March forecasts show mixed revenue outlook

Lawmakers in at least four states will have more money to spend this year than they expected, while lawmakers in at least three will have less, March revenue forecasts show. 

The changes in each reflect the nuances in state tax codes, regional economies and forecasters’ assumptions.

Corporate income tax payments recently surged in several states, boosting revenue estimates in places such as Colorado and North Dakota. Meanwhile, the slumping stock and real estate markets have lowered capital gains tax payments and hurt revenue estimates in Maryland and Hawaii.

In Washington, revenue estimates for the next two years have dropped along with estimates for incomes and residential construction activity.

March revenue projections are crucial for legislatures that pass a budget in April or May. They allow governors and lawmakers to update their annual or biennial plans based on more recent data, rather than relying on the outdated numbers governors used to build their initial budget plans. 

Eight states have released a March forecast so far, and most will use the March numbers in their final budgets. 

The forecasts emphasize that the economic outlook is uncertain.

The boom in corporate tax payments Colorado experienced in late 2022 is unlikely to last, said Greg Sobetski, chief economist for the Colorado Legislative Council Staff, which advises the legislature.

“We expect a lot of economic slowing,” he said. “We expect that a lot of corporations are going to be choked by rising costs, especially for labor.”

Sobetski said that in September his team was worried the Federal Reserve’s interest rate hikes would trigger an imminent recession. They are now predicting it will take longer for a recession to hit, but the recent failure of two banks — California-based Silicon Valley Bank and New York-based Signature Bank — add a new risk to the forecast. They raise questions about financial institutions’ ability to handle rapid rate increases, Sobetski said.

Here is a closer look at this month’s forecasts. Except in New York, where the consensus revenue forecast uses a different format, Pluribus News used general fund data. General fund dollars typically comprise most state spending on education, health care and other key services. 

Most state fiscal years begin July 1, except for New York (April 1), Texas (Sept 1), and Alabama and Michigan (Oct 1), according to the National Conference of State Legislatures. 

Colorado

• March estimate for this fiscal year: Legislative analysts estimate $17.16 billion, $269 million more than estimated in December. Governor Jared Polis’s (D) team estimates $17 billion, $128.1 million more than estimated in December. 
• Next fiscal year: Legislative analysts estimate $17.74 billion, $391 million more than estimated in December. Gov Jared Polis’ (D) team estimates $16.7 billion, $201.7 million more than estimated in December.

Delaware

• March estimate for this fiscal year: $6.2 billion, $79 million less than estimated in December.
• Next fiscal year: $6 billion, $42 million more than estimated in December. 

Hawaii

• March estimate for this fiscal year: $9.5 billion, $327 million less than estimated in January.
• Next fiscal year: $9.9 billion, $439 million less than estimated in January. 

Maryland 

• March estimate for this fiscal year: $23.6 billion, $77 million less than estimated in December.
• Next fiscal year: $24.7 billion, $400 million less than estimated in December.

New York

• March estimate for next two fiscal years: $800 million more across both years than Gov. Kathy Hochul’s (D) February budget estimated. Her budget projected that the state would collect $225.1 billion in taxes, federal transfers and other receipts in fiscal 2023 and $224.7 billion in fiscal 2024.

North Dakota

• March estimate for the 2021-23 biennium: $4.6 billion, $16 million more than estimated in January.
• Next biennium: $5 billion, $38.6 million more than estimated in January.

Oregon

• March estimate for the 2021-23 biennium: $28.8 billion, $497 million more than estimated in December.
• Next biennium : $25.3 billion, $185 million more than estimated in December.

Washington

• March estimate for the 2021-23 biennium: $64.1 billion, $194 million more than estimated in November. 
• Next biennium: $65.7 billion, $483 million less than estimated in November.