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Sales tax growth masks smaller general-fund share as statutory earmarks rise, staff tells JFAC
Summary
JFAC budget staff outlined sales-tax distributions that route significant growth to statutory programs — including a tax relief fund and school modernization allocations — reducing the share of sales tax dollars available to the general fund.
Legislative budget staff briefed the Joint Finance-Appropriations Committee on sales-tax collections and statutory distributions, showing that while gross sales-tax receipts have risen, statute-directed earmarks and transfers have reduced the share that flows to the general fund.
Keith Bybee, Division Manager of Budget Policy Analysis, walked members through the legislative budget book tables on sales-tax distributions. He said gross sales-tax collections are projected to grow to about $3.37 billion in fiscal 2025 and $3.5 billion in fiscal 2026; however, statutory distributions — including revenue sharing (11.5% of net collections), an earmark for the program referenced in statute as the tech/transportation set-aside (4.5% of net revenues), the tax relief fund (online-retailer sales tax rerouting) and a statutory $125 million school modernization fund — reduce the amount available to the general fund.
Bybee noted the tax relief fund (sales tax on online purchases routed by statute) is projected to increase to roughly $253 million in 2025 and $307 million in 2026; he said those amounts are treated as statutory transfers and reduce net sales-tax dollars available for appropriation. Staff showed that the share of gross sales-tax collections reaching the general fund has fallen over time — from roughly 85% in the years before the Great Recession to about 65% in the fiscal 2025 projection — because more sales-tax revenue is earmarked by statute for other purposes.
Members asked practical questions: Representative Petzke asked why the tech/transportation set-aside is a percentage rather than a fixed dollar amount; Bybee said the statute currently uses a percentage (4.5% of net collections) and that the law also contains a mechanism guaranteeing an $80 million carve‑out for bonding in early years while spillover amounts go to local transportation districts. Representative Tanner asked for a brief explanation of the property-tax “circuit breaker” and staff said it is a statutory program intended primarily to help low‑income taxpayers remain in their homes.
Bybee warned members that the increasing number of statutory earmarks for sales tax reduce the revenue flexibility available to JFAC and could make balancing appropriations more difficult in a downturn, even though reserves exist. He urged members to keep the distributions in mind as they consider appropriations and potential new statutory commitments.
No committee vote was required on the briefing; the material will inform JFAC—s budget deliberations.
