AP NewsBreak: North Carolina Tax Collections Surge by Another $260 Million
By GARY D. ROBERTSON
Associated Press Writer
Posted: Apr. 30 6:45 p.m.
Updated: Apr. 30 8:47 p.m.
RALEIGH, N.C. - Legislative leaders received more good news about North Carolina's financial picture Monday, learning the state has $260 million more than had been expected in its coffers from April tax filings.
The extra money means North Carolina has brought in $1.1 billion more than anticipated through the first 10 months of the fiscal year, giving budget-writers more breathing room in forming a two-year spending plan that begins July 1.
Higher than expected income tax payments on April 17 - thanks in large part to capital gains on stocks and real estate sales and withholding payments from continued job growth - helped give revenues a surprising boost.
Fiscal analysts at the General Assembly now predict revenues will increase by 8.4 percent for the year ending June 30, more than double what was projected when lawmakers passed this year's $18.9 billion budget last summer. It also means North Carolina state government should register a revenue surplus for the fourth year in a row.
"We were expecting a bump, but we weren't expecting this kind of bump," said Rep. Jim Crawford, D-Granville, a longtime co-chairman of the House Appropriations Committee, which will likely roll out the chamber's proposed budget next week.
Crawford argued the over-collections don't mean there will be a surplus of cash sitting around. He said much of the money already has been lined up to pay for routine or mandated programs such as state employee raises, annual teacher performance raises, Medicaid spending and "rainy day" reserve funds.
Crawford believes that means only about $110 million isn't already earmarked, although some contend the amount is larger. Other legislators hope the surplus means money will be available to fund their favorite pet projects or those endorsed by their constituents.
"We'll finish a little ahead" than previously expected, said House Speaker Joe Hackney, D-Orange, adding that the money shouldn't be used for recurring expenses. Much of the surplus comes from one-time corporate taxes or capital gains taxes that can't be counted on year after year.
House leaders have indicated they would prefer to keep on the books a pair of "temporary" taxes initiated in 2001 that were supposed to be phased out by the end of this year.
The Senate, which will approve its budget plan after the House completes its work, wants the quarter-penny on the sales tax and a higher marginal income tax rate to come off the books as scheduled.
The mid-April tax payments for both individuals and corporations are traditionally the strongest indicator of the state's financial picture. Final tax payment checks filed by April 17 rose 28.3 percent compared to last April, when they increased by 21.7 percent, according to a memo written by David Crotts, a fiscal analyst for the General Assembly.
Tax withholdings continue to grow by 7 percent during the fiscal year, reflecting job growth that is approaching a pace not seen since the late 1990s, Crotts wrote.
But he said a national economic slowdown is being felt in North Carolina as corporate income tax collections in April were up only 8 percent, compared increases as high as 40 percent in recent years. The residential housing market is expected to worsen, harming capital gains and sales taxes.
The revenue outlook for the next two years "reflects a major economic slowdown, but not an outright recession," Crotts wrote.