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Economic Forecasting Advisory Board adopts lower near-term revenue forecast after weak April receipts
Summary
Board members approved revised fiscal-year revenue estimates after April tax collections came in below earlier projections and staff shifted expected receipts between individual and corporate income tax to reflect pass‑through entity payments and timing of refunds.
The Economic Forecasting Advisory Board voted to adopt revised state revenue forecasts after April tax receipts underperformed earlier estimates, prompting staff to lower near‑term revenue projections and reallocate expected revenue from individual income tax to corporate income tax.
Board staff told members that April data showed several large shortfalls versus the February forecast. “Sales tax is 8,400,000 below forecast. Individual income tax is about $187,900,000 below forecast. Corporate income tax is $53,300,000 below forecast, and miscellaneous tax is $3,100,000 below forecast,” a Department of Revenue forecaster said during the meeting.
Those shortfalls, combined with a shift in how some pass‑through entity payments (PTET) are being recorded, led staff to recommend adjustments to both current and out‑year forecasts. A Legislative Fiscal Office presenter told the board that the office would lower its individual income tax estimate for the current fiscal year by roughly $200 million and add an offset of about $100 million to corporate income tax receipts to reflect PTET payments that appear in corporate receipts in state accounting.
Nut graf: The board’s decision affects the certified forecast and the state’s cash‑reserve process. Under state law, a materially lower adopted forecast triggers a recertification; any forecast excess for the current year is directed to the cash reserve. Staff emphasized the change was largely distributional — shifting recorded receipts between tax categories — but also noted the April data reduced the overall net‑receipts outlook for the fiscal year.
Staff emphasized two technical drivers behind the revisions. First, timing and size of individual refunds were larger than expected: staff had budgeted about $340 million of refunds for April–June, but April alone produced roughly $300 million in refunds, leaving much less room for May and June than previously assumed. Second, payments tied to pass‑through entity elections (PTET) have been larger than initially modeled and are being captured in the state’s accounting as corporate receipts in many instances, reducing estimated payments and final payments in the individual category. A presenter said the forecast model undercounted that distribution and that a manual adjustment outside the model was made to better reflect observed entries in April tax collections.
The revisions the board adopted were presented as adjusted net‑receipt totals for three fiscal years. For the current fiscal year, staff reported a revised net‑receipts estimate of about $6.245 billion. For fiscal year 2025–26 staff reported an adjusted figure of about $6.865 billion, and for 2026–27 the adjusted figure reported was about $6.925 billion. Board members moved through a series of roll‑call votes to adopt component estimates (sales and use, individual income, corporate income and miscellaneous) and then the totals.
Board members pressed staff on process and timing. Several members asked for earlier e‑mail notification of material changes to the packet, and one member urged staff to “show your work” when making manual adjustments to the model. Staff acknowledged the committee’s frustration and said they would work on better coordination between offices and on integrating the PTET treatment into the underlying forecast models so fewer manual post‑hoc adjustments are required.
On federal funds and reserves, staff reported approximately $724.5 million of federal COVID‑related funds remained unexpended, with about $383 million of that in the state Coronavirus Fiscal Recovery Fund and $78 million in a capital projects fund. Staff said they had not seen any federal effort to recall those funds and that agencies worked to obligate those awards by statutory deadlines. Staff also reported the general fund cash balance (as of April 23) had fallen to roughly $750 million from about $1.2 billion in February, and the rainy day fund balance was roughly $910 million, with an expected ending balance near $880 million after legislative transfers.
Ending: Board members scheduled the committee’s next meeting for October 31 at 10 a.m. and completed final roll‑call votes adopting the revised forecasts. Staff said they will provide updated materials to the board before the October meeting and will continue efforts to reconcile methodology differences across forecasting offices.
