PHOENIX — A little-known committee called the Joint Legislative Budget Committee is responsible for keeping tabs on state revenues.
Its employees give monthly updates on revenue to state coffers to make sure lawmakers know they are working with a balanced budget.
In a letter sent to lawmakers on Friday, JLBC staff warned revenues for May and June might not meet current targets.
Budget documents prepared by the JLBC show four years of state budgets and future baselines.
Fiscal Year 2023 is the operational budget for this year while Fiscal Year 2024 is the budget signed by the governor that goes into effect on July 1.
This year’s budget stands at $15.9 billion with an extended cash balance of $2.6 billion. The budget agreed upon by the Republican legislature and Democratic Governor Katie Hobbs is $17.8 billion for Fiscal Year 2024.
Nearly all the cash balance from this year is carried over to 2024 to pay for additional one-time expenditures, leaving a cash balance of $6 million.
Carrying over any balance into the new budget is typical, but the JLBC forecasts the cash balance will increase again in Fiscal Year 2026.
An important note: The cash balance is not the rainy-day fund.
The overall concern by the JLBC that prompted the letter to lawmakers stems from April revenues. Sales tax collections, a stable source of state income, only grew 2.5% compared to April of last year.
Net income tax collections dropped by more than half. In total, revenue collected for April was down 25%.
This may look bad at first glance, but it’s not unexpected. Last year’s flat tax took effect in January and forecasters knew income tax revenue would decline. Income tax collections in the past few months are solidly between the same months in 2021 and 2022.
Despite the small growth, sales tax collection is not growing like it used to. Between 2021 and 2022, sales tax collections grew 15% on average each month. That growth has fallen to 8% in 2023.
This slowing of growth has the added concern of showing Arizonans are simply not buying as much this year.
The question remains, does the state end the fiscal year in the red?
In their letter, JLBC analysts say no.
Corporate tax collection is seeing record growth this year, and there is plenty of money to absorb drops in collection stemming from the flat tax and slowing sales tax growth.
They do say they will have to monitor collections more carefully in the coming year to ensure the budget remains balanced.
