Fiscal Review: Collections slightly above estimates but lottery and higher-education transfers face shortfall

Boyan Savage, executive director of Fiscal Review, presented the state's revenue outlook to the Senate Finance, Ways and Means Committee on Feb. 3, telling members the total enacted state budget for the current fiscal year is "just under $60,000,000,000." He said state tax collections are 2.3% higher than the prior fiscal year while general fund collections are up about 1.65 percent.

Savage highlighted that two-thirds of state tax collections come from sales taxes and that sales-tax strength accounts for most of the recent overcollection: "we've seen an over collection of about 1 percent or $91,000,000 more than what we've anticipated so far," he said. Year-to-date general fund overcollections were roughly $65 million.

Lottery and sports wagering were a central part of Savage's forecast. He said net lottery proceeds year to date rose from $214 million to $226 million, driven by two large Powerball jackpots that do not signal a structural increase in instant-ticket sales. Sports wagering privilege tax collections have grown and are projected to yield about $109 million this fiscal year, with an anticipated 5% annual growth in the taxable base.

But Savage cautioned that higher-education construction needs outpace those dedicated revenues. He told the committee the higher education commission's estimated need for construction and maintenance is about $508.3 million while revenue expectations for the relevant lottery and wagering transfers are roughly $493 million, "so that would not leave any funding to be transferred for those construction purposes."

Savage also reviewed two recently legislated tax lines: a 10% wholesale vapor-product tax that has tracked near projections (about $17.2 million estimated for the year) and new hemp tax collections, which he described as "very uncertain" because of recent regulatory changes and pending federal definition changes set to take effect in November.

Why it matters: The shortfall between higher-education needs and lottery/wagering-related transfers will require policy choices about prioritization or new revenue sources; members pressed Fiscal Review and administration staff for details and follow-up analysis.

The committee asked follow-ups about the composition of the budget and the sources of the FY25 closing surplus. Savage attributed much of the closing balance to interest earnings on large balances, agency underspending (reversions), insurance proceeds and cleaned-up reserves.

Fiscal Review agreed to supply additional data and clarifications at members' request.