The U.S. federal government’s budget surplus for April was down 43% from a year ago, thanks to a slide in tax revenues for the month that annual household filings are due.

For the first seven months of the fiscal year, the budget deficit hit $924.5 billion, more than double the same period of 2022, according to budget figures released Wednesday by the Treasury Department. Weaker revenues—including diminished transfers from the Federal Reserve—and bigger outlays for interest on the public debt, education and Social Security are among factors that propelled the widening.

The surplus for April was $176.2 billion, compared with $308.2 billion last year, a 43% decline. In April 2022, a record revenue haul drove up the monthly surplus, helped by higher capital gains thanks to the financial-market rallies of 2021. The selloff in markets in 2022 means a major relative drop-off in such revenues for this year. Adjusted for calendar differences, the April surplus was $260 billion, down 72% on the year. 

Fed policy is also affecting the Treasury in another way: its remittances to the department have been decimated. That’s because it’s paying much higher rates to commercial banks on the reserves that they park at the Fed, while the rates it earns on bonds it stocked up on during quantitative easing remain relatively low. Fed earnings transfers to the Treasury have plunged about $70 billion for the fiscal year that started October 1.

Shrinking revenues make it harder for the Treasury to stay within the federal debt limit, which the department hit in January. Treasury Secretary Janet Yellen earlier this month warned that the Treasury could run out of sufficient cash as soon as June 1 if Congress doesn’t raise or suspend the ceiling.

Interest payments on outstanding debt in the first seven months of fiscal 2023 totaled $460.3 billion, an increase of 31% over the same period last year. That expense has climbed as the Fed lifted its benchmark interest rate to combat inflation, forcing the government to pay higher returns to purchasers of U.S. Treasury securities.

Spending Rises
Meantime, Department of Education outlays increased 55% to $133.7 billion in the first seven months of the fiscal year, due in part to costs associated with the Biden administration’s loan-forgiveness program.

Federal Deposit Insurance Corp. payments to cover depositors at the failed Silicon Valley Bank and Signature Bank added $41 billion to outlays by the end of April, Treasury officials said on a call with reporters. However, that expense is expected to be covered by fees paid by FDIC member banks.

This article was provided by Bloomberg News.