August general fund tax revenues rose about 5.4 percent compared to August 2021 when adjusted for an extra deposit day this year. That’s a good sign, but Secretary of Finance Stephen Cummings told legislators September’s data will be more significant for analysts and legislators who are trying to figure out what fiscal year 2023’s finances will look like.
“August collections exceeded projections, driven by employment and wage growth year-over-year,” Cummings said in a press release from the governor’s office.
”However, persistent high inflation, rising interest rates, concerns regarding worsening economic conditions and slowing job growth have the potential to impact future revenue collections. We continue to monitor these issues and will have a better indication of current trends after September month-end, including the first estimated payments for nonwithholding and corporate tax collections,” Cummings said.
In a presentation to the House Appropriations Committee Tuesday, Cummings concluded that current economic data has a mixed outlook, with a tight labor market, strong corporate profits with some concerns, volatility in financial markets, and sales tax collection exceeding previous years – but inflation and consumer fears could bring that down.
Cummings said national economic forecasters are starting to predict an economic soft landing.
He said, “A month ago, nobody would have said that, because how do you put the brakes on an economy that’s been roaring?”
“It’s hard to stop a falling knife, that’s been the concern, but I think people, with the strength of jobs, are more optimistic that we just might be able to manage that,” Cummings said.
Cummings also highlighted Virginia’s “revenue cushion,” allowing for the recently passed budget’s anticipated 14 percent, $4.1 billion decline in fiscal year 2023.
But July and August revenues were up, adding more money to the cushion.
“So we’ve added to the cushion that we have going into the budgeting process, which I think all of us agree is a good thing to start with given some of the uncertainty that is out there,” he told the legislators.
“This report shows our purposeful efforts since day one to continue to place Virginia in a strong financial position,” Governor Glenn Youngkin said in a Tuesday press release. “Virginians can be confident in our efforts to keep the Commonwealth moving forward, with that said, economic headwinds continue due to inflation-inducing policies at the federal level, and we continue to dig out from the unnecessary closures during the pandemic that crippled Virginia businesses.”
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