This post provides an update to our formal Fiscal Outlook revenue forecast. This update reruns our Fiscal Outlook forecasting models using newer revenue and economic data that has become available in recent months. We then compare those new estimates to projections in the 2024-25 Governor’s Budget.
Latest Forecast Unchanged From Last Month, Continues to Suggest Downside Risk. February's tax collections and economic data did not materially change our outlook, with our latest forecast being basically unchanged from last month. Our forecast continues to suggest there is significant downside risk to state revenues relative to the Governor’s Budget. Specifically, our forecast is about $25 billion below the Governor’s Budget across 2022-23 to 2024-25. That being said, there is still significant uncertainty about how much revenue the state ultimately will collect. It is entirely possible that revenues could end up $10 billion higher or lower than our estimate for 2023-24 and $25 billion higher or lower for 2024-25. In another recent post, we discuss what our lower revenue estimate means for the size of the state's budget problem.
Weak Cash Collections Contribute to Revenue Downgrade. Our updated forecast represents a downgrade from our Fiscal Outlook. This downgrade is consistent with weak cash collections in December and January. In particular, traditional corporation tax collections (excluding elective pass-through entity payments) were down by over one-third in December relative to the year before. Similarly, income tax estimated payments were weak in January. Income tax withholding saw an uptick in February, but this was driven in large part by a timing issue related to leap day.