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Senate Appropriations Committee Report
General Fund Collections Above Estimate for January
General Fund revenue collections for the month ended January 2015 totaled
$2.4 billion, which was $89.7 million, or 3.9%, above estimate. Fiscal
year-to-date collections total $15.7 billion, which is $360.4 million, or 2.3%,
above estimate. January is a “quarterly estimated tax payment” month for
personal income taxes and is typically the month having the largest share of
sales and use tax collections for the entire fiscal year. The $80 million Liquor
Store Profit transfer, which was anticipated in September 2014, was paid in
January. Absent this payment, January’s monthly surplus would have been $9.7
million instead of $89.7 million.
Receiving the Liquor Store Profit transfer has resulted in the year-to-date
surplus of $360.4 million finally matching up with the monthly distribution of
the Official Revenue Estimate.
The year-to-date revenue surplus is expected to be negatively impacted late
in the fiscal year because certain revenues assumed in the official revenue
estimate will not accrue to the General Fund. These include $125 million for
casino license revenue and $95 million for non-impact drilling revenue. This
$220 million negative revenue adjustment should be kept in mind when considering
the year-to-date surplus amount.
Corporation tax collections were below estimate by $940,743, or 0.7%, for the
month. January is not a particularly important month for corporation taxes
because no large quarterly or annual payments are due for calendar year tax
filers. Corporation tax collections are $162.6 million, or 11.7%, ahead of
estimate for the year-to-date.
Sales and use tax (SUT) collections were ahead of estimate by $6.9 million,
or 0.8%, for the month. January’s general sales and use tax collections are the
highest of the fiscal year because the taxes collected in December, during the
peak of the holiday shopping season, are remitted in January. General SUT was
$3.5 million, or 0.5%, above estimate. Sales and use tax on motor vehicles was
$3.4 million, or 3.7%, ahead of estimate for the month. Sales and use tax
collections are $66.6 million, or 1.2%, above estimate for the fiscal
year-to-date. Overall, sales and use tax revenues are 4.7% ahead of last year at
this time. The Official Revenue Estimate anticipates year-over-year sales and
use tax growth of 3.8%.
Personal income tax (PIT) collections were below estimate by $14.1 million,
or 1.3%, for the month. PIT from employers’ withholding missed the estimate by
$10.5 million for the month. Quarterly estimated PIT collections were $5.1
million, or 1.4%, short of estimate for January. The quarterly payments due in
January represent the final installments for the 2014 tax year. Payments on
annual tax returns were $1.6 million over the estimate for the month. PIT
collections are $441,894 above estimate for the year, and they are running 3.1%
ahead of last year at this time. The Official Revenue Estimate calls for 5.2%
annual growth over last year, much of which is expected to be realized in April
Realty transfer tax (RTT) collections missed the estimate by $7.3 million, or
19%, for the month. RTT is now $28.4 million, or 10.3%, below estimate for the
year. Inheritance tax collections were $1.4 million below estimate for the
month, but they are $81.5 million over estimate for the year.
Cigarette tax collections were $4.8 million below estimate for the month and
are $9.5 million short of estimate for the year. Liquor tax collections just
beat the estimate at $323,478 over for January. Table games tax revenue was
$684,034 above estimate for the month.
Non-tax revenue collections totaled $101.4 million, which was $83.4 million
above estimate. The bulk of the overage is attributable to the aforementioned
$80 million Liquor Store Profit transfer.
Motor License Fund collections were $7.9 million above estimate for the month
of January. The Motor License Fund is $9.3 million, or 0.7%, above estimate for
On January 28, 2015, the Independent Fiscal Office (IFO) released a revised
revenue estimate for FY 2014-15. The revised estimate calls for FY 2014-15
General Fund revenue of $30.207 billion, which is $250 million higher than the
estimate published by the IFO at the beginning of the fiscal year and $26
million higher than the Official Revenue Estimate recertified by Governor
Corbett in September. The IFO’s revised estimate accounts for (i.e. removes) the
casino license revenue and non-impact drilling revenue that was originally
expected to be received in June 2015. According to IFO Director Matthew Knittel,
lower gasoline prices drive some of the projected revenue increase. He
anticipates that Pennsylvania households will save between $3.0 billion and $3.5
billion on gasoline purchases this fiscal year. These savings are expected to
translate into higher consumer spending on goods and services, which would net
an additional $60 million in sales tax collections. The improved revenue outlook
for FY 2014-15 also includes a large (approximately $100 million) one-time
inheritance tax payment and strong corporate net income tax payments during the
first half of the fiscal year.
Despite these improvements, the IFO cautioned that there are reductions in
the revised estimate for other revenue sources, which will offset some of the
gains. In addition to the loss of casino license and drilling revenue, the IFO
expects to see some reduction in personal income tax collections resulting from
sluggish wage growth and potential weakness in bank shares tax collections as
changes made to this tax in Act 52 of 2013 continue to get sorted out. Another
potential risk to the revenue forecast is the effect very low inflation can have
on tax revenues. While consumers typically welcome lower prices, higher prices
may actually benefit the General Fund in the short-term because sales tax
collections are directly related to the price of taxable goods and services, and
increased personal income tax collections rely heavily on higher wages (i.e.
The IFO projects that certain non-tax revenues assumed in the Official
Revenue Estimate will not materialize in the second-half of the fiscal year,
reducing the current $360.4 million revenue surplus to just $26 million by June
30, 2015. The all-important tax collection months of March and April are quickly
approaching, and the IFO will release an updated revenue forecast soon
thereafter on or about May 1st.
Department of Corrections Populations & Costs
The 2012 Justice Reinvestment Initiative (JRI) has reduced the inmate
population, however, costs associated with staffing and operating costs for the
Commonwealth’s correctional institutions, the boot camp and community correction
centers have increased significantly over the past several years.
The FY 2014-15 General Fund budget for the Department of Corrections is
currently $2.06 billion. This amount, however, does not include funding for the
Pennsylvania State Correction Officer Association arbitration award because the
arbitration award occurred after the beginning of the fiscal year. The award
will result in increased costs of about $30 million in the current fiscal year.
In addition, the department’s operating budget is likely to exceed its
authorized spending level by about $25 million due to an inmate population that
is falling less than projections.
As a result, the Department of Corrections will require supplemental
appropriations of $55 million for FY 2014-15.
The preliminary FY 2015-16 cost-to-carry for the Department of Corrections is
estimated to be $2.26 billion, an increase of approximately $200 million over
the current year’s appropriated amount.
Contact Senator Browne:
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By Appointment Only
Northern Lehigh County
North Whitehall Township Building
3256 Levans Road
Coplay, PA 18037
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