North Carolina tax collections are $405.7M higher than expected

lbonner@newsobserver.com May 4, 2013 

The state will collect nearly $406 million more in taxes than anticipated this year, but collections in the next two years will fall short of estimates, a legislative economist told lawmakers.

The legislature’s Fiscal Research Division and the Office of State Budget and Management revised downward tax revenue for the next two years, legislative economist Barry Boardman told legislators in a memo.

Taxpayers managed their tax bills by shifting income into 2012 and out of 2013 because of last year’s uncertainty over changes in federal tax policy, Boardman wrote. The result was $405.7 million more than expected this year and an estimated $101.5 million less next year and $125.8 million less the following year.

The tax collection numbers, called the April Surprise, are important to legislators as they write the state budget.

“We’ll have to manage the excess availability of one-time money in the current year, and we’ll have to spread it over the next two years,” said Sen. Pete Brunstetter, a Winston-Salem Republican and a Senate budget writer. “We have to manage our cash wisely.”

The Senate is expected to present its budget proposal this month.

The state Department of Health and Human Services announced this week that the shortfall in the Medicaid budget had increased by $135 million to $248 million. DHHS said faulty forecasts were to blame, which means that Medicaid costs over the next two years were also underestimated by $249 million and $197 million.

Budget writers built contingencies into the current budget anticipating Medicaid overruns, Brunstetter said. The higher costs over the next two years are a bigger concern.

“My guess is we will lean pretty heavily toward beefing up our reserves just because of uncertainties with respect to the economy and to Medicaid,” Brunstetter said.

Bonner: 919-829-4821

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