Virginia ends fiscal year with surplus but still missing 133,000+ pre-pandemic jobs

Gov. Glenn Youngkin announced on July 22 that Virginia ended the fiscal year 2022 with a $1.94 billion general fund revenue surplus. On a fiscal year-to-date basis, total revenue collections rose 16.3 percent, based on preliminary data. 

“While I am pleased that our additional revenue can be reinvested in Virginia, the Commonwealth’s general fund revenue surplus confirms that Virginians have been overtaxed for way too long,” said Governor Glenn Youngkin. “As inflation hits another 40-year high, I’m proud that our budget provides almost $4 billion in tax relief to Virginians, the largest tax relief in the Commonwealth’s history. We have a lot of work left to do to recover from the pandemic, but Virginia’s economy is demonstrating promising economic and company growth with major companies such as Boeing, Raytheon, and LEGO moving their headquarters to Virginia.” 

“Fiscal 2022 was an extraordinary year for revenues and finished strong. However, there are a number of critical economic issues that we will continue to watch very closely as we put our plan together for the future. We are encouraged by the continuing strength of payroll withholding and retail sales taxes, which increased by 9.5 percent, indicating that Virginia’s underlying economic foundation is strong,” said Secretary of Finance Stephen Cummings. 

Virginia’s strong labor market has produced 79,818 jobs since January, driving growth in payroll withholding. There were 124,878 more Virginians employed in May 2022 than there were in May 2021, an increase of 3.5 percent year-over-year. Although recent trends are encouraging, Virginia has yet to recover more than 133,000 jobs that were lost during the pandemic (now at 96.9 percent of pre-pandemic levels) while our key competitor states have all exceeded pre-pandemic employment levels. While the Commonwealth underperformed the nation in jobs recovered since the pandemic, ranking 47th overall, momentum is building and Virginia is now ranked 15th among the states in employment growth for the first four months of 2022. 

Analysis of Fiscal Year 2022 Revenues
Based on Preliminary Data

Based on preliminary data, Fiscal Year 2022 ended with a $1.94 billion general fund revenue surplus. General fund revenues, excluding transfers, rose 16.3 percent for the year compared to fiscal year 2021, exceeding the forecast of 8.5 percent growth.
Payroll withholding and sales tax collections, 69 percent of total revenues, and the best indicator of current economic activity in the Commonwealth, finished $193.5 million or 1.0 percent ahead of the forecast. 
Payroll withholding grew of 9.5 percent, exceeding the forecast of 9.0 percent growth. 
Sales tax collections increased 9.4 percent as compared to the annual forecast of 6.5 percent.
Nonwithholding income tax collections finished the year ahead of expectations, up 30.5 percent. This was mainly due to a 40.9 percent increase in final tax payments to the Department of Taxation. 
Individual income tax refunds were a positive to the forecast as the average check size decreased. Tax refunds were $280.2 million below expectations, a positive to the bottom line.
Corporate income tax collections increased 30.5 percent for the year, behind the annual forecast of 32.6 percent.
A complete accounting of all final revenue sources will be available after final year-end close and will be released on August 19 when the Governor speaks at the Joint Money Committee Meeting.