Revenue from the state’s personal income tax “continued to be disappointing” in the first half of the state’s fiscal year, the Division of Budget reported in its mid-year budget analysis.

The report, released Monday, found PIT collections through September decreasing by $404 million over the estimate in its first quarter update and more than $1.2 million below the estimate in the initial budget plan.

As a result, the Division of Budget is lowering its projections for revenue from the personal income tax to $775 million.

“The expected loss of tax receipts is offset by substantial downward revisions to General Fund disbursements, including General Fund transfers to Other Funds,” the DOB wrote in its report. “Based on a review of operating results through the first half of FY 2017 and updated data on State programs and activities, DOB has lowered its spending estimates in several areas, including mental hygiene, preschool special education, and higher education.”

Current estimates “show a potential” for a budget gap $689 million in the coming fiscal year, which begins April 1. Following that, a $2.1 billion deficit is projected for 2018-19 fiscal year, and a $1.7 billion deficit in 2019-2020 if spending growth continues to be limited to 2 percent increases in the coming years.

“The projected budget gaps in FY 2019 and FY 2020 are due to several factors, including the planned reversion of the top PIT rate to 6.85 percent from the current rate of 8.82 percent at the end of calendar year 2017, and the multi-year income tax reductions for middle-class taxpayers enacted in FY 2017,” the report found.

Fy 2017 Midyear Update by Nick Reisman on Scribd