Analysis of State Fiscal Condition
At FY 2014 Closeout
FY 2014 Revenue Results
Total state revenue for FY 2014 was $14 million above forecast but $60 million below total revenue collections in FY 2013. While FY 2014 revenues were impacted by $132 million in incremental revenue loss from tax cuts taking effect during the fiscal year, negative revenue growth is disappointing at a time when the national economy has been improving at a slow, but steady rate.
Sales tax collections, the state’s largest revenue source, exceeded forecast by 0.2%, growing at a tepid 1.9% year-over-year rate. Individual income tax collections were disappointing the entire fiscal year and ended the year 2.4% below forecast and 1.6% below collections in FY 2013. This performance remains an enigma at a time when state unemployment continues to decline. Our best speculation points to the very low labor participation rate and the likelihood that some jobs being created are paying lower wages and require fewer hours of work. The only significant positive for the fiscal year was that corporate revenues exceeded forecast by 12.4% and were 8.9% higher than FY 2013, essentially off-setting the shortfall in individual income tax collections.. Finally, gaming revenues, negatively impacted by increased competition in surrounding states, especially from new casinos opened in Ohio, decreased by nearly 15%.
State Financial Condition
Despite disappointing state revenue collections, continued spending constraint has enabled the state to maintain strong state reserves balances:
FY 2013 FY 2014 FY 2015
(Actual) (Actual) (Projected)
Net Total Reserves (in $million) $1,943 $2,005 $2,169
% of Net Operating Expenditures 12.8% 13.3% 14.4%
Note that reserves are projected to remain well above the generally accepted minimum desired level of 10%.