State budget director announces yet another revenue surplus

Collections beat forecast by $158 million, wage growth and median income outpace national averages

RALEIGH — According to a report from the nonpartisan Fiscal Research Division of the N.C. General Assembly, the Office of State Budget and Management (OSBM) recently announced revenues for the first quarter of the state government’s fiscal year have come in above forecast. The surplus continues a multiquarter trend of revenues exceeding expectations.”We projected some growth, and we exceeded that growth by $158 million,” said state budget director Andrew Heath in an interview. “I think the biggest driver of that is withholding taxes, so it’s wages.”During the last fiscal year, the state averaged revenue surpluses around 2 percent, according to Heath. This time, revenues have exceeded forecasts by 3.1 percent.The official forecasts are consensus projections reached by OSBM and economists at the Fiscal Research Division using projected economic and wage growth models to estimate future revenues. Deputy Budget Director Nathan Knuffman explained that the forecasters typically aim to be “just on the conservative side of reasonable” in an effort to aid the legislature and state agencies in maintaining fiscally responsible spending plans.Heath expounded that while some economic indicators can have significant lag times, withholding taxes data is in real time and is an effective way to take the pulse of the North Carolina economy.Still, even retrospective data shows North Carolina’s economy outperforming its peers. A report conducted by Wells Fargo Securities and released Sept. 20 shows that incomes in the state grew nearly twice the national average. Over the course of 2015, real median household income in North Carolina grew an impressive 9.9 percent. The national average? 5.2 percent.”[Wells Fargo Securities] said that North Carolina reached a major milestone,” reported Heath, “which was exceeding its pre-recession levels of median household income.”Heath said that absent a large economic disruption, he does not envision North Carolina having any large declines in revenues, wages or incomes in the short term.”[North Carolina is] a big state, $510 billion GDP economy, strong wage growth,” asserted Heath.” You know our forecasts have some growth built in there, and beating it by $158 million in the first quarter, that’s really some strong news for us.”