Post by MMM RUHLs on Apr 7, 2009 15:05:56 GMT -5
The monthly revenue report of March 2009 state tax collections was released today.
Results
„h Total revenue collections were $821 million, 15% below collections for the same period last year. A
decline of this magnitude has only occurred one time in the last 214 monthly revenue reports (May
2002). Total collections were $87 million (9.5%) below the December 2008 forecast amount. Year
to date collections are 5% below prior year.
„h Sales tax collections totaled $389 million for the month, 11% below collections for the same period
last year. This is the fifth consecutive month of lower collections compared to prior year. As
indicated last month, sales tax collections have never declined compared to prior year for this many
months in succession. Year to date collections are 3% below last year.
„h Individual income tax collections totaled $270 million for the month, 21% below collections for the
same period last year. Year to date collections are 7% below prior year. If collections ended this
fiscal year 7% below last year, it would be the largest decline in income tax collections compared to
prior year in state history.
Commentary
For the fourth consecutive month tax collections have lagged the most recent forecast.
Additionally, the magnitude of the declines compared to prior year has dramatically increased in the last
four months.
If the March trend of a -15% decline in revenues compared to prior year continued for the remainder of FY
2009, tax collections would be $550 million lower than the December 2008 forecast. Given these and prior
months¡¦ results, it is 100% clear that the April revenue update will result in fewer resources to work with
than December¡¦s forecast. This will make matching spending to available revenues difficult. Meanwhile, we
are seeing numerous costly bills outside of the budget advance in the General Assembly. Every one of these
bills standing alone is a veto candidate. The proper approach to funding worthy programs is to incorporate
them into a budget that protects Hoosier taxpayers.
It is also important to note that revenue collections are unlikely to immediately recover for two key reasons.
First, income tax generated from investment income and capital gains will be offset by the substantial
capital losses that occurred in the equity markets. Second, sales tax growth will be diminished because
dramatic declines in retirement portfolios and available equity in primary residences are likely to result in a
higher savings rate. A recent study concluded that ¡§new, normal¡¨ spending levels for consumers will only
reach 86% of their pre-recession levels. See March 30, 2009 AlixPartners Survey.
Results
„h Total revenue collections were $821 million, 15% below collections for the same period last year. A
decline of this magnitude has only occurred one time in the last 214 monthly revenue reports (May
2002). Total collections were $87 million (9.5%) below the December 2008 forecast amount. Year
to date collections are 5% below prior year.
„h Sales tax collections totaled $389 million for the month, 11% below collections for the same period
last year. This is the fifth consecutive month of lower collections compared to prior year. As
indicated last month, sales tax collections have never declined compared to prior year for this many
months in succession. Year to date collections are 3% below last year.
„h Individual income tax collections totaled $270 million for the month, 21% below collections for the
same period last year. Year to date collections are 7% below prior year. If collections ended this
fiscal year 7% below last year, it would be the largest decline in income tax collections compared to
prior year in state history.
Commentary
For the fourth consecutive month tax collections have lagged the most recent forecast.
Additionally, the magnitude of the declines compared to prior year has dramatically increased in the last
four months.
If the March trend of a -15% decline in revenues compared to prior year continued for the remainder of FY
2009, tax collections would be $550 million lower than the December 2008 forecast. Given these and prior
months¡¦ results, it is 100% clear that the April revenue update will result in fewer resources to work with
than December¡¦s forecast. This will make matching spending to available revenues difficult. Meanwhile, we
are seeing numerous costly bills outside of the budget advance in the General Assembly. Every one of these
bills standing alone is a veto candidate. The proper approach to funding worthy programs is to incorporate
them into a budget that protects Hoosier taxpayers.
It is also important to note that revenue collections are unlikely to immediately recover for two key reasons.
First, income tax generated from investment income and capital gains will be offset by the substantial
capital losses that occurred in the equity markets. Second, sales tax growth will be diminished because
dramatic declines in retirement portfolios and available equity in primary residences are likely to result in a
higher savings rate. A recent study concluded that ¡§new, normal¡¨ spending levels for consumers will only
reach 86% of their pre-recession levels. See March 30, 2009 AlixPartners Survey.