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October Surprise: General Fund Revenue Over-performs

General Fund revenue collections for the month of October exceeded the estimate by $119.7 million. General Fund tax revenues were $86.3 million higher than the monthly estimate. Non-tax revenue was $33.4 million above the estimate. General Fund revenue collections for the first four months of the fiscal year are $164.2 million ahead of estimate.

The $164.2 million year-to-date revenue surplus is attributable to a tax revenue surplus of $91.7 million and a non-tax revenue surplus of $72.5 million, all of which consists of over-performing unclaimed property revenue collections (Treasury escheats). Throughout the fiscal year, the Treasury Department receives unclaimed property and deposits it as revenue into the General Fund, and the department also pays out refund claims on such property. Often, the revenue deposits and refund claims are out of sync in the monthly revenue estimates, but they tend to balance out over the course of the year. Therefore, the $72.5 million non-tax revenue surplus may not be as reliable as the $91.7 million tax revenue surplus over the remainder of the fiscal year.

October 2019 General Fund Revenue vs. Monthly Estimate:

  • General Fund revenue collections of $2.67 billion were above the monthly estimate by $119.7 million, or 4.7%.
  • General Fund tax revenues were above estimate by $86.3 million, or 3.4%.
  • Corporation taxes were $16.4 million, or 12.7%, above the estimate.
  • Sales and use tax (SUT) collections beat the estimate by $27.4 million, or 2.7%, for the month.
  • Personal income tax (PIT) collections were above estimate by $27.4 million, or 2.4%.
  • Cigarette, liquor, realty transfer and gaming taxes were each above estimate, while other tobacco and inheritance taxes were slightly below estimate.
  • Non-tax revenues exceeded the estimate by $33.4 million.

Fiscal Year 2019-20 vs. the Official Revenue Estimate To-Date:

  • Total General Fund revenues are $164.2 million, or 1.6%, higher than the Official Revenue Estimate through the month of October.
  • General Fund tax revenue is $91.7 million, or 0.9%, above estimate.
  • Corporation taxes are $62.5 million, or 6.1%, below the estimate.
  • Sales and use taxes are $59.6 million, or 1.6%, above the estimate.
    • General SUT collections are $45.2 million, or 1.4%, above estimate.
    • SUT collections on motor vehicle sales are $14.4 million, or 2.7%, higher than the estimate.
  • Personal income tax collections are ahead of the estimate by $77.6 million, or 1.8%.
    • Withheld PIT is $9.9 million, or 0.3%, below the estimate.
    • Non-withheld PIT (annual & estimated payments) is $87.5 million, or 12%, more than the estimate.
  • Non-tax revenues are $72.5 million, or 141.4%, higher than the estimate.

Fiscal Year 2019-20 vs. Fiscal Year 2018-19:

  • Total General Fund revenues through October are $348.8 million, or 3.5%, higher than last year at this time.
  • General Fund tax revenue is $329 million, or 3.3%, higher than last year.
  • Corporation taxes are $16.8 million, or 1.8%, higher.
  • Sales and use tax collections are $88 million, or 2.3%, higher than last year through October.
  • Personal income tax collections exceed last year’s collections by $208.9 million, or 5.1%.
  • Non-tax revenues are $19.8 million, or 19%, more than last fiscal year through October.

Motor License Fund:

  • Motor License Fund revenues are below the estimate by $15.7 million, or 1.7%, through October.
  • Motor License Fund revenues are $15.3 million, or 1.7%, less than last fiscal year at this time.

Election Code Changes, Nonprofit Security Grants Add to General Fund Spending

On October 31, 2019, Governor Wolf signed into law Senate Bill 421 (Act 77 of 2019), which makes sweeping changes to modernize Pennsylvania’s Election Code. Among other changes, Act 77 authorizes the Pennsylvania Economic Development Financing Authority (PEDFA) to issue bonds for up to $90 million over ten years to provide funding for counties to replace voting systems. In the event that PEDFA issues $90 million in bonds, debt service on a 10-year bond at a 4% interest rate would be roughly $11.1 million per year. These debt service costs would be subject to appropriation by the General Assembly and are expected to begin in fiscal year 2020-21.

In addition, Act 77 of 2019 also allows the Department of State to utilize up to $4 million for the communication, administration and assistance within each county of the Commonwealth for the purposes of ensuring a complete and accurate census count of the Commonwealth in the 2020 Federal decennial census. The $4 million consists of funds not expended, encumbered or committed from General Fund appropriations for any fiscal year ending before July 1, 2020, from any agency that falls under the Governor’s jurisdiction.

House Bill 859, which was presented to the Governor on October 29, 2019, adds a new Chapter 56 to Title 35 (Health and Safety) that establishes the Nonprofit Security Grant Fund as special fund in the State Treasury with the grant program to be administered by the Pennsylvania Commission on Crime and Delinquency (PCCD). PCCD is authorized to provide grants to nonprofit organizations exclusively for security enhancements to facilities owned and operated by a nonprofit organization.

The program directs the Secretary of the Budget to transfer $5 million in prior year unexpended, unencumbered funds originally appropriated from the General Fund to any executive agency under the Governor’s jurisdiction. The secretary may only make the transfer if the funds will not create a deficit in any of the appropriations from which the funds are transferred and must notify the Senate and House Appropriations Committees in writing of the transfers. The legislation also provides that the General Assembly may appropriate money for the Nonprofit Security Grant Fund beginning in FY 2020-21. Any unexpended and unencumbered funds remaining in the fund shall lapse and be transferred back to the General Fund as of July 1, 2024.

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