Following the Department of Revenue report in August on a $281 million tax revenue shortfall for the end of FY14 (June 30, 2014) the Legislative Fiscal Bureau (LFB) has re-estimated the “structural deficit” going into the 2015-17 biennium. The structural deficit is a measure of how general fund tax collections in the current 2013-15 budget match up against general purpose revenue (GPR) spending commitments in the next two-year cycle. The structural deficit calculation assumes zero revenue growth and does not take into account any potential reductions in spending appropriations.
As outlined in a recent LFB memo, the revised structural deficit is now projected at $1.8 billion. That estimate compares to a $642 million deficit the LFB reported in May of 2014. The revision reflects lower than anticipated general tax collections for FY14 (carried forward and repeating itself into FY15) and downgrading FY15 tax collections based on a revised national economic forecast.
The LFB has noted that actual tax collections in FY15 and final expenditure data for FY14, which DOA will publish by October 15, 2014, will impact the current structural deficit projection. New numbers are in fact already coming out. In a September 16th letter from DOA Secretary Mike Huebsch to 4 Senate Democrats, and, according to the Department of Revenue, actual tax collections for the first two months of FY15 have come in close to $50 million over the budget estimates for July and August. The DOR further reported that “We believe it is likely that the state will meet the LFB’s May estimate of $14.725 million in total tax collection for FY15”. If that is the case, and assuming no change in actual GPR expenditures vs budgeted spending, the projected structural deficit would be in the neighborhood of $923 million, or the second lowest structural deficit in the last 20 years.