State revenues sputter along, continuing recent trend of slowing growth
COLUMBIA – During state government’s fiscal year that ended June 30, 2017, General Fund revenues increased slightly over 2016 revenues, bringing in $7.582 billion in fiscal year (FY) 2017 compared to $7.271 billion in FY 2016, an increase of $311 million. However, the revenue growth rate has been slowing during the past two fiscal years. While revenues grew by 6.2 percent in FY 2015 (and grew at a five-year average rate of 5.9 percent through 2015), the growth rate dropped to 4.5 percent for FY 2016 and continued dropping in FY 2017 to 4.3 percent.
The most significant component of the $311 million increase in total 2017 revenue increase was from individual income tax receipts, which increased $270 million or 8.1 percent over 2016 levels.
On the other hand, corporate income and license taxes declined from last year’s receipts by $113 million, or 25.1 percent, while retail sales tax receipts increased by only 2.8 percent for the year, which was well below sales tax revenues being forecasted.
General Fund expenditures for FY 2017 totaled $7.645 billion, an increase of $464 million or 6.5 percent over the prior year. Spending on education and health services consumed almost three-fourths of all spending in the General Fund, with $3.717 billion spent on education and $1.867 billion on health services, increases of 10.0 percent and 7.0 percent, respectively, over amounts spent in FY 2016.
The 2017-2018 Appropriations Act contained a proviso that appropriated projected 2017 General Fund surplus in a supplemental proviso. The proviso directed that disbursements for any of these items were not to be made until after the 2017 books were closed to determine the amount of actual 2017 surplus. If the surplus projections used in the proviso exceed the actual surplus verified during the closing process, the proviso includes a method to curtail funding of certain proviso items so that disbursing more than the actual surplus available will be avoided. The closing process has revealed that the projected surplus amount appropriated in the proviso exceeded the actual surplus available for appropriation, and as a result approximately $11.8 million of supplemental appropriations in the proviso will not be funded.
While the state has begun to address the serious problems it faces with managing its employee pension plans, steps that it has taken are inadequate to correct the pension dilemma it faces. The state continues to measure plan deficits using inappropriate methods and in doing so it continues to understate significantly the problems it has created by not being realistic in structuring and funding the plans. To gain any reasonable ability to deal with these along with other mounting costs of operating state government, state leaders must adopt a more disciplined, comprehensive, and long-term approach in considering the amount of revenue it raises and striking a better balance between those revenues and the vast competing obligations those revenues must fund.
The economic downturn we survived within our recent past revealed our ability to operate government and provide necessary services on much less than we had been spending and on much less than we spend today. Annual revenues have increased from $5.2 billion in 2010 to $7.6 billion in 2017. During the downturn state government demonstrated that it can survive on less just as businesses, individuals or families can. It’s a basic mindset that all government officials should adopt.