A revised forecast from state government economists indicates an additional $6.2 billion in revenue through the end of the next budget year. That includes a $4.2 billion dollar jump, from $28.4 billion to $32.6 billion forecasted in fiscal year 2021-22. The report comes from the Fiscal Research Division of the N.C. General Assembly and Gov. Roy Cooper’s Office of State Budget and Management.
“Today’s forecast highlights the General Assembly’s winning formula of low taxes, reasonable regulations, and responsible spending,” Senate leader Phil Berger, R-Rockingham, and House Speaker Tim Moore, R-Cleveland, wrote in a joint statement. “Our state continues to experience growth and record-breaking economic development coupled with regular revenue surpluses.”
In the report, economists point to employment data released by the federal Bureau of Labor Statistics in March 2022 that indicate the “State’s economy has recovered from the depths of the pandemic-induced recession more quickly than anticipated.”
“State employment had returned to pre-pandemic levels by the summer of 2021 and, by March 2022, already exceeded our pre-pandemic forecast,” the revised forecast reads.
Strong consumer spending and inflation also mean sales and use tax may finish well ahead of economists’ forecast. Plus, corporate income tax collections are expected to be higher than estimated due to stronger corporate profits. This year’s “April surprise” revenue boost leads economists to believe that final and extension payments will exceed expectations by $1.4 billion.
Still, inflation surged in March to its highest level since January 1982, at 8.5%.
“Nevertheless, consumer demand outpaced inflation, as consumers continued to spend down savings accumulated during the pandemic,” the forecast states.
Economists expect slower economic growth in the upcoming year as the risk of recession increases due to geopolitical unrest and monetary policy dedicated to handling inflation. However, the revised consensus still projects an increase of $1.9 billion beyond the certified budget, citing this fiscal year’s performance as driving continued growth, even as inflation drags on the economy.
“We must be cognizant of the national economy and the precarious position the Biden administration has put the American people in thanks to rising costs and runaway inflation,” Moore and Berger said. “It is crucial that we continue on this track of responsible and disciplined spending in light of the potential for a recession as we begin the short session budget process.”
Lawmakers return to Raleigh on May 18 to discuss the budget and other issues.
Brayden Marsh is an intern at Carolina Journal and a student at N.C. State University.