As Kriss wrote Friday, the state revenue forecast is up again. Chart 1 shows how much biennial revenues from funds subject to the outlook (NGFO) have grown over the past few decades. Even adjusted for inflation, actual NGFO revenues for 2019–21 were 40.9% higher than the pre-Great Recession peak. Adjusted for inflation, NGFO revenues for 2021–23 are now estimated to be 50.3% above the pre-Great Recession peak.

Revenues per capita (adjusted for inflation) have jumped since the Great Recession and are expected to increase to $3,691 in FY 2022 (an increase of 33.1% from the pre-Great Recession peak). From the early 1990s through the Great Recession, real per capita revenues stayed around $2,500.

Charts 3 and 4 show how the forecasts for 2019–21, 2021–23, and 2023–25 have changed over time (by biennium and fiscal year). They show the key forecasts for the pandemic period, including Friday’s forecast: The Feb. 2020 forecast was the pre-pandemic baseline; the June 2020 forecast reflected the recession; and the March 2021 forecast is what the current budget was based on. Every forecast since the June 2020 forecast has increased the revenue estimate over the six-year period.

Under the current forecast, through 2023–25, NGFO revenues are estimated to be $8.562 billion higher than in the March 2021 forecast (the forecast on which the current budget is based). Of course, the Legislature made some changes to taxes during the session, most notably imposing a capital gains tax. Removing those legislative changes from the revenue increase, the state has $7.356 billion more than expected at the end of session. That’s a substantial amount. The increase for 2021–23 is 5.4% of estimated biennial revenues and the increase for 2023–25 is 5.2% of biennial revenues.

A few other notes from the forecast:

• It expects that capital gains tax revenues will come in lower than previously estimated. The fiscal note for the bill estimated that it would increase revenues to the education legacy trust account (ELTA; part of the NGFO) by $500.0 million in 2021–23 and $1.028 billion in 2023–25. (That will be offset a bit by reductions to the B&O tax in other accounts.) Now, the Economic and Revenue Forecast Council (ERFC) estimates that capital gains tax revenues to the ELTA will be $234 million in 2021–23 and $942 million in 2023–25. According to the ERFC, the new estimate incorporates more behavioral effects. (For example, that taxpayers will change the timing of their asset sales in response to the tax.)
• The forecast includes revenue from the financial institutions B&O tax surcharge that was recently found to be constitutional. According to the forecast, this revenue totals $164 million in 2021–23 and $219 million in 2023–25.