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Committee adopts cautious revised revenue forecasts, warns of about $100 million in cuts
Summary
The Revenue Estimating Committee adopted revised Division of Administration forecasts that lower the FY26 general‑fund estimate by about $113 million and reduce FY27 by roughly $104 million, citing weak individual income tax collections and transition effects from recent tax changes; committee members said agencies will be asked to identify cuts to close approximately $100 million in shortfalls.
The Revenue Estimating Committee on May 5 adopted revised state revenue forecasts that reduce the near‑term general‑fund outlook and signaled the need for roughly $100 million in spending reductions.
A Division official told the committee the Division's recommendation lowers the State General Fund official forecast for fiscal year 2026 by about $113,000,000, driven primarily by a proposed reduction of roughly $235,000,000 in projected individual income tax collections compared with the December forecast. "Collections have been fairly weak since January," the Division official said, characterizing the drop in individual income tax remittances as the major culprit. The presenter also pointed to modest weakness in sales‑tax collections and uncertainty in mineral revenue tied to global oil prices and the Iran conflict.
Jared Coniglio, Secretary of Revenue, and Department of Revenue staff joined the discussion on the operational cause of refunds. Coniglio said mid‑year changes to withholding tables would be the fastest way to reduce the size of refund spikes that have arisen during this filing season, but that payroll systems and employers would need time to implement any new tables. "As soon as we issued them, businesses would implement that in their payroll," he said.
The Legislative Fiscal Office (LFO) offered an alternative set of numbers. An LFO official reported a net increase of about $16,000,000 to the current‑year bottom line and $127,000,000 for next year relative to the adopted numbers, but emphasized large downward revisions to corporate and personal income tax collections (the LFO said corporate collections are running roughly 50% behind the prior year in recent months and personal income tax about 20% behind). The LFO speaker described methodological differences and the timing lags between economic activity and remittances that explain divergence between the two forecasts.
Committee members questioned particular line items and statutory allocation mechanics (page 1 driving page 2 in the packet), noting that changes to page‑1 revenues can cascade into formulas that allocate funds to special accounts. One member emphasized that sales tax tends to be easier to detect and that the transition effects from recent rate and base changes make personal and corporate forecasts more uncertain.
On motions recorded in the meeting, a committee member moved to adopt the Division of Administration's revised FY26 forecast and, after the Chair noted no objections, the motion carried. The committee later moved and adopted the Division's FY27 forecast as recurring. The Chair summarized the practical consequence: "For the current year we're in now, we have to find a way to reduce about $100,000,000," and added that similar reductions will be necessary in the operating budget for the next fiscal year.
Committee members instructed staff and department heads to look for possible savings and prepare for adjustments in the coming budget cycle. The committee also adopted a conservative long‑range forecast and set inflation assumptions used for trust and severance allocations.
What happens next: agencies were told to expect outreach from leadership to identify potential reductions or reprioritization; the committee may reconvene if near‑term collection milestones (May and June corporate payment dates) materially change the outlook.
