Virginia reached the end of fiscal year 2021 with an historic $2.6 billion surplus, the largest in the Commonwealth’s history, according to Gov. Ralph Northam. Total revenue collections soared 14.5 percent over fiscal year 2020, ahead of the forecast of 2.7 percent growth.
“We have effectively managed Virginia’s finances through the pandemic, and now we are seeing the results—record-breaking revenue gains, a recovery that has outpaced the nation, and recognition as the best place to do business,” said Northam. “Fueled by a surging economy, federal American Rescue Plan funds, and the largest surplus in Virginia history, we have significant resources available to make transformational investments in this Commonwealth. I look forward to working with the General Assembly in the fall to seize this opportunity so we can build a brighter future for all Virginians.”
All major general fund revenue sources exceeded their forecasts for the fiscal year. Individual nonwithholding taxes, one of the Commonwealth’s most volatile revenue sources, accounted for about half of the surplus, although collections in payroll withholding, sales, and corporate income taxes were also well above their respective forecasts.
Total revenue collections reached $8.6 billion in the final quarter of fiscal year 2021. In June, revenues decreased by $180.8 million, or 5.8 percent, compared to the previous year, which can be attributed to the extension of the individual income tax filing deadline to May 17.
“We expected a strong revenue performance, and this surplus is even larger than initially anticipated,” said Secretary of Finance Joe Flores. “We are encouraged that for the fiscal year, payroll withholding and retail sales taxes increased by 6.4 percent signifying that Virginia’s underlying economic foundation is strong.”
The Commonwealth will release the final figures for fiscal year 2021 on August 18 at the Joint Money Committee meeting. A complete analysis of all final receipts for revenue sources, including transfers, will not be available until then.
An analysis of FY ‘21 revenues based on preliminary data includes
Total general fund revenue collections, excluding transfers, exceeded the official forecast (Chapter 552) by $2.6 billion (11.7 percent variance) in fiscal year 2021.
The 30-year average general fund revenue forecast variance is 1.6 percent.
*Payroll withholding and sales tax collections, 80 percent of total revenues, and the best indicator of current economic activity in the Commonwealth, finished $560.2 million or 3.3 percent ahead of the forecast.
*Payroll withholding grew by 4.7 percent, exceeding the forecast of 2.7 percent growth.
*Sales tax collections increased 12.4 percent as compared to the annual forecast of 4.7 percent. Brick and mortar store sales increased 7.6 percent and internet sales increased 32.3 percent.
Fourth quarter results show that payroll withholding and sales tax grew 12.5 percent.
*Nonwithholding income tax collections finished the year ahead of expectations, up 37.1 percent. This was mainly due to a 68.0 percent increase in final payments to the Department of Taxation. Estimated payments increased 19.8 percent.
*Individual income tax refunds were a positive to the forecast as the average check size did not increase. Tax refunds were $339.4 million below expectations, a positive to the bottom line.
*Corporate income tax collections increased 49.8 percent for the year, ahead of the annual forecast of 27.4 percent. A preliminary analysis of the data reveal a broad based increase from larger corporations based on economic related growth.