As of July 2025, state revenues have shown a notable increase, rising 12.8% above the prior year and coming in $107 million above the enacted budget forecast. This positive performance was primarily driven by Individual Income Tax Withholding, which saw a remarkable 31.7% growth. It is important to note, however, that such a large increase may be partially attributed to a reporting error and will be further reviewed.

Corporate Income Tax collections in July were 12.1% below last year, resulting in a $6 million loss for the month. This is not unexpected, as August typically represents a smaller collection period for corporate taxes.

Sales tax collections for August (reflecting July activity) grew by 2.7%. Despite this growth, collections still resulted in a $4 million loss compared to forecast. The retail and restaurant/bar sectors performed strongly during this period, but overall contracting activity slowed, impacting total collections.

Year-to-date figures show 1.4% growth and a forecast gain of $148 million. This steady trend provides a cautiously positive revenue outlook for the remainder of FY 2026. Federal reconciliation impacts remain highly speculative but are currently estimated as follows:

• FY 2026: $382 million
• FY 2027: $268 million
• FY 2028: $433 million

These figures could have a significant effect on future budget planning. In addition, the Finance Advisory Committee has released updated revenue growth estimates for the coming years:

• FY 2026: 3.2%
• FY 2027: 3.6%
• FY 2028: 4.5%
• FY 2029: 4.8%

We will continue to inform ACE of revenue and spending trends as the year progresses.