Gov. Roy Cooper will make an announcement Wednesday regarding his spending proposal for North Carolina as the state deals with a budget surprise.
North Carolina collected $457 million more in tax revenue in the 2020 fiscal year than expected, but it does not mean the state has extra money to spend.
According to analysts from the Legislature’s Fiscal Research Division, most of the over-collections occurred after more people paid their income taxes in fiscal 2020 than expected after a three-month tax payment deadline extension to July 15.
The payment extension caused a total of $1 billion to shift to fiscal year 2021, but analysts expected more.
“We wanted to make you aware that the state over-collected on its projected revenue undercollections at the end of FY 2019-20,” the nonpartisan budget staff’s report said. “In other words, even though revenues were down in FY 2019–20, the state collected more than was projected relative to the May 2020 Revenue Forecast.”
Analysts estimated in May that revenue collections over the biennium budget would drop by $4.9 billion – or 8.4 percent – because of the economic downturn caused by the response to COVID-19.
They also predicted $1.06 billion would crossover to 2021 because the tax deadline changed from April 15 to July 15. However, fewer people than expected paid their taxes after the fiscal year started.
The $457 million over-collection would not be recurring, and “it may put negative pressure on the FY 2020-21 forecast,” analysts wrote in a report sent to legislators Tuesday afternoon.
The Senate’s chief budget writer, Sen. Harry Brown, R-Onslow, said Tuesday he believes Cooper might try to allocate the unappropriated funds in his spending proposal, calling it a Democratic “budget gimmick.”
“That would be outrageously irresponsible, reckless, and negligent,” Brown said. “That same ‘spend now, pray later’ strategy resulted in teacher firings and salary cuts during the last recession.”
Budget writers also will have to work through $2 billion to $3 billion in one-time federal aid that was used to fund recurring state programs. The money was provided through Congress’ coronavirus stimulus package, which was signed into law in late March.
Fiscal analysts also advised lawmakers to “treat” Tuesday’s report with “caution” as the economic climate continues to spiral because of the pandemic.
“The $457 million estimated unappropriated balance is predicated on the accuracy of the revenue forecast in a time of unprecedented economic tumult,” they wrote.
The fiscal office was supposed to publish a revised forecast this month but delayed the report until late September.
