(The Center Square) – Virginia revenue collections are running hundreds of millions of dollars above budget projections by state finance officials, according to a new revenue report published Friday.
It's a sign Republican Gov. Glenn Youngkin says confirms the state is correct in its projection of a “multi-billion dollar budget surplus.”
Year-to-date general fund revenue collections in Virginia are ahead of February projections by $111.3 million, according to a new February revenue report published by the secretary of Finance.
In a statement, Youngkin said February's revenue numbers "confirm that our December forecast continues to accurately represent that we will have a multi-billion-dollar surplus." In the latest estimate, it's $3.6 billion.
“Virginians remain overtaxed, and the commonwealth has abundant resources available to lower costs and cut taxes for families and local businesses,” Youngkin said in a statement. “At the same time, we can make critical investments to transform our behavioral health system, invest in education and law enforcement, and strengthen communities across Virginia.
“With the continuing uncertainties in the global economy and recent turbulence at U.S. banks, Virginia remains in a position of strength to deliver services and reduce taxes for Virginians.”
The new revenue report comes as negotiators in the General Assembly work to reach a compromise on amendments to the state’s biennial budget. Republicans and Democrats remained divided over $1 billion in tax cuts proposed by Youngkin, which includes proposals to trim the corporate tax rate, slash the top individual income tax rate and increase the standard deduction.
Republicans in the General Assembly largely stood behind Youngkin’s proposed tax cuts during the legislative session. Democrats have pushed back on passing an additional $1 billion in tax cuts after lawmakers agreed to $4 billion in tax cuts in last year’s budget. Democratic lawmakers argue the money instead should be spent on education, mental health and public safety, among other priorities.
The impact of the $4 billion in tax cuts is evident in the latest revenue report. Through February, the Department of Taxation has issued close to $2 billion in refunds, most of which is attributed to $1 billion in taxpayer rebates included in the biennial budget along with the increased standard deduction and an expansion of the earned income tax credit.
Before adjustments for policy and timing, general fund revenues rose by 1.2% year-to-date. After adjusting for policy actions and timing based on economic trends, the report estimates general fund revenues are up 4.1% through the first eight months of the fiscal year compared to the same period last year.
The latest revenue results have exceeded the expectations of state finance officials based on a “stronger than expected” economy since the forecast was issued, Secretary of Finance Stephen Cummings said in a statement.
The state’s revenue forecast anticipates a three-quarter recession beginning in the third quarter of Fiscal Year 2023. State finance officials say they are still anticipating an economic downturn to occur, but are expecting it to occur “two to three quarters” later in the forecast period.
“In accordance with that forecast, we continue to expect an economic downturn to occur, albeit later than originally anticipated,” Cummings said. “Overall, results year-to-date support our outlook, and we continue to have confidence in our December forecast.”