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March 2019 revenue assessment report available

Providence, R.I. --The Rhode Island Department of Revenue (DOR) today released its FY 2019 Revenue Assessment Report for March 2019. The Revenue Assessment Report, which is issued on a monthly basis, compares the adjusted general revenues by revenue source on a fiscal year-to-date and monthly basis to expected general revenues by revenue source. Expected general revenues are estimated by DOR's Office of Revenue Analysis from the FY 2019 revenue estimates adopted at the November 2018 Revenue Estimating Conference (REC).1 The methodology underlying the Office of Revenue Analysis' estimates is contained in the report. The principals of the November 2018 REC revised the estimate for FY 2019 total general revenues down by $5.4 million from the enacted budget.

? March Year-To-Date Performance. On a fiscal year-to-date basis, the March 2019 report shows that adjusted total general revenues are less than expected total general revenues, based on the revised revenue estimates adopted at the November 2018 Revenue Estimating Conference (REC) and the Office of Revenue Analysis' estimation methodology, with adjusted total general revenues 1.1 percent, or $27.7 million, below expectations. The primary sources of the variance are: ? Personal income tax revenues which are down $20.4 million, or -2.2 percent, from revised expectations an improvement from the February report when the comparable figures were ($43.2 million) and -4.9 percent respectively; Insurance company gross premiums tax revenues which are $9.0 million, or 15.1 percent below expectations an improvement from the February report when the comparable figures were $(12.0 million) and -21.1 percent respectively; ? Business corporation tax revenues, which are down $6.4 million, or -5.4 percent, from the year-to-date FY 2019 estimate a reversal from the February report when the comparable figures were +$8.5 million and 10.1 percent; ? Financial institutions tax revenues, which lag the estimate by $6.3 million, or -58.4 percent a modest deterioration from the February report; ? Public utilities gross earnings tax revenues which are $2.0 million, or 3.7 percent, below the fiscal year-to-date through March revised estimate a modest improvement from the February report; ? Health-care provider assessment adjusted revenues which trail the revised estimate by $5.2 million, a variance of -13.7 percent a further decline from the February report where the same figures were $(4.0 million) and -12.0 percent.

The improvement in personal income tax revenues relative to the February report is due in large part to final payments revenues which are $19.4 million above the estimate or 34.1 percent. The deficits in the business tax revenues, although ameliorated somewhat in March, likely reflect the change to a quarterly estimated payments schedule in tax year 2018 and the uncertainty in knowing a priori when estimated payments would be received. This may be particularly true for business corporation tax revenues.

Offsetting these shortfalls are departmental receipts adjusted revenues, which lead revised expectations by $11.1 million, or 7.4 percent a trend that has persisted for the past several months; adjusted estate and transfer tax revenues which are more than the revised estimate by $9.4 million or 36.1 percent; and sales and use tax revenues, which are $2.5 million above the revised estimate for FY 2019 through March, or 0.3 percent.

? March Monthly Performance. For the month of March, the report indicates that adjusted total general revenues are $5.8 million above the revised estimate adopted at the November 2018 REC or a variance of 2.3 percent. The primary drivers of this overage are: ? Adjusted personal income tax revenues which are $22.8 million more than the estimate for March, up 38.1 percent due in large part to strong performance in personal income tax final payments, $10.5 million or 53.4 percent above expectations and refunds and adjustments, $11.3 million less than expected for the month or 13.2 percent less than expected; ? Monthly adjusted insurance company gross premiums tax revenues, which are $3.0 million above the monthly estimate, or 111.0 percent; ? Adjusted public utilities gross earnings tax revenues, which are $2.4 million or 43.5 percent above the revised monthly estimate; and ? Monthly estate and transfer tax revenues, which are $1.0 million, or 30.4 percent, more than expected.

Substantive underperformers for the month of March include: ? Adjusted business corporation tax revenues, which are $14.9 million, or 44.3 percent, less than the revised monthly estimate with this shortfall possibly attributable to a delay in tax payments being made due to the different tax return due dates and payment schedules for C-corporations and other business entities; ? Monthly adjusted sales and use tax revenues, which are $2.7 million, or 3.3 percent, below monthly expectations for March; ? Adjusted lottery transfer revenues, which are $1.4 million, or 4.4 percent, behind the estimate due to a shortfall in sports betting revenues of $2.1 million; ? Monthly adjusted health care provider assessment revenues, which are $1.2 million, or 26.3 percent, less than expected as revenues from the restructuring of the dual eligible program continue to not materialize; and ? Adjusted financial institutions tax revenues, which are $1.2 million less than the estimate for March, a variance of -72.9 percent.

Regarding the March year-to-date performance, Director of Revenue Mark A. Furcolo made the following observations: ? Fiscal year-to-date adjusted total general revenues through March are below revised expectations but are an improvement from the February 2019 report; ? Adjusted personal income tax revenues are $20.4 million below expectations, a variance of -2.2 percent, due to lower than expected personal income tax estimated and withholding payments while final payments and refunds and adjustments exceed expectations; o The personal income tax revenue estimate was revised down by $4.9 million at the November 2018 Revenue Estimating Conference as follows: estimated payments revised down by $3.6 million, final payments revised up by $2.8 million, withholding payments revised up by $3.6 million, and refunds and adjustments increased by $7.3 million; o FY 2019 year-to-date adjusted personal income tax revenues are $13.0 million, or 1.4 percent, lower than FY 2018 year-to-date adjusted personal income tax revenues were at this time last year, mostly due to the sharp swing in estimated payments, which are down $35.8 million from FY 2018 through March.

?Adjusted sales and use tax revenues through March are $2.5 million above revised expectations, or 0.3 percent; o The sales and use tax revenue estimate was revised upward by $9.9 million at the November 2018 REC so eclipsing the revised estimate is encouraging; o FY 2019 year-to-date adjusted sales and use tax revenues are $48.3 million, or 6.2 percent, more than FY 2018 year-to-date adjusted sales and use tax revenues were at this time last year. ? Adjusted departmental receipts revenues are $11.1 million above the revised estimate, a variance of 7.4 percent, continuing a trend that began in July of the fiscal year; o The departmental receipts revenue estimate was revised upward by $1.6 million at the November 2018 REC; and ? Adjusted general business tax revenues are a combined $29.1 million below revised expectations, a variance of -10.3 percent; o The estimates for these revenue items were revised down by $25.9 million on a combined basis at the November 2018 REC with most of that downward revision being made to business corporation tax revenues; o The shortfall in general business tax revenues appears to be related to the change in the estimated payments schedule that took effect for tax year 2018. It may be the case that some taxpayers will find they have underpaid their estimated payments for tax year 2018 and as a result will have increased final payments due in April.

Regarding the month of March performance, Director of Revenue Mark A. Furcolo made the following observations: ? March total general revenues were above the monthly estimate based on the revisions adopted at the November 2018 Revenue Estimating Conference, leading revised expectations by $5.8 million, or 2.3 percent, an improvement from the February 2019 report; ? Adjusted personal income tax revenues for March were better than expected driven in large part by an overage in final payments, reinforced by lower refunds and adjustment than estimated for the month; Adjusted insurance company gross premiums tax and public utilities gross earnings tax revenues for March are $5.4 million ahead of the revised monthly estimate and may indicate that some of these taxpayers continue to remit tax payments under the payment schedule that was in place prior to tax year 2018; ? Monthly sales and use tax revenues on an adjusted basis are less than expected by $2.7 million or -3.3 percent; ? March adjusted business corporation tax revenues are $14.9 million below the revised monthly estimate, a variance of -44.3 percent and may reflect some fluidity in the receipt of estimated and final payments in the months of March and April; ? Finally, the lottery transfer for March is 4.4 percent, or $1.4 million, less than expected, primarily due to the underperformance of the sports betting revenues through February.

The entire report can be found on the Department of Revenue's web site at http://www.dor.ri.gov/revenue-analysis/2019.php.

Questions or comments on the report should be directed to Paul Grimaldi, Chief of Information and Public Relations by e-mail at paul.grimaldi@revenue.ri.gov or by phone at (401) 574-8766.

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