Staff briefed JFAC on sales-tax distribution changes and provided a general fund update

Budget Policy and Analysis staff told the Joint Finance-Appropriations Committee that statutory distributions and recent earmarks have materially reduced the share of gross sales tax that flows into the General Fund, and provided the committee with a general fund daily update to track where appropriations stand relative to the governor's budget.

Keith Bybee explained that total gross sales-tax collections are projected to grow (staff cited roughly $3.37 billion in 2025 and $3.50 billion in 2026), but statutory distributions reduce the amount that reaches the General Fund. Key deductions include refunds, revenue sharing (11.5 percent of net collections), Techum (identified by statute as receiving 4.5 percent of net revenues, with $80 million earmarked for bonding and any excess flowing to local transportation districts), and the tax relief fund (revenues from online sales tax collections routed to a tax relief fund with specified distributions to public-school facility, public defense and a general fund transfer).

Bybee said the committee's materials show the General Fund received about 86 percent of sales tax during the Great Recession era but is now projected at about 65 percent after those statutory distributions and new earmarks. He warned that because personal income taxes are more volatile during recessions, the legislature's reduced reliance on sales-tax receipts for the General Fund could make balancing future downturn-year budgets more difficult, possibly requiring larger cuts or changes to distributions.

Committee members asked clarifying questions about the Techum allocation and whether new bond earmarks would be additive to the existing 4.5 percent allocation or implemented within the existing distribution. Bybee said he had not seen final legislation and that specifics would determine whether the change reduced general-fund availability or was accommodated within current distributions.

Budget Policy also distributed a general fund daily update that tracks the governor's recommended budget, pending legislative changes and items to be decided by the committee. Staff said the report will be updated regularly as JFAC works through maintenance and enhancement decisions.

Why it matters: Statutory earmarks and distributions change how much sales-tax revenue the legislature can appropriate from the General Fund. That affects JFAC's ability to maintain services and the size of potential cuts in a downturn.

Next steps: Staff will correct and publish updated materials (Bybee said he would fix a reporting error on page 34) and continue weekly or biweekly updates while the committee advances maintenance and enhancement decisions.