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CREC adopts revised revenue estimates; general fund and school aid fund forecasts revised upward
Summary
State fiscal staff agreed on updated revenue forecasts and conference principals adopted the estimates by voice vote; Treasury reported FY 2024 collections about $276 million above May targets, driven by stronger withholding.
Department of Treasury and the House and Senate fiscal agencies presented updated economic inputs and revenue forecasts at the Consensus Revenue Estimating Conference and reached consensus on updated revenue estimates that principals adopted by voice vote.
Presenters Eric Busses (Department of Treasury), Ben Gichak (House Fiscal Agency) and David Zinn (Senate Fiscal Agency) reviewed the five largest revenue sources that together make up roughly 90% of combined general fund and school aid fund receipts: income tax withholding, income tax (quarterlies/annual), sales and use taxes, corporate income tax (CIT) and the state education tax. Treasury staff reported preliminary FY 2024 book‑closing left combined collections about $276 million above the May CREC targets, driven largely by stronger than expected income tax withholding.
Under the consensus presented to the principals and adopted by voice vote, combined general fund and school aid fund revenues were revised up by $770.0 million for FY 2025 (a 1.8% increase). Key numbers presented at the conference:
- FY 2025: combined growth 1.8% (Treasury revision to May: GF +$457.7M; School Aid Fund +$312.0M). - FY 2026: combined growth 3.6% (total revision vs May ~+$910.2M across funds). - FY 2027: combined growth ~2.1% (general fund growth 1.7%; school aid fund 2.5%).
Presenters highlighted several drivers and risks to the forecast:
- Withholding: income tax withholding grew materially above May expectations in late 2024 and represented the largest positive surprise for FY 2024 results. - Sales and use tax: collections remain influenced by the post‑pandemic shift in consumption from services to goods and by the taxable composition of purchases; carryover weakness in the taxable goods base continues to weigh on sales tax growth. - Corporate income tax (CIT): historically volatile; agency forecasts showed the largest relative dispersion on CIT, producing some of the differences in multi‑year projections. - Common cash interest earnings: higher short‑term rates and federal ARPA cash balances generated unusually large common cash interest receipts (~$600M across the last two fiscal years, including ~$200M attributable to ARPA balances); staff cautioned this source is unlikely to persist at the same level. - Transformational brownfield tax captures: staff noted nearly $1.8 billion in committed tax capture awards that could affect state revenues over time; the timing and recognition of those captures create forecasting risk.
Conference principals moved to adopt the estimates as presented; the transcript records a voice vote with unanimous assent and no roll call recorded. Staff will incorporate the consensus estimates into February materials and the executive budget process.
