July and August are not “barnburner” months to begin with.  In fiscal year 2012, July ranked 10th in revenue brought in and August ranked seventh out of 12 months. But, one year ago, each of the two months showed solid gains at 7.3 percent in July and 9.1 percent in August. That memory just makes July and August of FY13 even more a matter of concern.

This July’s growth came in at 7.4 percent overall and that seemed OK until you looked at the overall sales tax level of only 0.9 percent growth, which followed other anemic months in the spring. And when you look at the August numbers: 1.9 percent overall growth, 0.2 percent up in individual income taxes and -0.2 percent sales tax drop, it is hard not to be concerned if not alarmed.

In fact, the unusual second month growth of corporate income taxes at $23.8 million was essentially all of the growth of $24.5 million for the month.

There is just no good news in any of the numbers for August. These are the August numbers that are causing furrowed brows:

Individual income taxes: -0.2 percent down, -$1.6 million
Sales and use taxes—gross: 0.2 percent up, $1.6 million

Inside the individual income tax numbers for the month of August, individual withholding payments were up only $18 million but refunds were also up $4.5 million. All other individual tax categories, including estimated payments, were down $12 million … not a pretty picture.

Motor fuel taxes were down in both categories: Excise taxes down $1.6 million or -4.3 percent and sales taxes down $2.1 million or -4.4 percent. Usually as gas prices rise, sales tax collections go up because of the higher price, but it is obvious that sales were down dramatically.

As mentioned, corporate sales taxes were up for a second consecutive month showing a gain of $23.8 million for the month that was caused mostly by corporate tax refunds being down for the month by $22 million. Corporate return and estimated payments were down by $7 million and all other categories of corporate income taxes were up a combined $9 million over August of last year.

Year-to-date totals are problematical
With a total of $2.6 billion collected so far this fiscal year, the big months that carry the load of the state’s revenue stream are ahead of us. But the year-to-date totals, an analysis shows, only seem to be extending a trend that has plagued the state since the first of 2012. Both individual income taxes and sales tax collections are lethargic and are well below the amount expected in the revenue level contained in the FY2013 general appropriations budget passed this past March by the Legislature and signed by the governor.

Overall, the YTD gain is only $115.5 million for the two months or a growth rate of 4.6 percent.

Individual income taxes have grown only $43.1 million or only 3.2 percent.

Gross sales taxes are up only 0.4 percent and somehow through “adjustments/refunds,” the state portion shows a 3.1 percent growth.

Motor fuel taxes are down in total $9.3 million, or -5.4 percent, with both taxes, excise and sales taxes, falling so far this year.

The redeeming grace so far has been corporate income taxes showing a positive $65.8 million gain and frankly, if you took that amount out of the total for FY2013, state revenues would really be flat.

Tobacco tax collections are negative year to date at $6.6 million or -20.5 percent and alcoholic beverages collections are up slightly at 2.1 percent.

It is with this backdrop that Gov. Deal called for 3 percent budget reductions in amended FY2013 and 3 percent for the FY14 budget being prepared by the governor this fall. He exempted K-12 education and assigned a 5 percent cut to Medicaid. Some departments may not believe these cuts will actually happen, but those are not folks studying state revenue trends and the fact that the FY13 budget that began in July counts on about 5.5 percent growth from the state’s economy.

As the weeks move on, we will be looking at the issues facing the Legislature and the governor in 2013 as they prepare a budget.

I may be reached at
234 State Capitol, Atlanta, GA 30334
(404) 656-5038 (phone)
(404) 657-7094 (fax)
E-mail at Jack.Hill@senate.ga.gov
Or call toll-free at
1-800-367-3334 day or night