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Senator Jack Hill's "Notes From the Senate"
Friday, 15 May 2009

May 15--  This column is provided by State Senator Jack Hill of Reidsville.

APRIL REVENUES SHOW NO SIGN OF RECOVERY

 

If you are looking for good news, you might want to check the stabilizing unemployment rate or the housing market beginning to move a little or possibly some retail sales perking up....but don't look at the state revenue picture for any encouraging news here at 10/12's of the 2009 year mark.

 

April's revenues were down 20.6% or some $362 million under April of 2008.  This is very disturbing and only follows the sharp decline of the last 6 months.  For the month, Individual Income Tax collections were down 16.9% or $159 million.  Sales tax collections overall were down 11.1% with the state portion down 24%.  Local sales tax distributions were actually up $34 million or 10.5%.

 

Corporate tax collections were down $39 million or 33.1%.  Motor fuel collections continue the slide downward winding up at $25 million down for the month or 29.4%...heavily weighted by the decline in the motor fuel sales tax which is tied to the lower fuel price this year.

 

One of the telling numbers to come out of the revenue report is the number of individual returns filed....some 166,000 fewer than April of 2008.  It is not clear if the reduction in the number of DOR employees to process returns has had any effect in creating a backlog.

 

The total revenue for the month of $1.399 billion was only the 5th highest month this fiscal year, while in 2008, April was the second highest month all year.

 

YEAR-TO-DATE FIGURES POINT TO PROBLEMS NOW AND AHEAD

 

Year-to-date numbers are even more depressing if that is possible.  They show the sharp angle of decline on a graph starting cumulatively in November at -1.5% with a decline of 3-4% monthly and now totals a minus 9.50% decline from FY 08 YTD.  Total revenues for the FY 09 YTD are down $1.36 billion dollars over the same 10 months on FY 2008 through.  The state stands at just under $13 billion in collections with just two months to go.

 

Individual Income taxes are down $704 million or -9.8%.  Sales tax collections are down overall $599 million or -6.7%, with state collections down 8.3%.  Corporate tax revenues YTD are down 26.3%  or $261 million.  Motor fuel revenues of sales tax and excise taxes are down $103 million or -12.3%.  The general budget has to make up this difference at year's end.

 

As of today, the budget is eating into the Shortfall Reserve Fund by some $90 million dollars......if the last two months follow the trend of the last 6 months, the state could easily use up most of the remaining $562 million in reserves in the rainy day fund.

 

Not only is the cumulative -9.2% revenue line for FY09 under the revenue estimate for this fiscal year, the revenue level is also under the projected budget level that the 2010 budget is based upon.

 

SOBERING DECISIONS AHEAD IF TREND CONTINUES

 

If July rolls around and the rate of decline in revenues has not leveled off and if the state reserves are essentially gone, the FY 2010 budget as passed is almost surely to be up for review.  If our best guess is that we have reached a new equilibrium at a lower budget level of say $14 or $15 billion, then some very tough decisions will be required.  A revenue level at $14 or $15 billion, would require a new review of the state’s priorities from top to bottom.

 

GOVERNOR VETOES FEW BUDGET ITEMS

 

Governor Perdue signed the $18.6 billion state budget for FY 2010 on May 13 and only vetoed 3 items....a signal of how little new funding there was in this budget.

Those include:

 

$25,000 for the Ga. Games Commission

$250,000 in bonds for the Herty Foundation in Savannah

$1.6 million in bonds for a project at Darton College

 

A review of the 2010 Budget and vetoes will be forthcoming.

 

 
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