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Virginia revenues $395 million ahead of forecast as labor market shows slow growth and federal job losses
Summary
Secretary of Finance told the Senate the commonwealth is $395 million ahead of its midyear forecast, driven largely by nonwithholding collections; staff and members warned the boost is partly timing- and market-driven and cited risks from federal HR 1 and recent federal job losses.
Secretary of Finance Mark the Secoo told the Senate committee that Virginia's fiscal-year-to-date general fund collections exceed the forecast by $395,000,000, driven primarily by unexpectedly strong nonwithholding receipts in December.
"We have $395,000,000 ahead of where we thought we'd be," the secretary said, attributing the month's outperformance mainly to nonwithholding payments and weaker-than-expected refunds. He cautioned that an extra deposit day also lifted withholding receipts and that the strength may be partly timing-related.
The secretary framed the revenue picture against a slowing labor market: national job growth added about 50,000 positions in December (year-over-year growth 0.4%), and Virginia added roughly 8,600 jobs in November (about 0.2% year over year). He flagged large October federal job losses that, he said, likely reflect deferred resignations rather than furlough accounting: "...the month of October was...we were waiting for...workers were offered the so-called fork in the road...deferred resignation...and the losses in October were largely attributable to that," the secretary said.
Charles Kennington of the Department of Taxation told senators that separating inflation-driven revenue increases from real growth requires further analysis: "The simple math...is to take the growth rate in revenues and subtract CPI," he said, and offered to provide a disaggregated look at wage versus goods inflation.
Committee members pressed staff on downside risks from the federal HR 1 package and on how much of the revenue gain is inflation rather than new economic activity. The secretary acknowledged uncertainty and urged caution: the administration's forecast could tolerate a 1.6% revenue decline and still meet the estimate, he said, but "there's a lot of clouds on the horizon that we need to prepare for."
Next steps: staff offered to run additional analyses on inflation-adjusted revenue growth and to follow up on the distributional impacts of federal workforce changes; no formal committee action was taken at this meeting.
