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Despite reduced revenue, North Carolina anticipates nearly $1 billion more

RALEIGH, N.C. (AP) — North Carolina officials on Friday lowered a projected state revenue surplus through mid-2025 by $430 million, citing lower-than-expected April 15 individual income tax payments due to recent changes in business taxes. Still, the state expects nearly a billion dollars more to flow into its coffers.

Last month, economists working for Democratic Gov. Roy Cooper’s administration and in the Republican-controlled Legislature formally predicted that collections would exceed budgeted revenues for the year ending June 30 by $413 million. And they determined that jump would lead to receiving another billion dollars more in the fiscal year that begins July 1 than projected in the current two-year state budget.

The consensus forecast now calls for the surplus for this fiscal year to be $188 million, with another $799 million expected next year, the State Office of Management and Budget and the legislature’s Fiscal Research Division said.

Economists had warned that a revision of forecasts could be necessary if April collections, which are typically the most volatile, deviated significantly from estimates. That’s what happened, according to the agencies. Personal income tax refunds were higher than expected and final payments were lower than expected, as a 2022 tax change that allowed certain corporations and partnerships to pay state taxes, rather than owners or shareholders for Its favored tax treatment probably resulted in some duplicate payments.

“Fortunately, this adjustment is a one-time event,” a memo from the state budget office said, adding that “despite this downward revision, North Carolina’s economic outlook remains unchanged, with no effect on the long-term growth of the state.

It’s unclear whether fewer excess collections will make lawmakers more cautious about additional spending or a possible income tax refund as the General Assembly meets to adjust the second year of the budget. The additional money is a small percentage compared to the nearly $31 billion the state currently plans to spend next year.

The April forecast served as the basis for Cooper to present his budget adjustment proposal last month. He also gave Republicans confidence that there was money to advance a measure that would set aside another $463 million to help children seeking scholarships attend private schools and eliminate the waiting list.

That bill needs just one House vote to send the measure to Cooper, who strongly opposes the broader Opportunity Scholarship program. The legislature agreed last year to eliminate family income limits to receive the scholarships, resulting in a massive increase in applications. Cooper has called for a moratorium on opportunity scholarships.

In a post Friday on the social platform the taxpayer-funded rich.”

Republican budget writers are also considering requests from the business community and children’s advocates to address the upcoming loss of federal money for grants designed to help child care centers stay open during the COVID-19 pandemic.

Senate Leader Phil Berger told reporters Thursday that Republican leaders were considering whether it makes sense to offer broad tax refunds this year. Giving even $500 to each household, for example, could cost billions.

“We’re looking at it, but I don’t think there’s any interest in doing it unless the amount we can send is an amount that makes a difference,” he said.