PROVIDENCE – The hit COVID-19 took on state coffers in fiscal year 2020 was not as bad as expected, thanks to a combination of higher tax revenue and lower expenses, plus a $120 million boost from the rainy day fund.
According to the fiscal 2020 preliminary closing statement published last week by the state comptroller, general revenue clocked in $141.8 million higher than was anticipated as of the state’s May Revenue Estimating Conference.
While revenue remained below pre-pandemic numbers, several sources came in well-above expectations. Taxes paid by financial institutions, while still a smaller contributor of income at $44.6 million, were nearly double the $24.4 million expected. In addition to taxes paid on net income, this figure also includes two somewhat unexpected contributions this year: a $10 million reimbursement for redemption of a historic structure tax credit certificate and $15 million in “large, infrequently occurring payments,” according to Paul Dion, chief of the R.I. Office of Revenue Analysis.
While Dion could not comment on the source or reason for these unexpected payments, he noted that they were somewhat unusual. The last time the state collected tax revenue from financial institutions for redeeming a historic structure tax credit certificate was in fiscal 2013, and for half the amount collected this year. The contribution in large, infrequently occurring payments was also substantially higher this year, he said.
Revenue from personal income taxes, which represent the lion’s share of the state’s tax income, also proved better than expected: the $1.4 billion in tax revenue was $46.6 million more than anticipated. That the pandemic hit fairly late in the fiscal year likely helped keep income taxes strong, said Michael DiBiase, CEO and president of the Rhode Island Public Expenditure Council. DiBiase also pointed to extra federal unemployment benefits, which are subject to the income tax, as an unforeseen source of tax revenue.
Other revenue sources that proved more lucrative than anticipated included:
- Sales and use taxes, which came in 3.4%, or $38.4 million, higher than expected, for a total of $1.2 billion.
- Taxes on business corporations, which were $15.7 million, or 11.82%, higher than expected, for a $148.6 million total.
- Rhode Island lottery revenue, which was $15.3 million, or 5.69%, above expectations, to end at $283.9 million.
The state also spent less out of its general fund than anticipated, saving $46.1 million over what was budgeted, to end the fiscal year with a $180.4 million surplus, which includes the $120 million transfer from the rainy day reserve fund.
Nancy Lavin is a staff writer for the PBN. Contact her at Lavin@PBN.com.
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