Raleigh, N.C. — A forecast released late Tuesday by the legislature's leading economist predicts the state's revenues will fall $271 million short of its $21 billion budget for the 2014-15 fiscal year, with a gain of less than 4 percent expected for the coming 2015-16 fiscal year as well.
The report is slated to be presented to a joint meeting of the House and the Senate budget committees Thursday morning.
In a memo to legislators, Fiscal Research Division Chief Barry Boardman says revenues in the current fiscal year have grown by only 2.9 percent, rather than the 4 percent growth predicted in May 2014.
The increase was driven by state sales tax collections, which have grown as the economy has recovered. But personal income tax projections are now expected to fall 3.8 percent short of projections.
In his memo, Boardman says the 1.3 percent difference in overall projected revenue – he points out it is smaller than the median error since 1987 – is largely due to "slower than expected wage growth."
Previously publicized projections of the expected shortfall this year were around $200 million, although sources at various state agencies told WRAL News they were instructed by the governor's budget office to plan for a $300 million shortfall instead.
Boardman also says in his memo that his predictions are based on an assumption of higher state income tax revenue in April due to changes made in the 2013 tax code rewrite. However, he also says corporate income taxes are likely to bring in 5.7 percent less next fiscal year due to 1 percent drop in the corporate income tax rate scheduled to take effect in 2015.