State revenue collections were above targeted amounts again in March, following February’s relatively strong receipts.
Business tax receipts were still below planned amounts, with those losses offset by growth in other sources, but showed growth relative to last year. April’s returns will be more important for informing revenue forecasts than receipts from March, and may be an inflection point in the ongoing State Budget process.
Combined March revenue to the General and Education Trust Funds totaled $388.4 million on a cash basis, which was above the State Revenue Plan by $9.6 million (2.5%). For the year thus far, the total State Fiscal Year (SFY) 2025 revenue deficit was $6.6 million (0.3%) below planned amounts after the March receipts.
March is one of the more significant months for state revenue on the calendar, and was expected to bring in about 13.5% of the variable state revenue, excluding the fixed-amount Statewide Education Property Tax, collected during SFY 2025. March’s importance is boosted by receipts including both the end-of-year tax returns and first quarterly estimate payments for businesses organized as partnerships. Other types of businesses pay their first estimate payments and quarterly returns in April.
The combined business tax receipts in March were still lower than the State Revenue Plan’s expectations by $14.8 million (9.6%). However, business tax revenue was higher than March 2024 by $18.4 million (15.2%); this was the first month since August, and only the third month since November of Calendar Year 2023 (SFY 2024), that business tax revenues have grown year-over-year relative to the same month of the prior year on a cash basis.
This favorable March figure is no guarantee that business tax revenues in April will be stronger than they have been in other months so far this year. Corporations, proprietorships and other business entities that file and pay Business Profits Tax and Business Enterprise Tax, particularly the large, multi-national businesses that pay a significant portion of the Business Profits Tax, may not have revenues or profits that are impacted by the same factors as businesses incorporated as partnerships.
The collections from other revenue sources varied relative to their targets. As with the business taxes, Tobacco Tax receipts and Liquor Commission profits pulled total revenues down in March relative to the target. Tobacco Tax revenues continued to fall far short of targets, coming in at $4.9 million (29.3%) below the month’s target and $24 million (14.9%) below planned amounts for SFY 2025 thus far. Liquor Commission profits to the General Fund were $3.9 million (33.9%) below planned amounts of the month.
On the other side of the ledger, Insurance Premium Tax revenues were $12.3 million (9.6%) above planned amounts for the month, and are $35.4 million (23.7%) above the State Revenue Plan’s target for the year thus far. This result was particularly favorable given February Insurance Premium Tax revenues were also well above planned amounts, and the Insurance Department suspected those higher February amounts were due to early payments.
Relatively high historic horse racing and spots better revenues helped the Lottery Commission’s profits in March outpace the State Revenue Plan for the month by $7 million (56.0%). Lottery profits to the Education Trust Fund are $31.7 million (29.3%) above target for the year thus far.
The Real Estate Transfer Tax continues to make a slow recovery. Revenues collected in March, based on February activity, were above plan by $2.5 million (23.8%), bringing the total for the year thus far to $3.7 million (2.3%) below target. While still behind the State Revenue Plan, Real Estate Transfer Tax revenues were $15.7 million (11.2%) higher than they were at this point last fiscal year. March revenues continued to be driven by higher property transaction prices (35.9% above last year) than the number of transactions (1.4% lower than last year), likely reflecting the expensive housing market with a constrained supply.
Revenues over the last two months have been positive relative to the State Revenue Plan. Much of this increase was driven by Insurance Premium Tax revenues; without those higher-than-expected returns, March would have been in deficit, and February’s surplus would have slipped from $22.8 million to $6 million. The Insurance Premium Tax typically does not generate substantial revenue throughout the year; most arrives in March, so overperformance in only that tax would offer limited relief from deficits during other times of year.
April was originally projected to collect 15.9% of all the variable General and Education Trust Funds revenue for the fiscal year, which is the largest of any month in the calendar. April revenue data will help policymakers determine the size of a potential revenue shortfall this year and in the next two years, and inform their work on the next State Budget.
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