The Office of the Economic and Revenue Forecast Council today released the January Economic and Revenue Update. The “headline” numbers show collections for the most recent month to be $36.9 million (3.4 percent) greater than anticipated under the November revenue forecast. Cumulatively, for the two months since the November forecast, revenues are $61.0 million (2.3 percent) higher than anticipated.

The situation is not quite as bright as these headline numbers suggest.

Of the $61.0 million positive “variance”, $28.2 million is due to one-time assessment payments ($20.9 million for the December collections report and $7.3 million for the January report). Excluding these revenues reduces the cumulative variance from the forecast to $30.7 million. This variance is more than accounted for by an administrative change made by the Department of Revenue. As the January Update explains:

In order to cut back on processing expenses and reduce reporting errors, the Department of Revenue switched 32,600 taxpayers from quarterly filing of paper tax returns to monthly filing of electronic returns, starting with October taxable activity. This shift in the monthly payment patterns, which was not accounted for in the monthly collection estimates based on the November forecast, does not alter the forecast of total collections for fourth quarter activity, only the timing of the receipts. With the change in frequency, taxpayers who would have formerly paid taxes for the entire fourth quarter on January 31st have instead already paid taxes for October and November activity in November and December, and their January filings will reflect only December activity. Any revenue increases over the last two collection periods that have resulted from this change are therefore expected to be reversed in the January 11 – February 10 collection period. Based on an assessment of the history of taxes paid by these filers, it is estimated that the change would have caused Revenue Act collections to increase by an average of $24 million in the last two collection periods, but decrease by approximately $48 million in the next collection period. (Page 4)

Taking into account this $48 million shift in tax payments reduces the cumulative variance from $61 million to $13 million. Excluding the one-time assessments, the variance becomes negative $15 million.

The January Economic and Revenue Update is available here.