Six months into the fiscal year, tax collections are running more than 7% ahead of last year’s pace.
State lawmakers and Gov. Josh Green’s administration will have about $250 million more to work with this year than expected as they look to fund affordable housing, the Maui wildfire recovery effort and other priorities.
State tax collections were expected to increase slightly this year over last year’s level, but the state Council on Revenues voted Monday to bump up that projection. The council is tasked with forecasting tax collections, and lawmakers use those predictions as the basis for each state budget.
The budget proposed by Green last month assumed state tax collections would grow by a modest 1.3% in the fiscal year that began July 1, but actual tax collections thus far have been running a startling 7.3% ahead of last year’s collections.
Given that unexpected surge, the council revised its official projection of growth in tax collections for this year from 1.3% to 4%. Each percentage point change amounts to more than $90 million, which means the new projection gives Green and lawmakers about $250 million extra to use as they see fit.
Green’s proposed budget assumed the state general fund would collect nearly $10.2 billion in taxes and other revenue this year, so the additional cash isn’t a game-changer. But it will be helpful as the administration looks for ways to help finance the Maui recovery and other initiatives.
Carl Bonham, a council member and executive director of the University of Hawaii Economic Research Organization, said Maui’s economy proved to be stronger than expected in the wake of the devastating Aug. 8 fire as the rebound in tourism there happened more quickly than anticipated.
In fact, tourists on Maui have spent several hundred million dollars more than UHERO projected shortly after the fire, and the statewide tourism trade also proved to be stronger than expected, Bonham said.
The council slightly downgraded its projection of growth in tax collections for the next fiscal year that begins July 1 from 5.2% to 4%, and increased its projection for the following year from 3.5% to 4%.
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