State Enjoys $339M Windfall, Leaders Advised to Save

Attendees at the MACo Summer Conference session, Navigating Murky Waters: Predicting Unpredictable Revenue Streams heard the State’s top revenue estimator Andrew Schaufele discuss how difficult estimating revenues has become – and how much of that has to do with the top 1 percent having most of the money, and earning much of it through capital gains.

This week, the State announced that as it closes out fiscal 2018, it has received 2 percent in revenues above estimates – a total of $339 million in unanticipated dollars for public services. A large chunk of that – $218.7 million – came from the personal income tax, which came in at 2.4 percent above revenue estimates. The latter matters for counties, which receive their own “piggy back” local personal income tax.

The windfall, Schaufele states, largely results from capital gains realizations – a revenue source which is basically unestimatable:

In this era of extraordinary volatility, we have estimated no growth in capital gains to deter large negative variances, opting for the lesser of two evils.

Comptroller Peter Franchot urges State leaders to pocket the extra cash:

I urge our state’s leaders to regard this year-end boost like an unexpected bonus to be saved for future use, not to be spent immediately.

Sure enough, in his closeout report, Schaufele provides a foreboding prediction:

….surely in the future there will be an unpredictable correction that will reverse these good fortunes.

Of course, that future period will most certainly take place after the November election.

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