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June 2021 Special Report on Revenue available

Providence, R.I. -- The Rhode Island Department of today released its FY 2021 Special Report on Preliminary Revenues. This report provides a detailed look at FY 2021 preliminary revenues as provided in the Controller's Preliminary General Fund Revenue Report for FY 2021 and compares these revenues to both the final enacted FY 2021 revenue estimates and the audited FY 2020 revenues as provided in the Final General Fund Revenue Report for FY 2020. Some of the detail information is derived from reports generated by the Division of Taxation and the Division of Lottery. This report should be viewed as a complement to the Controller's Preliminary General Fund Revenue Report for FY 2021.

Preliminary FY 2021 Revenues vs. FY 2021 Final Enacted Revenue Estimates The FY 2021 Special Report on Preliminary Revenues shows that preliminary FY 2021 total general revenues led the final enacted FY 2021 revenue estimates by $217 million or 5.1%. Preliminary FY 2021 total taxes and departmental receipts revenues finished ahead of the final enacted FY 2021 total taxes and departmental receipts revenues by $202.9 million or 5.2%. The largest portion of this difference is attributable to total taxes, which were $201.6 million, or 5.8%, more in preliminary FY 2021 revenues than the final enacted FY 2021 revenue estimates. Preliminary FY 2021 other general revenue sources were $14 million, or 4.4%, above the final enacted FY 2021 revenue estimate of other general revenue sources, with the lottery transfer responsible for $12.9 million of the total difference.

Details of the difference between preliminary FY 2021 total general revenues and final enacted FY 2021 revenue estimates for the largest sources of general revenues are in the chart below:

Regarding preliminary FY 2021 revenues and final enacted FY 2021 revenue estimates, Director of Revenue Guillermo L. Tello made the following observations: Preliminary FY 2021 total general revenues were $217 million more than the final enacted FY 2021 total general revenues estimate. This overage was due in large part to strong business corporation tax, personal income tax, and sales and use tax preliminary revenues, which outperformed estimates by $211.6 million. Business corporation tax revenues in preliminary FY 2021 were $86 million more than estimated for the final enacted FY 2021 budget, a variance of 75.2%. The spread between preliminary FY 2021 and final enacted FY 2021 personal income tax revenues was $75 million, due primarily to the personal income tax final payments, which were $85.6 million more, or 18.8%. Preliminary FY 2021 personal income tax final payments revenues include $109.1 million of personal income tax payments received from pass-through entities on behalf of shareholders vs. a final enacted FY 2021 net estimate of $70.9 million. o In addition, personal income tax withholding payments came in $9.1 million above the FY 2021 final enacted estimate, or 0.7%, while personal income tax estimated payments and refunds and adjustments were $10.1 million more. o The surpluses in the personal income tax components in preliminary FY 2021 relative to the final enacted FY 2021 revenue estimates for the same were offset by a larger negative net accrual recorded in preliminary FY 2021 vs. the negative net accrual estimated in the FY 2021 final enacted budget. Preliminary FY 2021 sales and use tax revenues exceeded final enacted estimates by $49.6 million, or 3.8%, boosted in part by the significant financial support provided to households and businesses by the federal government as part of the Consolidated Appropriations Act of 2021 and the American Rescue Plan Act. Preliminary FY 2021 lottery transfer revenues were 4.5% above the final enacted estimate for lottery transfer revenues of $288.9 million. Most of the overage was due to casino gaming activity led by video lottery terminal revenues coming in above final expectations for FY 2021 reinforced by the out performance of traditional lottery revenues (i.e., scratch tickets, Powerball, Keno, etc.) vis--vis the final enacted estimate for FY 2021. Departmental receipts and financial institutions tax revenues were a combined $2.4 million more in preliminary FY 2021 than the FY 2021 final enacted revenue estimates. Preliminary FY 2021 public utilities gross earnings tax, insurance company gross premiums tax, and healthcare provider assessment revenues were a combined $10.9 million below the final enacted FY 2021 estimates for these revenue items.

Preliminary FY 2021 Revenues vs. Audited FY 2020 Revenues The FY 2021 Special Report on Preliminary Revenues shows that preliminary FY 2021 total general revenues exceeded audited FY 2020 total general revenues by a robust $371.3 million or 9.1% due in part to the impact of the onset of the COVID-19 pandemic during the last 3 months of FY 2020 and the vigorous financial support provided by the federal government to households and businesses in the second half on FY 2021. Preliminary FY 2021 total taxes and departmental receipts revenues were $387.7 million or 10.4% more than audited FY 2020 total taxes and departmental receipts revenues. Total tax revenues were $422.5 million, or 12.9%, more in preliminary FY 2021 than in audited FY 2020. Preliminary FY 2021 other general revenue sources, however, were $16.4 million less than audited FY 2020 other general revenue sources, a variance of 4.7%.

Details of the difference between preliminary FY 2021 total general revenues and audited FY 2020 total general revenues for the largest sources of general revenues are in the chart below:

Regarding preliminary FY 2021 revenues and audited FY 2020 revenues, Director of Revenue Guillermo L. Tello made the following observations: Preliminary FY 2021 total general revenues were $371.3 million more than audited FY 2020 total general revenues. "The substantial difference between preliminary FY 2021 and audited FY 2020 total general revenues is a reflection of the degree to which the pandemic negatively impacted FY 2020 and the federal response to it positively impacted FY 2021," Tello said. The spread between preliminary FY 2021 and audited FY 2020 personal income tax revenues was $210 million, a difference of 14.9%. o For preliminary FY 2021, personal income tax final payments revenues were $359.4 million more than in FY 2020 and incorporates $150.4 million of cash receipts received in July 2021 that were accrued back to FY 2020. Additionally, personal income tax payments received from pass-through entities made on behalf of their shareholders were $109.1 million in preliminary FY 2021 vs. $47.8 million in audited FY 2020. o Preliminary FY 2021 personal income tax estimated payments were $92.5 million above audited FY 2020 amounts. This difference includes $29 million of estimated payments received in July of FY 2021 but accrued back to FY 2020. o FY 2021 preliminary personal income tax refunds and adjustments were $43.5 million, or 12.1%, more than in audited FY 2020. Preliminary FY 2021 refunds and adjustments include cash payouts of $19.3 made in July 2020 but accrued back to FY 2020. o Personal income tax withholding payments in preliminary FY 2021 were $59.6 million above audited FY 2020 consistent with the reopening of the State's economy over the July 2020 through June 2021 period. o Finally, the personal income tax net accrual was $258 million less in preliminary FY 2021 than in audited FY 2020. The $160.1 million of net revenue accrued back to FY 2020 from July 2020 was reversed in preliminary FY 2021 and was the major contributor to this difference. Preliminary FY 2021 sales and use tax revenues were $174.5 million more than in audited FY 2020, a variance of 14.9%. The substantive difference in sales and use tax revenues between preliminary FY 2021 and audited FY 2020 was driven by the significant financial support provided to households and businesses by the federal government to combat the negative economic impacts of the COVID-19 pandemic. Significant growth in net taxation receipts (i.e., sales and use tax on items other than meals and beverages and motor vehicles), up 15.3%, were bolstered by very strong growth in use taxes from motor vehicle sales, up $39.5 million in preliminary FY 2021 vs. audited FY 2020. Sales taxes from meals and beverages prepared away from home fell in preliminary FY 2021 by 5% compared to audited FY 2020. Other significant preliminary FY 2021 increases relative to audited FY 2020 were realized in the business corporation tax revenues, which were up $54 million, cigarette and other tobacco products tax revenues, $22.1 million more and likely due to Massachusetts' banning of the sale of flavored cigarettes and other tobacco products effective June 2020, and the lottery transfer, $17.9 million ahead and reflective of the fact that the Twin River Casino Hotel and the Tiverton Casino Hotel were closed for nearly three months in FY 2020 versus 21 days in FY 2021. Preliminary FY 2021 other miscellaneous revenues, departmental receipts, public utilities gross earning tax, and estate and transfer tax revenues were each more than $10 million less than in FY 2020. Other miscellaneous revenues were $38.5 million below audited FY 2020 due to decreased transfer of excess reserves from quasi-public agencies to the general fund. Preliminary FY 2021 departmental receipts revenues were $34.7 million less than in audited FY 2020 primarily the result of a reduction in hospital licensing fee rate from 6% in FY 2020 to 5% in FY 2021. Public utilities gross earnings tax revenues in preliminary FY 2021 were $15.2 million behind audited FY 2020 while estate and transfer tax revenues in preliminary 2021 were $12.3 million less than in audited FY 2020 due in part to the receipt of $25.8 million of infrequently occurring large payment(s) in FY 2020.

The entire report can be found on the Department of Revenue's web site at http://www.dor.ri.gov/revenue-analysis/2021.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) 378-1080.

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