Legislative budget writers will have more funding to work with after North Carolina’s projected revenue surplus grew slightly to $580.5 million, according to projections released Friday.
The numbers show that tax collections and other revenues are about 2.5 percent higher than what state leaders budgeted last summer. The latest surplus estimate is an increase from a $552.5 million surplus projected in February.
Senate Republican leaders say they plan to unveil their budget proposal on Monday or Tuesday and vote on it by the end of the week. The House will then develop and pass its own separate spending plan, and then leaders from the two chambers will work out a compromise budget and send it to Gov. Roy Cooper.
Senate leader Phil Berger praised the surplus and called for “middle class tax relief.”
“While most other states struggle with revenue shortfalls, North Carolina has, once again, built a significant surplus as a result of the economic impact of our nationally recognized tax cuts and reform,” he said in a news release.
Budget director Charlie Perusse said the new revenue forecast shows only minor changes since February.
“I would generally categorize these as ‘technical adjustments’ based on having three more months of actual data,” Perusse said in an email. “There are no underlying changes or concerns with the economy.”
The change since February is largely based on franchise tax collections, according to Barry Boardman of the legislature’s Fiscal Research Division. Franchise taxes are paid by businesses that are headquartered elsewhere but have assets or operations in North Carolina.
“Franchise tax collections significantly increased over February’s projections,” Boardman wrote in a memo to legislators. “The increase was largely the result of one-time payments. Other revenue sources tracked closely with our consensus estimates from this February. Thus, the ‘April surprise’ never materialized.”
Projected revenue for the fiscal year that begins in July is down $14 million from February’s numbers, but that’s a tiny percentage of the $23.15 billion in total revenue now expected in the next budget year. The total revenue available to budget writers is a 2 percent increase over the current fiscal year.
Projected personal income tax collections have increased slightly for the next fiscal year since the February revenue forecast, while projected sales and corporate tax collections have decreased slightly.
The Senate budget will likely include a reduction in corporate and personal income-tax rates that passed the chamber along party lines last month.
According to the legislature’s nonpartisan fiscal researchers, the tax cut would reduce the state’s expected revenue by $324 million in the fiscal year beginning in July, $710 million in the second year and more than $800 million in subsequent years.