The latest state revenue forecast anticipates collections for the current fiscal year to come in about $271 million below the $21 billion budgeted by the General Assembly and Gov. Pat McCrory for the year. A memorandum from the General Assembly Fiscal Research Division and the Office of State Budget and Management released Tuesday cites slower-than-anticipated wage growth - which is pulling down personal income tax revenues - as a main cause of the 1.3 percent projected shortfall for 2014-15.
Since 1987, the median forecast error has been 2.5 percent.
Through January, state revenues were about $215 million short of projections, said Barry Boardman of the Fiscal Research Division. Even with the shortfall, General Fund revenues are expected to increase by 2.9 percent over the amount collected in the 2013-14 fiscal year. Back in May, analysts projected a 4 percent increase over 2013-14.
The latest revenue prediction uses a "very cautious approach" given the uncertainty surrounding potential revenue implications from the Republican-led General Assembly's tax changes the past two years, according to the memo. "This approach is further warranted given the persistent weaknesses in wage growth and the ongoing instability of the global economy," the memo states.
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It says "risks persist" in forecasting how the year will settle up. It says the forecast assumes that April 15 tax filings will result in lower refunds and higher final payments by individual income taxpayers.
Boardman is scheduled to update lawmakers about the revenue picture Thursday during a joint meeting of the Senate and House appropriations committees. He cautioned that the $271 million figure could rise or fall as a result of April's tax collections.
"It's called an April surprise for a reason," Boardman said.
General Assembly Republicans have said they're not overly concerned about the shortfall because they've faced larger holes in the past and the amount represents a tiny fraction of the budget. Also, North Carolina has more than $800 million set aside in Medicaid reserves and "rainy day" funds they could tap into if necessary, state officials have said.
The shortfall in the 2013-14 fiscal year was about $450 million, Boardman said.