TRG | The Bottom Line – 9/15

TRG’s building materials coverage group receives anywhere from 50% to 100% of their revenues from the public market. The largest revenue driver within the public market for our coverage group is state DOTs.  In addition, we believe studying overall state revenue collections lends itself to a broader view of the economic health of both the state and its citizens, which supports additional public and private construction, residential and non-res. General Fund (GF) tax collections for TRG’s core 15 states in FY’23 totaled $555.6B, down 8.8% YOY, while FY’23 fuel tax collections across the board rose 1.8% (with Q4’23 posting a ~3% YOY gain). Despite the headline GF decline of 8.8% YOY, TRG core state revenue collections fared better than expected in FY’23, having anticipated a decline of between 2-3%. Excluding California, GF collections were up 2.5% YOY as the much-anticipated recession never materialized. To be clear, FY’23 failed to generate the staggering collections seen in both FY’21/’22, but states revenue managers were pleased, nonetheless. Looking into FY’24, many states are again calling for revenue declines of 2-3% as “economic disruption is still evident, with varied impacts on household savings, the elevated use of credit, the continued normalization of spending on services and away from taxable goods, and strong inflationary pressures on households” according to Florida’s Revenue Estimating Conference. In addition, several states noted the winding down of federal stimulus dollars from COVID also reducing revenues. Fortunately for our heavy material group, several states have used previous year’s revenue surpluses to make record investments in transportation projects that should provide funding visibility over the next 3-4 years.