Will there be an 'April surprise?'
Published April 15, 2014
Editorial by Winst0n-Salem Journal, April 14, 2014.
Gov. Pat McCrory, legislative budget writers and the state Revenue department have a plea for taxpayers preparing their 2013 tax returns today: “Hurry up!”
All are eagerly awaiting the April revenue report, hoping to learn if they will have enough money in Fiscal 2015, which starts on July 1, for promised teacher pay raises.
This year’s preliminary revenue reports are troubling.
While overall revenues are $12 million above projections, there has been a $221-million shortfall in personal income payments since the January 1 personal income tax cut went into effect. The legislature’s Fiscal Research Division is also concerned about fewer corporate tax returns, fearing that corporate income tax collections will also wane, WRAL News reported.
It is important to note that a shortfall is not a deficit. A shortfall refers to having less money on hand before a budget is written. A deficit refers to inadequate funds to cover expenses already approved.
So the shortfall threatens the Fiscal 2015 budget that was approved last year but which legislators will revise when they reconvene in Raleigh next month. If the shortfall continues through the April revenue report, legislators will face lower revenue projections for next fiscal year. That is, they will have to plan on spending less come July 1.
Legislators planned to have money available for a teacher raise, primarily for starting teachers. They set aside $360 million in anticipated revenue for those raises. But if revenues aren’t meeting this year’s projections, not all of that money will be there. And, Medicaid expenses are expected to run over budget, eating up as much as $200 million of the reserve.
The April report should provide a clearer balance sheet.
McCrory made a wise move several weeks ago, ordering his agencies to go slow on late Fiscal 2014 spending. Money not spent this fiscal year will remain in the treasury for use after July 1.
Over the years, North Carolina lawmakers have seen a number of “April surprises,” that is, revenue collections either higher or lower than expected.
Let’s all hope that this year’s surprise is on the high side.
