The shortfall that legislative budget analysts are projecting has gotten a little smaller, though they’re still expecting a sizable deficit.
On Monday, the Joint Legislative Budget Committee released a revenue update for May that showed the state exceeded projections by $163 million.
That’s better than the state’s Finance Advisory Committee expected in April, when it estimated that the budget for the fiscal year 2021 would have a $1.1 billion deficit due to the economic downturn triggered by the COVID-19 outbreak and subsequent shutdowns of many businesses. Because of the uncertainty at the time, the committee said the actual deficit could be up to $500 million larger or smaller than the prediction.
The improved May revenue numbers follow April revenue collections that were also better than expected. April revenue exceeded the Finance Advisory Committee’s projections by $108 million, meaning the state’s overall financial picture is $271 million ahead of budget projections.
The new revenue projections for May are based on four revenue categories that JLBC described as “direct measures of economic activity” – sales tax, individual income tax, corporation income tax and insurance premium tax.
Of those four categories, $143 million of the new money in the revenue forecast come from sales taxes. Individual income taxes account for $34 million and corporation income taxes for $16.5 million.
The relatively good news follows reports that the United States added 2.5 million jobs in May as many businesses reopened. A spokesman for the U.S. Bureau of Labor Statistics said state-by-state numbers won’t be available until June 19.
June 19 is also when JLBC will release a full update on the fiscal year 2021 budget.
Though the numbers were better than expected, sales tax revenue in general is still nearly 10% lower than it was a year ago. According to JLBC, the biggest drops were the leisure and hospitality sectors, which have been especially hard hit by the coronavirus crisis. Sales tax revenue for hotels and motels is down 81% from May of last year, amusements are down 72% and restaurants and bars generated 42% less revenue.
Gov. Doug Ducey is expected to call at least one special session of the legislature so lawmakers can tackle a budget crisis that may still approach $1 billion, along with other possible special sessions for other COVID-related topics.