A strengthening economy and higher state revenues set the stage for the 2014 legislative session.
(Published Jan 21, 2014)
For the months of November and December 2013, the state’s net general fund receipts totaled $3.330 billion, which was $172 million (5.4 percent) more than projected in the November 2013 state budget forecast. Minnesota Management and Budget (MMB) released these numbers on Jan. 10 in the January 2014 Revenue and Economic Update, a report that provides a snapshot of recent state revenue collections.
The positive news was largely due to stronger-than-projected estimated individual income tax payments for the period, which were $90 million, or 6.7 percent, above forecasted levels for the two-month period. Net receipts for all other major revenue sources were also up: sales tax (+$37 million, or 4.6 percent), corporate income tax (+$22 million, or 8.5 percent) and all other revenues (+$22 million, or 2.9 percent).
The stronger-than-expected individual income tax receipts for November and December were largely due to a $67 million increase in estimated tax payments. According to the report, even though fourth quarter individual estimated payments are not due until Jan. 15, many taxpayers make early payments on or about Dec. 31 so that they can deduct them on their federal tax returns.
Net sales tax receipts for the months of November and December were $37 million (4.6 percent) more than forecast. According to the report, the additional sales tax revenue appears to be due to stronger-than-anticipated economic activity and possibly larger-than-anticipated effects of recent law changes. Also, since most businesses remit sales taxes in the month after a purchase was made, the additional revenue reflects only the November portion of the Christmas shopping season.
The report also provides a brief update on the status of the state and national economies. According to the state’s economic forecasting firm, Global Insight, the forecast for U.S. economic growth has improved modestly since the November forecast. Also, with the passage by Congress of the federal Bipartisan Budget Act, some of the potential downside risk, including the possibility of another federal government shutdown, has effectively been eliminated.
Global Insight continues to forecast accelerating economic growth over the course of 2014, led by an increase in consumer spending and an improved housing market. The forecasted improvement in the pace of economic growth is expected to generate faster job creation, reducing the unemployment rate to near 6 percent by the end of 2014.
The next state budget forecast will be released in late February or early March, shortly after the Legislature convenes for the 2014 legislative session. That forecast will provide the governor and lawmakers with the final official revenue and expenditure estimates upon which the Legislature will base any supplemental budget actions and a 2014 bonding bill.
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