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Despite the revenue decline, North Carolina expects nearly $1 billion more in cash

Written by GARY D. ROBERTSON


North Carolina officials on Friday cut a projected state revenue surplus through mid-2025 by $430 million, citing lower-than-expected individual income tax payments on April 15 due to recent corporate tax changes. Still, the state expects nearly another $1 billion to flow into its coffers.

Last month, economists working for Democratic Gov. Roy Cooper’s administration and the Republican-controlled Legislature formally forecast that collections would exceed revenues budgeted for the year ending June 30 by $413 million. And that jump, they found, would result in receiving another $1 billion more in the fiscal year that begins July 1 than projected in the current two-year state budget.

Now, the consensus forecast shows the overage for this fiscal year will now be $188 million, with another $799 million expected next year, according to the Office of State Budget and Management and the Legislature’s Fiscal Research Division.

The economists had warned that a revision to forecasts could be needed if April figures, which tend to be the most volatile, deviate significantly from estimates. That’s what happened, the agencies said. Personal income tax refunds were higher than expected and final payments were lower than expected, as a 2022 tax change that required certain corporations and partnerships to pay state taxes instead of owners or shareholders for their preferred tax treatment likely led to some duplicate payments .

“Fortunately, this adjustment is a one-time event,” said a memo from the state budget office, adding that “despite this downward revision, the economic outlook for North Carolina remains unchanged, with no effect on the state’s long-term growth.”

It’s unclear whether the lower excess collections will make lawmakers more cautious about additional spending or a possible income tax cut as the General Assembly now meets to adjust the second year of the budget. The additional money is a small percentage compared to the nearly $31 billion the state currently plans to spend next year.

The April forecast served as the basis for Cooper to present his budget adjustment proposal last month. It also gave Republicans confidence that there was money to pass a measure that would set aside another $463 million to help children seeking scholarships attend private schools and eliminate the waiting list.

That bill needs just one vote in the House to send the measure to Cooper, who strongly opposes the larger Opportunity Scholarship program. Lawmakers last year approved eliminating family income limits for receiving the grants, leading to a huge increase in applications. Cooper has called for a moratorium on Opportunity Scholarships.

In a post Friday on the social platform the rich.”

Republican budget writers are also considering requests from the business community, advocating for children to address the coming loss of federal money for subsidies intended to keep child care centers open during the COVID-19 pandemic.

Senate Minority Leader Phil Berger told reporters Thursday that Republican leaders are questioning whether it makes sense to provide widespread tax cuts this year. For example, giving even $500 to each household could cost billions.

“We’re looking at it, but I don’t think there’s interest in doing it unless the amount of money we can send out is an amount that would make a difference,” he said.

Featured photo via AP Photo/Hannah Schoenbaum.

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