Virginia revenue projections for the fiscal year have remained stable since the state reforecast in light of the economic effect from the response to COVID-19, Secretary of Finance Aubrey Lane told the Senate Finance and Appropriations Committee on Tuesday.
Revenue projections are about $2.5 billion below the initial projections that were calculated before the COVID-19 pandemic hit.
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According to Lane, the state’s recovery has been steady, and he does not expect major changes unless outside factors come into play. Economic activity likely will surge only once a vaccine is readily available and another economic decline is unlikely unless a resurgence of COVID-19 yields another shutdown, he said.
“I don’t think we’re going to see much of this change until there is an actual vaccine,” Lane said. “… We’ve been saying from the very beginning that it’s not going to be a government-led recovery. … It’s going to be based on consumer confidence, when they feel safe to go back into some of these establishments, and no government is going to tell them that. That’s going to be a behavior that they’ll feel good about once there’s a vaccine and then their own personal decisions.”
Virginia’s economic problems were not as bad as other states, primarily because of the economy’s reliance on the federal government for military jobs, government jobs and contractor jobs, Lane said. He said defense contractors have held up well during the pandemic and these contractors and other essential employers have begun to hire new people. He said the state’s recovery has mostly followed national trends.
Total income tax projections, which make up more than 60 percent of the state’s revenue, are trending slightly below the reforecast projections, but the total sales tax projections, which make up nearly 20 percent of the state’s revenue, have trended higher than reforecast projections. The gains in sales taxes offset the losses in income taxes, which keeps the projections on track as a whole.
Revenue from nonwitholding income taxes is up significantly from this time last year because the state delayed its due date for the collection of income taxes.
Lane said he will find out more when September’s numbers are in, and he can make more confident projections. He also noted there is not a funding mechanism to implement the COVID-19 vaccine, which could be another liability if Congress does not allocate funding.
