State tax collections are expected to come in about $50 million higher than previously forecast for this fiscal year, giving legislators a little more room to work with as they craft the overall budget in the coming weeks.
The state Council on Revenues, an appointed panel of tax professionals, business leaders and economists, upgraded its quarterly forecast Tuesday to 5.3 percent general fund growth for fiscal year 2018, which ends June 30.
That was a cautious increase, given strong revenue collections the past eight months. But the council members said it was a number they could all agree on.
“There’s a lot of economic and political volatility all over the place right now,” council member Ed Case said.
The forecast had been increased to 4.5 percent growth at the council’s January meeting but members decided to raise it again after discussing a booming tourism industry, rebounding construction sector and federal tax cuts.
The council also increased its forecast for fiscal 2019 growth, to 4.5 percent from 4.3 percent, and left its projections for 2020 to 2024 at 4 percent growth each year. The projections translate to about $66 million more for fiscal 2019, which starts July 1.
Sen. Donovan Dela Cruz, who heads the Ways and Means Committee, will have the lead on the Senate’s version, which will rely on the council’s latest revenue projections.
He said in a statement Tuesday that the council’s revised revenue forecast was “good news for our short-term obligations” but the state’s six-year financial plan still shows the state spending more than it’s making from 2019 to 2022. The shortfall is being covered by a $1 billion carryover balance from 2017.
Dela Cruz said the state’s 2016 reserve policy calls for keeping at least 10 percent of the preceding year’s general fund revenues in the Emergency and Budget Reserve Fund, combined with a carryover balance of 5 percent of the preceding year’s general fund revenues. That fund is currently at $317.2 million for fiscal 2018, so he said it needs to be increased to $700 million.
“This may allow the state to move away from the practice of restricting funds to balance the budget and avoid any threat to our bond rating,” he said.
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