Senate Appropriations Committee Report
(all tables and graphics can be viewed online)
First Quarter of the 2019-20 Fiscal Year in the Books
General Fund revenue collections for the month of September were below the estimate by $17.8 million, or 0.6%. General Fund tax revenues were $37.1 million, or 1.2%, lower than the monthly estimate, but non-tax revenue exceeded the estimate by $19.3 million.& General Fund revenue collections for the first quarter of the fiscal year are $44.6 million, or 0.6%, ahead of estimate.
Total corporation tax revenues missed the monthly estimate by $71.5 million, or 10.2%. September is an important quarterly estimated payment month, and quarterly estimated corporate net income tax (CNIT) payments were below the estimate by $49.3 million, or 9.1%. Annual CNIT payments also were short of estimate by $15 million, or 11.3%. Quarterly estimated CNIT payments will be due again in December, and hopefully September’s underperformance will not be repeated three months from now.
Sales and use tax (SUT) collections were just about on estimate for the month, missing by less than $1 million, or 0.1%. September 2019 SUT collections were 5% higher than September 2018, and SUT collections are 0.6% above last year through the first quarter of the fiscal year. This year’s SUT collections were $115 million lower than they would be otherwise because of a July transfer to pay debt service on tobacco settlement bonds. After adjusting for the transfer, SUT collections are approximately 4.6% higher than last year.
Quarterly estimated personal income tax (PIT) collections (also due in September) beat the estimate by $33 million, or 8.1%; however, PIT withholding was under the estimate by $9.8 million, 1.2%. Total PIT collections were 8.2% higher than last year for the month of September, and they were 4.5% higher than last year through the first quarter of the fiscal year. The FY 2019-20 Official Revenue Estimate calls for annual PIT growth of 3.4%, so collections are on track to meet or exceed the estimate for the revenue source that makes up more than 40% of all General Fund revenue.
September 2019 General Fund Revenue vs. Monthly Estimate:
Fiscal Year 2019-20 vs. the Official Revenue Estimate Year-To-Date:
Fiscal Year 2019-20 vs. Fiscal Year 2018-19:
Motor License Fund:
Rainy Day Fund Grows Substantially
On September 30, 2019, the Commonwealth transferred $316.9 million to the Budget Stabilization Reserve Fund, commonly known as the “Rainy Day Fund,” which represents 100% of the remaining General Fund surplus from the 2018-19 fiscal year. Including the $22.4 million from the 2017-18 fiscal year surplus, the Rainy Day Fund balance is $340.2 million. That balance is equal to 1% of the General Fund’s annual expenditures for FY 2019-20, which corresponds to less than four days of operating reserves.
The Rainy Day Fund is designed to provide financial assistance to minimize future revenue shortfalls and deficits and promote greater continuity and predictability in the funding of vital government services. The fund minimizes the need to increase taxes to balance the budget during periods of economic distress. Efforts to build reserves also help to improve the Commonwealth’s credit rating. The amount placed into the fund in 2018 was the first deposit into the Rainy Day Fund since FY 2007-08, and this year’s transfer is the first substantial deposit of funds in over a decade.
The nationwide average for Rainy Day Fund operating reserves is 7.5% of annual expenditures. For Pennsylvania to meet the national average, its Rainy Day Fund would require a balance exceeding $2.5 billion. While a $340 million Rainy Day Fund balance is a good start, it is only about 14% of the reserves needed to meet just the average. The table to the right shows how Pennsylvania’s Rainy Day Fund balance of 1% of annual expenditures compares with the position of other states.
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