The Economic and Revenue Forecast Council (ERFC) will adopt its next update to its forecast of state revenues on Wednesday, February 19th. This revenue forecast will be based on a forecast of the state economy prepared by the ERFC staff. In my January 30 post, I discussed the preliminary version of this economic forecast. The final version is now available (here).

The final February economic forecast is a bit better than the November economic forecast upon which November revenue forecast was based. In the final February economic forecast, state personal income is $7.5 billion higher in 2020 and $6.1 billion higher in 2021 than in the November forecast, while state employment is 9,000 higher for 2020 and 14,000 higher for 2021.

On Friday ERFC released its monthly revenue collections report. For the January 11–February 10 period, collections were $6.2 million (0.3 percent) less than anticipated in the revenue forecast adopted in November. Two large refunds reduced net collections by $24.1 million. Without these refunds, collections would have exceeded the forecast by $17.9 million.

Over the three months since the November revenue forecast, collections have exceeded forecast by $162.4 million (2.5 percent). More than one half of this, $97.4 million, was in real estate excise tax (REET), however. This REET surplus was the result of legislation enacted during the 2019 session under which REET rates applicable to high value properties jumped on January 1. (See pages 4 and 5 our brief on 2019 tax legislation here.) A significant number of transactions were accelerated to beat the rate hike and this effect was not fully captured in the November revenue forecast. ERFC expects the recent REET surplus to be offset by lower REET collections in future months.

Given the modest improvements in the economic forecast and the positive collections experience for non-REET sources, it is likely that February 19 revenue forecast update will give legislative budget writers a bit more money to play with as they write their supplemental budget.