State revenue under projections for first time this fiscal year

The state of Indiana took nearly $1.5 billion into its General Fund in October, but the amount was under projections for the first time this fiscal year. The year began in July.

The state budget plan predicted revenues of about $1.6 billion but collections were short $139 million: almost 9% below expectations, according to a monthly revenue report. In comparison, the revenue was down $186.8 million year-over-year.

Although revenue in the three months prior to October was slightly higher than anticipated — ranging from 0.1% to 3% above projections — October’s lower revenues put the state below its year-to-date projection by 1%.

Collections on individual gross income came in 17% below expectations, while sales and use taxes were nearly 6% below.

“This month’s lower-than-expected performance is mostly driven by individual income tax and should be interpreted within the context of the fiscal year-to-date perspective and the full fiscal year outlook, ” a fiscal commentary said. “Notably, October individual income tax revenues were $104.1 million below monthly estimate while September and August individual income tax revenues were $81.0 million and $53.1 million above their respective monthly estimates.”

Rep. Greg Porter, D-Indianapolis, called the October performance “sobering.” He said a move last year to help Indiana small business owners calculate their taxes in a manner that helped them save money on their federal taxes is now resulting in a loss of state revenue.

And he noted sales taxes have been down for months.

“Hopefully, we can collectively use the bad news of last month’s revenue collections as a moment to pause and reflect on the fact that even though we had a couple of exceptional years when it came to revenue collections and record surplus amounts, there is a still a business cycle that inevitably has as many downturns as upturns when it comes to tax collections and sound budgetary and policies must flow from accepting that real world fact,” Porter said.

Riverboat wagering taxes were about 14% under, with racino wagering 7% under.

But corporate taxes slightly outperformed expectations by nearly 4% and a collection of other smaller taxes did nearly 39% better than projected.

The monthly collections fund Indiana’s biannual budget. The last time the state missed revenue projections was April 2023, and by just $3 million.

Outgoing Gov. Eric Holcomb, a Republican, signed his final budget bill — worth $44 billion — in May.