Gov. Glenn Youngkin announced that Virginia’s general fund revenues ended fiscal year 2023 $3.0 billion over the official revenue forecast, generating $5.1 billion in excess resources for the year. For the full fiscal year, overall general fund revenues were far better than the 14.0 percent decline assumed in the official forecast, declining by just 3.5 percent. The official estimate assumed a reversal of the extraordinary growth in individual income tax nonwithholding payments related to capital gains realizations in the prior year while the actual year-over-year change was significantly smaller than projected.
“Virginians remain overtaxed. Last year we provided $4 billion of tax relief for individuals, families and veterans. What this year’s preliminary numbers tell us is that even after that historic tax package the Commonwealth ended fiscal year 2023 with $5.1 billion in excess resources, far more than forecasted,” said Youngkin. “There is plenty of money in the system to fund our shared priorities of education, behavioral health and law enforcement while returning more of Virginians hard-earned dollars back to their wallets. Just as we did last year, I am calling on the General Assembly to reject the partisan, business-as-usual approach in Richmond, and agree on a deal that lowers the cost of living and cost of doing business in Virginia while investing in our shared priorities. This is not about Republicans and Democrats. It’s not about the Senate or the House. It’s about delivering for Virginians.”
“Preliminary year-end results show that revenue collections ended the fiscal year well above expectations. Not only did collections exceed estimates embedded in the current Appropriation Act by $3.0 billion, revenues also exceeded our updated December projections by $1.5 billion,” said Secretary of Finance Stephen Cummings. “Combined with the December forecasted $3.6 billion in surplus, the Commonwealth now has $5.1 billion in excess resources. Fiscal year 2023 results show that we are well positioned to enact an amended budget now and reserve as much as $1.5 billion to more than adequately protect against a possible economic downturn or other obligations.”
Based on preliminary data, Fiscal Year 2023 revenues exceeded the December Forecast by $1.46 billion and were $3.04 billion higher compared to the amended 2022 Appropriation Act (Chapter 769).
Higher than expected revenue collections were partly attributable to timing issues related to the new Pass-Through Entity Tax (PTET). The Forecast assumed that the new PTET would result in lower Individual Income Tax (ITT) payments in FY 2023 due to the offsetting credits to IIT generated by the PTET. Instead, the uncertainty around the new tax, to a large extent caused taxpayers to defer taking credits until fiscal year 2024. The full impact will be clear once taxpayers who filed on extension file their returns in November.
Sales tax collections increased 3.9 percent as compared to the annual forecast of a 1.3 percent decline.
Payroll withholding grew 4.0 percent, exceeding the forecast of a 0.1 percent decline.
Corporate income tax collections grew 2.6 percent compared to the official estimate of a 12.2 percent decline.
A complete accounting of all final revenue sources will be available after final year-end close and will be released on Aug. 23 when the governor speaks at the Joint Money Committee Meeting.
