March PIT withholding came in $217 million (2 percent) above projections included in the 2024-25 Governor's Budget, following a strong February withholding month. Overall, withholding is running 1 percent above the Governor's Budget projections and about 5 percent higher than last year.
Latest Forecast Unchanged From Last Month, Continues to Suggest Downside Risk. February's tax collections and economic data did not materially change our outlook, with our latest forecast being basically unchanged from last month. Our forecast continues to suggest there is significant downside risk to state revenues relative to the Governor’s Budget. Specifically, our forecast is about $25 billion below the Governor’s Budget across 2022-23 to 2024-25. That being said, there is still significant uncertainty about how much revenue the state ultimately will collect. It is entirely possible that revenues could end up $10 billion higher or lower than our estimate for 2023-24 and $25 billion higher or lower for 2024-25.
Our new forecast for 2023-24 cannabis retail excise tax revenue is $675 million, very close to the January Governor’s Budget forecast of $660 million.
In the first few weeks of January, real-time personal income tax (PIT) revenue collections are running $3 billion to $4 billion short of the January target for current year revenue projections included in the 2024-25 Governor's Budget.
Our new forecast for 2023-24 cannabis retail excise tax revenue: $702 million. This is $206 million above the budget package assumption.
The 2023-24 budget package anticipated a funding shortfall for programs supported by cannabis tax revenues. Our new revenue estimates are higher, yielding a smaller funding shortfall.
The May Revision anticipates a funding shortfall for programs supported by cannabis tax revenues. Our new revenue estimates are slightly higher, yielding a slightly smaller funding shortfall. Specifically, our estimate for 2022-23 cannabis retail excise tax revenue is $509 million. This is $24 million above the administration’s May Revision estimate but $133 million below the January Governor’s Budget estimate.
Based on the most recent revenue and economic data, we currently estimate that collections from the state’s “big three” taxes—personal income, sales, and corporation taxes—are likely to fall below the Governor's Budget assumption of $200 billion in 2022-23.
Revenue from the cannabis retail excise tax has declined for six straight quarters.
Based on the preliminary results, the state will receive an estimated $961 million in revenue from the most recent quarterly cap-and-trade auction held on November 16, 2022.
Cannabis tax revenues have declined for five straight quarters. One part of last quarter’s revenue decline is the lost revenue from the recently eliminated cultivation tax. Despite this policy change, revenues from the retail excise tax declined faster than ever before, indicating that other factors continue to drive down revenues.
Although October colletions from the state's “big three” tax revenues—personal income, corporation, and sales taxes—came in far ahead of Budget Act assumptions, this is not indicative of better than expected revenue performance for 2022-23 overall. Instead, a closer look at the data shows that the recent trend of revenue weakness continued in October.
August state income tax withholding was down $450 million (6.1 percent) compared to last year.
Cannabis tax revenues have declined substantially for three straight quarters.