Unlike last year when most states experienced a positive “April surprise,” revenue collections this April have been more mixed. April surprises often occur in states after taxpayers pay both their federal and state taxes. Sometimes the surprise can be a positive one as states experience higher than projected tax windfalls. Other times the surprise can be negative as was the case for most states in 2014. State tax collections this April appear to be more varied than the past two years when clear trends emerged.
There are a number of reasons for the apparent variation in state revenue collections this April. One reason is states’ differing economic performance; oil producing states in particular are currently facing a number of fiscal challenges. Another reason is the composition of states’ revenue collections; for example, states heavily reliant on capital gains and high-income earners may be seeing weaker April returns this year due to the poorer stock market performance in calendar year 2015. Finally, fiscal policies, including various spending decisions and prior tax changes, can also impact revenue collections.
Additionally, some of the reasons for the apparent variation in the reporting of April tax collections are related to the question of what is being measured, as well as states’ differing revenue estimating procedures. Some states are seeing revenues come in below projections in April, but are still seeing revenue growth. This would occur, for instance, if a state forecasted four percent growth in overall tax collections in April, but revenues only grew three percent. Revenue collections can also be impacted by the timing of the state’s latest revenue forecast. For example, a state may have revised its revenue projection downward earlier in the spring. April collections may then come in above the revised projection, but below the original forecast.
Overall, revenue conditions for fiscal 2016 seem to indicate another year of moderate growth. It is projected that in total states will experience a sixth consecutive year of revenue growth in fiscal 2016, although the gains are expected to be modest and the positive growth may be less than the 4.8 percent growth rate for fiscal 2015. Additionally, more states are expected to have revenues come in below original forecasts than fiscal 2015. In June, NASBO will release its Spring 2016 Fiscal Survey of States with updated information on states’ revenue performance for fiscal 2016, as well as data on projected revenue levels for fiscal 2017, which will begin on July 1 for 46 states.
Below is a compilation of recent press articles detailing states’ April revenue collections: