Yesterday, the governor’s Office of State Budget and Management and the General Assembly’s Fiscal Research Division released their latest consensus forecast, which includes the truly surprising April tax collections.
Earlier reports suggested the revenue could be as much as $700 million higher than originally forecast. The final estimate is that revenue will come in $643 million higher, which is still significant. Other states had similar increases, but few expect the bump to last. There was a note of caution in the report as “most of the increased collections were considered a one-time, non-recurring increase” from personal and corporate income taxes as well as higher than expected franchise tax collections.
Gov. Roy Cooper quickly sent a letter to legislators calling on them to “Seize this easy choice” and dedicate one-time money to spend $250.7 million more from the General Fund in FY2019-20, $440 million more in FY2020-21 and into the future. His call for profligacy should not be surprising. Cooper had been willing in his original budget proposal to borrow $288 million for capital in next year’s budget so he could spend more on operations and left just $75 million unspent of $25 million available. His desire to borrow from tomorrow is also reminiscent of former Gov. Bev Perdue who urged schools to use one-time federal stimulus money to pay teacher salaries and create a future obligation for the state and local governments.
As a result of the bump, revenue growth in FY2018-19 is a remarkably strong 4.3%, much more than the 2.1% originally expected. As a result, even as the forecast adds $106 million to revenue projections for FY2019-20, the growth rate will slow to 1.4%.