The Department of the Treasury reported today that the robust revenue collections that had been realized through the first five months of Fiscal Year 2020 (FY 2020) began to moderate in December with combined collections for the major taxes totaling $2.969 billion, down $4.4 million, or 0.1 percent, below last December.
December is typically the largest revenue collection month of the first half of the fiscal year, and the decline is in line with Treasury’s expectations that strong growth realized early in FY 2020 will not continue during the remaining months. However, year-to-date collections totaled $13.887 billion, up $986.4 million, or 7.6 percent, above the same six month period last year.
“Based on the latest revenue numbers, we currently anticipate we will be able to meet our targeted fund balance pursuant to the Governor’s Executive Order,” said State Treasurer Elizabeth Maher Muoio. “While there is always the risk of a future downturn, we are comfortable that we can maintain this surplus level throughout the remainder of FY 2020. However, we will continue to monitor collections and savings assumptions closely for the remaining six months of the fiscal year under the parameters of the EO.”
Per Executive Order 73, the Treasurer has notified the Director of the Office of Management and Budget (OMB) that amounts in excess of the targeted fund balance are anticipated to be available for expenditure in FY 2020. Accordingly, the OMB Director has initiated the release of the remaining $121 million still held in reserve. Treasury had released roughly half of the reserves – $114 million – in mid-October after a careful review of the first quarter of the fiscal year.
The Gross Income Tax (GIT), the State’s largest revenue stream, totaled $1.262 billion for the month of December, up $80.0 million, or 6.8 percent, above last December. However, a significant portion of that growth – $32.4 million – was due to a one-time payment, bringing baseline growth to a more modest 4.0 percent for the month. GIT collections, which are dedicated to the Property Tax Relief Fund, totaled $5.990 billion, year-to-date, up $323.2 million, or 5.7 percent for the first six months of the fiscal year.
The Corporation Business Tax (CBT) reported $542.9 million in December, a decline of $53.2 million, or 8.9 percent, below last December. The drop is consistent with Treasury’s projection that CBT revenues will decline in FY 2020, especially in the latter half of the fiscal year. Since December is the most important CBT month during the first two quarters of the fiscal year, this month’s performance cut the year-to-date growth rate in half compared to November.
While year-to-date CBT collections of $1.794 billion are up $257.9 million, or 16.8 percent more than last year, further declines are anticipated in the coming months due to the fact that significant, non-recurring payments received last year are not expected to repeat and the temporary 2.5 percent surtax rate dropped to 1.5 percent on January 1, 2020.
Additionally, Treasury has cautioned in recent months about potential increases in CBT refunds. That concern was borne out in December as refunds jumped 80.7 percent above last December. Nationally, tax analysts believe that some corporations have been overpaying taxes upfront while they continue to evaluate the implications flowing from the federal Tax Cut and Jobs Act. New Jersey has also made significant changes to its corporate tax policy in recent years, further complicating the predictability of tax planning behavior. Accordingly, corporations may continue filing for large refunds or reducing their tax payments once they have a better idea of their true tax liability.
The Sales and Use Tax, the largest General Fund revenue source, reported $812.4 million in December, up 3.1 percent over last December. Year-to-date, sales tax collections of $4.287 billion are up 7.6 percent from the same period last year. While the early months of FY 2020 benefited from new revenues paid by certain remote online sellers due to the U.S. Supreme Court’s Wayfair ruling, December’s more modest growth tracks closely with Treasury’s projections, which assume moderate economic growth conditions.