While the latest North Carolina General Fund revenue forecast is lower than April’s, online sports betting could make up for shortfalls in the future.
NC online sports betting had a strong start in March. A portion of the proceeds from mobile sports wagering go to the state’s General Fund.
A Temporary Shortfall for the General Fund
The General Fund is allocated to several areas, including education, health and human services, environmental and natural resources, agriculture, and public safety. Education receives the bulk of the funds. In March, the fund disbursed 60.61% of the funds to education.
The state released its revision to the 2023-25 biennium General Fund revenue forecast on May 10. The report showed a -$225 million difference for the 2023-24 period and a -$205 million difference for 2024-25, amounting to a $430 million decrease.
Reasons for the shortfall included changes in corporate tax provisions that led to “lower final payments and elevated refunds,” according to the report.
“This was driven by uncertainty in the wake of a provision implemented in 2022 that allows S corporations and eligible partnerships to elect to pay NC income tax at the entity level, thereby enabling shareholders to fully deduct those state tax payments on their federal taxes,” the report states.
However, the state’s Consensus Forecasting Group contends this uncertainty is an adjustment period that will not change the projected growth of personal income tax revenue and will not affect the state’s long-term growth.
Can Sports Betting Revenue Compensate?
Buoyed by March Madness and pent-up demand for online betting, North Carolina had a robust start to online sports wagering. Preliminary revenue data suggests the first week alone saw $198 million in total sports wagers to yield around $7.6 million in tax revenue. North Carolina taxes sportsbooks at 18% of gross wagering revenue.
State law mandates that a set amount of tax revenue be allocated to four areas: gambling and addiction programs, state amateur and youth sports, collegiate athletic departments at state schools, and expenses to administer legal sports wagering.
Of the remaining funds, 50% goes to the state’s General Fund. The NC Lottery Commission will release monthly reports on North Carolina sports betting revenue. However, the agency has yet to release its first report. For the truncated period in March, tax revenue amounted to nearly $12 million.
The state estimates that tax revenue from sports betting will be $64.6 million in its first year and reach $100.6 million by the fourth year. NCSharp projections are higher, projecting that the state will collect $126 million in tax revenue during the first year.
If the General Revenue Fund experiences future shortfalls, millions of dollars from sports betting tax revenue should help overcome any deficits.
Lead image credit: AP Photo/Gerry Broome
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