January 21, 2022
In this post, we provide an interim update to our formal revenue outlook for 2021-22, which was published in November. Using the methods discussed here, this interim update adjusts our November outlook to account for the most recent revenue and economic data and then compares this update to 2022-23 Governor’s Budget assumptions.
We currently project that there is a strong chance that collections from the state’s “big three” taxes—personal income, sales, and corporation taxes—will exceed the Governor’s Budget assumption of $184.6 billion in 2021-22. Currently, our best estimate is that there will be somewhere between $4 billion and $20 billion in unanticipated revenue. As reflected by the width of this range, with half of the fiscal year ahead of us there remains significant uncertainty about how much the state ultimately will collect. We also caution that the implications of unanticipated revenues for the state's budget are not straightforward. As we discuss here, an additional $1 of unanticipated revenue results in, on average, about $0.40 of additional state surplus. In addition, as we discuss here, additional revenues likely would need to be spent on purposes that meet the State Appropriations Limit's requirements, which reduces the Legislature's flexibility over these funds considerably.