In between each Budget & Economic Forecast , we also prepare a quarterly Revenue & Economic Update in January, April, July and October of each year. The Revenue & Economic Update reports on how actual revenue collections for the current year compare to the previous forecast as well as provide notes on changes in the national and state economic outlook.
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October 9, 2015
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FY2016 Revenue. Minnesota’s net general fund receipts totaled $4.428 billion during the months of July through September 2015, or $136 million (3.2 percent) more than projected in the February 2015 Budget and Economic Forecast adjusted for legislative changes. Receipts from all major tax types exceeded the forecast. The positive variance for the quarter was generated in July and August, as September receipts fell slightly below forecast.
FY 2015 Revenue. Net general fund revenues for the fiscal year that ended June 30, 2015, are now $531 million more than forecast in February, producing a variance that is $24 million less than the $555 million originally reported in the July 2015 Revenue and Economic Update. The decrease in the fiscal year 2015 revenue variance is due to higher than expected individual income and sales tax refunds paid out between the end of the fiscal year and the official close. Those changes are partially offset by lower than expected corporate refunds paid prior to the fiscal year close.
U.S. Economy. The U.S. economy continues to perform well. The unemployment rate is trending downward toward 5 percent, low gasoline prices are affording consumers extra spending money, and home and vehicle sales ratcheted up earlier this summer. The Bureau of Economic Analysis (BEA) estimates that real GDP grew at an annual rate of 3.9 percent in the second quarter of 2015, up from 0.6 percent growth in the first quarter. Broad-based consumer spending across all major categories was the main driver of growth. Foreign trade provided a modest positive contribution, after being a substantial drag the previous two quarters.
Still, there are concerns. The stronger dollar and weak global demand have been undercutting net exports, which combined with an inventory correction in the third quarter is taking a toll on U.S. manufacturing. U.S. wage growth remains stubbornly low, and recent financial market volatility is weighing on confidence. The Federal Reserve noted these risks in September when it decided to hold off on beginning to normalize interest rates. Finally, job growth unexpectedly downshifted during the past two months.