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Senator Pat Browne


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Senate Appropriations Committee Report
June 2016

Committee Website


General Fund Revenue Collections 1.3% Below Monthly Estimate

General Fund revenue collections for the month ended May 2016 totaled $1.94 billion, which was $25.4 million, or 1.3%, below estimate. Fiscal year-to-date collections total $27.84 billion, which is $97 million, or 0.3%, above estimate. Total FY 2015-16 General Fund revenues are $163.8 million, or 0.6%, more than last year.

Corporation taxes were below estimate for the month by $20 million, or 19.9%. As of May 31st, the year-to-date corporate net income tax surplus stands at $7.3 million; the capital stock/franchise tax year-to-date surplus is $32.8 million; the gross receipts tax surplus is $70.1 million; the insurance premiums tax deficit is $27.4 million; and the financial institutions tax (i.e. bank shares tax) surplus is $401,455. Total corporation taxes are above estimate for the year by $85.7 million, or 1.9%.

Sales and use tax (SUT) collections were above estimate by $9.1 million, or 1.2%, for the month. General sales and use tax was ahead of estimate by $11.3 million, or 1.7%, but sales tax on motor vehicles was short of estimate by $2.2 million, or 1.8%. Sales and use tax collections for May 2016 were 6.1% higher than May 2015 collections. Year-to-date SUT collections for FY 2015-16 are 3.6% ahead of last fiscal year and $15.5 million, or 0.2%, above this year’s estimate.

Personal income tax (PIT) collections were $43.9 million below estimate for the month. Employers’ withholding was below estimate for the month by $26.1 million, or 3.5%. PIT received from estimated and annual payments was short of estimate by $17.8 million for the month. Personal income tax collections are $150.4 million, or 1.3% below estimate for the year. PIT collections, which make up approximately 41% of all General Fund revenues, are 2.8% higher than last year through the month of May.

Realty transfer tax (RTT) collections were $956,639, or 2.5%, below estimate for the month. RTT is now $574,275, or 0.1%, above estimate for the year. Inheritance tax collections were $6.8 million, or 8.9%, above estimate for the month, and they are now $26.8 million, or 3.2%, above estimate for the year.

Cigarette tax collections were $332,825, or 0.4%, above estimate for the month, but they are $2.4 million, or 0.3%, below estimate for the year. Liquor tax collections were $1.76 million, or 5.9%, below estimate for the month, and they are now $527,903, or 0.2%, ahead of estimate for the year. Table games tax collections of $8 million were $182,347 short of the monthly estimate. The table games tax is $777,914, or 0.8%, below estimate for the year. Non-tax revenue was $4.5 million over estimate for the month.

May’s $25.4 million revenue shortfall reduces the year-to-date revenue surplus from $122.5 million at the end of April to $97 million. Continued revenue underperformance is problematic as it directly affects the General Fund balance sheet and the FY 2016-17 revenue estimate. Unfortunately, we anticipate further erosion of the year-to-date revenue surplus during the month of June. It is conceivable that we will see June revenues underperform the estimate by $25 million to $50 million. We will monitor revenues on a daily basis throughout the remainder of the fiscal year.

Motor License Fund collections were $4.2 million, or 1.7%, above estimate for the month of May. The Motor License Fund is $33.8 million, or 1.4%, below estimate for the year

Lottery Fund Update

Year-to-date Lottery Fund collections are $140 million, or 10%, above last year’s levels. That performance has largely been driven by the historic $1.6 billion Powerball jackpot in January, resulting in nearly $100 million of Lottery revenue in a single week. Following that jackpot, weekly revenues returned to expected levels.

The strong revenue performance, however, will not translate into a strong ending balance for the Lottery Fund. Estimates for prize payouts and vendor commissions have also increased by $115 million since the Governor submitted his budget in February, nearly consuming the entire revenue gain. If the Lottery Fund repays a cash flow loan by the end of this fiscal year, the ending balance will only be $15 million to $20 million (plus a $75 million reserve).

Looking to next year, Lottery Fund revenues are actually projected to decline because the historic Powerball jackpot cannot be assumed to recur. And despite using somewhat optimistic revenue assumptions, the Administration projects the $75 million reserve will be depleted by the end of FY 2016-17, and the balance in the fund will be less than $10 million.

Senate Appropriations staff will continue to monitor the Lottery Fund closely since it appears to be in a situation in which revenue gains are effectively offset by increases in prize payouts, setting the fund up for long-term fiscal issues moving forward.

Medical Assistance Snapshot

Based on data from the Department of Human Services (DHS), the Medical Assistance caseload increased by 331,691 persons during the period of February 2015 to February 2016. The increase occurred, primarily, due to the implementation of the Affordable Care Act in Pennsylvania. During that same time, nursing home populations saw a modest decrease while the number of persons served in the community increased by 5, 893.

 


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