NC Economists Now Projecting Budget Surplus
After earlier projections that showed North Carolina may finish this fiscal year with a budget shortfall, state economists are now saying the state will come out ahead. A consensus forecast released Wednesday projects a surplus of $400 million or about 2 percent.
State budget director Lee Roberts has emphasized all year that you don't have a true picture of what revenues look like until after April, the climax of tax season.
That was especially true this fiscal year because it was the first full one after major tax changes. Governor Pat McCrory and other Republican leaders cut personal and corporate income taxes, while raising the sales tax base slightly.
Roberts says forecasters were conservative with their estimates.
"Anytime you have broad-based, comprehensive tax reform, that's going to make the modeling a lit bit more difficult," he says, "so they were intentionally being cautious with that in mind."
But April tax returns blew those expectations out of the water. Roberts calls it a significant upswing, and now projects the state will finish the fiscal year $400 million ahead.
"We attribute that to broad-based economic growth," he says. "Employment is up. Personal income is up. And that's feeding through to income tax returns."
He notes that a lot of business income flows through those returns.
He says the April surge is consistent with what budget and revenue officers in other states are seeing too.
North Carolina is now on track to bring in enough revenue to trigger another tax cut. If the state hits $20.2 billion in revenue this fiscal year, the corporate income tax rate next year will drop from 5 percent to 4 percent.