NASBO recently conducted a short survey on year-end tax collections to help gain a better understanding of how states closed out fiscal 2016. As expected, revenue growth noticeably slowed for the recently concluded fiscal year. Twenty-eight states were able to provide preliminary data regarding fiscal 2016 tax collections. The survey results include:
- The median growth rate for total general fund tax collections in fiscal 2016 was 2.3 percent for the 28 reporting states.
- By comparison, the 50-state median growth rate in fiscal 2015 was 5.2 percent.
- Sales tax collections had the largest median growth rate in fiscal 2016 at 3.4 percent, while personal income tax grew 2.9 percent and corporate income tax declined at a median rate of 9.8 percent.
- 10 states saw revenues come in above their final projections for fiscal 2016, while 18 states were below.
- Overall, for the 28 states reporting data, total collections were 0.8 percent below final projections.
The preliminary year-end tax collections reported by the 28 states are mostly similar to estimated figures in the Spring 2016 Fiscal Survey of States, whose field survey was conducted from February through April. For example, the Spring Fiscal Survey reported that the estimated 50-state median growth rate for fiscal 2016 was 2.8 percent. However, some of the results from the new short survey on year-end tax collections seem to indicate slower than anticipated revenue growth since the time the Fiscal Survey was conducted. While the majority of states in the Spring Fiscal Survey reported revenue collections higher than, or on target with, their most recent revenue projection, a majority of states in the new short survey showed revenues below their most recent projection.
State revenue growth slowed in fiscal 2016 for a number of reasons including the impact of low oil and natural gas prices on energy-producing states, the weaker stock market performance in calendar year 2015, and modest national economic growth. It is likely that the slow revenue growth will continue into fiscal 2017, with the median projected growth rate being 3.1 percent. In the fall, NASBO will release a new Fiscal Survey of States with updated figures for both fiscal 2016 and fiscal 2017.