, taxable sales are expected to be up 5.0 percent.”
You have to love economist-speak – talking a lot, but all while not really saying much.
The update report warns:
“The current forecast assumes moderately strong growth in several key areas such as employment, wages, construction, and taxable sales.
“Factors that may influence the direction and magnitude of economic growth in the coming quarters include business investment, household formation, wage growth, commodity prices, interest rates, growth in China and other emerging market economies, equity markets, business and consumer confidence, and other unforeseen events.”
Yep. Even Utah’s tax collections could depend on the Chinese economy.