BRADENTON, Fla. — Preliminary figures show that Virginia ended fiscal 2014 with revenue collections down 1.6% compared to the prior year, leaving the general fund with a shortfall of $438.5 million, Gov. Terry McAuliffe announced July 10.
The state anticipated revenues would grow by 1%.
"This marks the first time that Virginia revenues have declined outside of a national recession," state officials said.
The main driver of the revenue decrease was a large drop in non-withholding payments. This category, which is made up of non-wage income such as capital gains, was $401.1 million off the mark.
Despite record-breaking increases in the stock market, it appears that the uncertainty about the federal "Fiscal Cliff" in December 2012 and January 2013 shifted more realized capital gains from 2013 into 2012 than expected, said officials.
Revenue collections during the last quarter of each fiscal year are significant because upper income individuals who have a significant portion of their income based on capital gains pay a substantial portion of their tax liability between April and June.
Payroll withholding and sales tax collections, which are 83% of total revenues and the best indicator of current economic activity in the Commonwealth, also fell short of the forecast by $78.9 million.
"Estimates for these two sources are directly tied to the economic outlook developed during the fall forecasting process, and specifically, the outlook for jobs and wage income in the Commonwealth," officials said. "The general weakness in withholding and sales tax collections over the last several quarters is indicative of the negative effect that federal government spending cuts are having on the Commonwealth."
Individual income tax withholding, 64% of total general fund revenues, was below the estimate by $66 million. Individual income tax non-withholding collections, 15% of total revenues, fell $401.1 million or 10.1% percent in fiscal 2014 reversing the 19.1% gain in fiscal 2013.
Sales and use taxes, which are 19% of total revenues, fell short of the annual estimate by $12.9 million.
Corporate income tax collections, 5% of total revenues and one of the most volatile revenue sources, declined by 4.9%.
Recordation tax collections on wills, suits, deeds, and contracts finished the year $66.7 million lower than projects by 17.7%.
Insurance premium taxes exceeded the annual estimate by $31 million, an 11.8% variance from the forecast.
