On Friday, Cris Johnston, the director of the Office of Management & Budget, says the state missed its revenue projection by nearly $1 billion for April in Indianapolis during a press conference. Photo by Whitney Downard | CNHI Statehouse Reporter
INDIANAPOLIS – Projections for the state’s April revenue missed the mark by nearly $1 billion with individual income taxes taking the biggest hit in the April revenue report.
December projections estimated the state would receive nearly $2.2 billion in April, usually the biggest revenue month because of taxes. Totals for April came in at $1.2 billion, or 44% lower than estimated and 46% lower than revenue for April 2019.
“Where the state was essentially even for the year, compared to the forecast, going into April, it is now almost 7% below because of single-month drop of 43%,” Cris Johnston, the director of the Indiana Office of Management and Budget, said. “The revenue miss in 2009, the last recessionary period, was $7.9%.”
The state extended the income tax filing deadline from April 15 to July 15 in late March. Income taxes account for 40% of revenue, second only to sales taxes, which makes up roughly half of the general fund.
Johnston said that roughly 80% of the deficit, or $800 million, was due to the tax deadline extension.
“While we hope that $800 million is mostly just a timing difference, we cannot avoid recognizing the risk of the inability to pay the full amount,” Johnston said.
The remaining 20% difference came from sales taxes and gaming taxes, Johnston said. Casinos have been closed since mid-March and aren’t projected to reopen until June.
Individual income taxes were 58%, or $669 million, below estimates while sales tax collections were 15%, or $103 million, lower than projected. The state collected 65% less corporate taxes, or $135 million less than anticipated.
March revenues missed the projections by 6% or $70 million, which Johnston said offset the previous eight months of positive growth where the state exceeded revenue projections.
“Needless to say, the remainder of the fiscal year will be challenging,” Johnston said.
Johnston said that state agencies had been encouraged to employ a variety of cost-saving measures before the next budget session in January. Though he said he anticipated tapping the state’s reserves, Johnston said the state would spend existing appropriations first.
Gov. Eric Holcomb said earlier the state would distribute $300 million to local governments, a portion of the $2.4 billion it received in federal relief aid to combat the virus.
Another relief package may include more relief for state governments, since the first package prohibited states from using the funds as a revenue replacement.
“My understanding is that there is discussion out in Washington (D.C.) about a potential package that may consider direct assistance to state and local governments,” Holcomb said. “But right now the federal assistance is being used directly to fight COVID-19.”
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