Despite the travails of the pandemic economy, virtually every state of the union is expected to meet its revenue forecast for the rest of fiscal year 2022, according to a comprehensive new study.
Published by the Denver-based National Conference of State Legislatures, the FY 2022 State Budget Update also shows that exactly half of the states are expected to exceed their forecasted revenues, meaning that in some cases the states in question have decided to revise their estimates upward.
Noting that at the start of the pandemic states such as New Mexico that rely on oil and gas taxes were “projecting significant negative revenue impacts,” the study says that, in fact, the Land of Enchantment and other oil-dependent states have seen a rebound in its fortunes primarily due to oil and gas severance taxes.
The NCSL study additionally contends that revenue surpluses at the state level have also been fueled, at least in part, by increased federal aid to state governments, particularly through the American Rescue Plan.
Meanwhile, personal income tax collections are reported to be on target in Arizona, among five other states.
General sales tax collections are also “expected to exceed estimates in over half of states,” a trend clearly driven by a pandemic-inspired increase in consumer spending.
Corporate income taxes, meanwhile, have “historically been a volatile revenue source for states because they are highly susceptible to changes in the broader economy and the business cycle.”
Even so, revenues from corporate income tax collections appear to be above previous estimates in at least 20 states, and on target in five more. “As with personal income tax and general sales tax estimates, revenue projections from corporate income tax collections have been revised upwards in nearly half of states since the beginning of the fiscal year.”
On an optimistic note, the study concludes by suggesting that the stronger than expected revenues across the country will “shape the conversations and policy decisions in many state capitols this session, and budget surpluses have many states considering temporary or permanent tax reductions.”
A separate report compiled by the Urban Institute of Washington details the impact that American Rescue Plan spending has had on the individual states, with Arizona receiving $4.2 billion in direct aid; Colorado getting $3.8 billion; and New Mexico $1.8 billion.
The American Rescue Plan was passed by Congress in the spring of 2021 and is designed to help state, local, and Tribal governments weather the economic devastation caused by the Covid 19 outbreak.
By Garry Boulard
