State General Fund revenues fell 20.6% in May
But losses were lower than expected, finance secretary says
Due to the economic impacts of COVID-19, state General Fund revenue collections fell 20.6% in May, compared to May 2019, Gov. Ralph Northam announced Thursday.
However, he noted in his afternoon news conference, this represents an improvement from last month and from an expected quarterly loss of $1 billion in revenue. In April, the state saw a decrease of 26%; with April and May’s revenue losses combined, the state saw a decrease of $800 million, added Secretary of Finance Aubrey Layne.
“This is better than we thought where we’d be. This is not mean that it’s all great and it’s all clear,” Layne said, but he does feel encouraged that the state will close the fiscal year June 30 better than officials initially expected.
“The restrictions we put in place to protect the health and safety of Virginians during this pandemic resulted in loss of jobs and of income, and our state revenues reflect that,” Northam said in a statement. “As our economy slowly begins to open up, we will continue to closely monitor revenue collections and take responsible steps to guide our economic recovery.”
May is usually a significant month for withholding and sales tax revenue collections. But this year, the deadline to submit individual and corporate income tax payments was extended until June 1. Layne said in a letter to Northam that he anticipates collections to be greater in June than they were in May due to the delayed deadline of June 1 for individual state tax returns.
On a year-to-date-basis, total revenue collections have dropped by 1.2%, which is less than half of the forecasted 3.1% growth. June 2020 collections have to be at least $3.3 billion to get back to the forecasted growth. Last June, $2.4 billion was collected.
Collections of payroll withholding taxes also dropped 13% in May, while sales and use taxes fell 12.5% while stores remained closed during the pandemic. Layne says, however, that these statistics are better than expected.
“Although there were two fewer deposit days and a broad-based decrease in the number of firms paying due to business closures, we are encouraged by the underlying resilience of the Virginia economy,” he said in a statement, adding during the news conference that many businesses were able to stay active remotely during the shutdown and that the federal Paycheck Protection Program loans also assisted.