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Senate Appropriations Committee Report

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April Personal Income Tax Revenues Rebound Strongly

General Fund revenue collections for April exceeded the monthly estimate by $464.9 million.  General Fund revenues are now $828.5 million above the estimate for the year-to-date with two months remaining in the fiscal year. General Fund revenues were buoyed by continued strong collections in corporate net income tax and sales and use tax, but a rebound in personal income tax (PIT) collections stole the show as PIT collections came in at $330.5 million above estimate for the month.  The significant shortfall in final quarterly estimated payments for the 2018 tax year due in December and January was overcome by robust annual PIT payments made with the filing of tax returns in April 2019.

It appears that tax liability payment patterns are being affected by changes in     federal tax law which altered the deductibility of state and local taxes (SALT) on federal tax returns.  Because of limitations placed on the deductibility of SALT, many Pennsylvania taxpayers had little or no incentive to make quarterly estimated payments for 2018 beyond some necessary minimum amount in the months of December and January.  Essentially, the surplus of annual payments for April is a true-up of payments that normally would have been paid sooner in years prior to the federal tax changes.

April General Fund Revenue:

• General Fund revenue collections of $4.4 billion were above the monthly estimate by $464.9 million, or 11.8%.
• General Fund tax revenues were ahead of estimate by $463 million, or 12.5%.
• Corporation taxes were $89.7 million, or 30.3%, above the estimate.
• Sales and use tax collections beat the estimate by $43.2 million, or 4.6%, for the month.
• Personal income tax collections were above the estimate by $330.5 million, or 15.1%.
• Non-tax revenues were ahead of estimate by $1.7 million, or 0.7%. 

Fiscal Year 2018-19 vs. the Official Revenue Estimate To-Date: 

• Total General Fund revenues are $828.5 million, or 2.9%, higher than the Official Revenue Estimate through the month of April.
• General Fund tax revenue is $732.2 million, or 2.6%, higher than estimated.
• Corporation taxes are $543.3 million, or 13.5%, above the estimate.
• Sales and use taxes are $273.9 million, or 3.1%, above the estimate.
  • General SUT collections are $188.1 million, or 2.4%, above estimate.
  • SUT collections on motor vehicle sales are $85.8 million, or 7.5%, over estimate.
• Personal income tax collections are below the estimate by $40.6 million, or 0.3%.
  • Withheld PIT is $95.3 million, or 1.1%, below the estimate.
  • Non-withheld PIT (annual & estimated payments) is $54.8 million, or 1.7%, above estimate.
• Non-tax revenues are $96 million, or 14.3%, over estimate.

Fiscal Year 2018-19 vs. FY 2017-18:

• Total General Fund revenues through April are $135.9 million, or 0.5%, higher than last year at this time.
• Last year’s revenues included $1.5 billion of proceeds from the securitization of tobacco settlement payments, which has the effect of skewing a true year-over-year comparison of General Fund revenues.
• General Fund tax revenue is $1.8 billion, or 6.9%, higher than last year.
• Corporation taxes are $532.5 million, or 13.2%, higher.
• Sales and use tax collections are $645.4 million, or 7.6%, higher than last year through April.
• Personal income tax collections exceed last year’s collections by $618.5 million, or 5.5%.
• Non-tax revenues are $1.7 billion, or 68.7%, less than last fiscal year through April. This large decrease results from tobacco securitization and gaming expansion that occurred last year.

Motor License Fund: 

• Motor License Fund revenues are below the estimate by $55.8 million, or 2.4%, through April.
• Motor License Fund revenues are $138.3 million, or 5.7%, less than last fiscal year at this time. 

Pennsylvania Department of Transportation Passenger Car Registration

Act 89 of 2013 eliminated the requirement to place a registration sticker on your license plate effective December 31, 2016.  Customers are still required to maintain current vehicle registration.

Between 2010 and 2016, the Pennsylvania Department of Transportation saw an annual average increase of 71,000 new passenger car registrations.

After the removal of the stickers on January 1, 2017, passenger car registrations for 2017 decreased by 184,243, costing the Motor License Fund $6.8 million in revenue over 2016.

Fines collected due to violations for driving without a valid registration have dropped swiftly in 2017.  Law enforcement face a significant challenge in knowing if a vehicle is unregistered due to the lack of a visible sticker.

Prior to the elimination of the stickers, Pennsylvania collected an average of $13 million to $14 million annually in fines for driving without a valid registration violations.

State Employees’ Retirement System (SERS) New Member Retirement Plan Enrollments

As part of the pension reform legislation that was enacted last session (Act 5 of 2017), new hires who begin state employment after January 1, 2019 are automatically enrolled into A-5 class of service and within 45 days have the option to choose to participate in two other retirement plans: the A-6 class of service and the Defined Contribution Investment Plan. 

The A-5 class of service and A-6 class of service are hybrid pension plans.  A hybrid plan is a plan where a portion of an employee’s retirement benefit comes from a traditional defined benefit plan and a portion comes from a defined contribution investment plan supported by both employee and employer contributions plus the amount of money earned from investments.

The Defined Contribution Investment Plan option is a straight investment plan supported by both employee and employer contributions plus the amount of money earned from investments.

Based on information provided by the SERS, through the first three months of the year, 1,497 new hires enrolled in SERS.  Of the new hires, 1,432, or 95.7%, enrolled in the A-5 class of service; 45, or 3%, enrolled the A-6 class of service; and 20, or 1.3%, enrolled in the Defined Contribution Investment

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