On Tuesday, January 26, the Legislative Fiscal Bureau (LFB) sent a memo to the Joint Committee on Finance regarding the state’s fiscal condition. LFB expects that the state will finish the current fiscal year, which ends on June 30, with a net balance of almost $1.77 billion. This projected balance is $629.5 million greater than the net balance of what was estimated by the Departments of Administration and Revenue (DOA and DOR) in a report published last November.

The difference between the two estimates is mainly driven by differences in expected revenues. LFB’s estimated tax collections for the 2020-21 fiscal year are $437.4 million higher than estimated by DOA and DOR.

Additionally, LFB expects that net appropriations will be $190.7 million less than estimated by DOA and DOR. This is because some state agencies are expected to spend less money than they were originally budgeted, and unspent appropriations lapse back into the state’s general fund at the end of the fiscal year.

As we reported a few weeks ago, most of this projected lapse in appropriations is because of an increased federal match for the state’s Medicaid program, which in turn reduced the amount of money the state had to spend on the program.

By law, when actual tax collections are greater than what the Legislature initially budgets for, half of the difference is deposited into the state’s budget stabilization or “rainy day” fund. Based on LFB’s projections, the state would deposit $231.8 million into this fund at the end of the current fiscal year, bringing the fund’s total to nearly $1 billion.