Governor Bob McDonnell announced today that October revenue collections increased by 3.1 percent over the prior year. This is the 19th month out of the last 20 in which state revenue collections exceeded the previous year’s amount. However, slowing growth, continued uncertainty regarding federal funding, and concerns about the national economy are prompting caution as the governor and budget officials begin preparing the 2012-14 budget.
October is not a significant month for revenue collections. The revenue increase was primarily driven by a 5.3 percent growth in individual income tax withholding payments, a 5.0 percent increase in individual income tax non-withholding payments, and a 2.9 percent growth in sales and use taxes. Conversely, receipts for corporate income tax fell by 55.1 percent. On a year-to-date basis, total revenue collections have risen 5.8 percent, ahead of the revised annual forecast of 3.7 percent growth. Adjusted for the accelerated sales tax program, state revenues have grown 5.0 percent, ahead of the economic base forecast of 3.5 percent growth. Corporate fell 55% for the month as the refunding season kicked off with extension returns being filed on Oct. 15th. A complete picture of corporate refunds will be known after December.
“While Virginia’s economy continues to grow and recover from the economic challenges of past years, that rate of growth has slowed somewhat in recent months. All indicators at the state, national and global levels continue to urge caution as our economy struggles to regain its footing,” Governor McDonnell said. “Virginia’s economy is showing modest growth and signs of improvement that surpass those of the nation’s economy as a whole, but the fragile national economy, persistent uncertainty in federal funding of programs that directly impact the states, and our economy’s vulnerability to upheaval due to national and world events requires economists and elected officials to take a conservative, responsible fiscal approach when budgeting for the future.
“More than 250,000 Virginians still lack good jobs. That is unacceptable, and it is why job creation and economic recovery is the top priority of our administration. We are working with public and private sector economic advisors to better understand the national and state indicators on the health of our economy as we develop our next biennial budget. That budget will continue our commitment to responsibly reducing government spending, spurring private sector job creation and economic development, eliminating burdensome regulations on businesses and local governments, and focusing government on its core functions.”