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Critical month starts well
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In a previous column, the reduced increase in state revenues over the last seven months was covered and we concluded that the economy of both the state and nation has not continued to recover from the recession as rapidly as it appeared it would a year ago. This column touched on the fact that the first quarter of the just-completed fiscal year, FY12, showed a 7.2 percent increase but by year’s end the growth rate of state revenues was more like 3.5 to 4 percent. The governor’s call to state agencies for budget proposals including 3 percent reductions for amended FY13 and for the general FY14 budget was a real splash of cold water for many in state government.

That background will insure that each month’s report of state revenues will be scrutinized for trends and results as never before. With that in mind, here is an analysis of the July revenue report: Because of the trend of the last few months, it is more important than usual to compare July 2012 to the same month a year ago, especially as it pertains to the percentage of the budget target the month should contribute. Because the first quarter of FY12, July, August, September, was so strong a year ago, we will be really observing with interest the first quarter this year to see if the trend matches the recent slide in revenue growth or matches the strong growth of a year ago.

July is not a big revenue month. In FY 2012, July was the third-smallest month for collections ahead of only February and March. So we don’t expect a huge month in July but always are looking to improve on the previous July.

July — as good as last year
With all of that in mind, July’s revenue report was positive, showing a 7.4 percent increase on revenues of $1.32 billion for the month. That was a net increase of $90.9 million. Interestingly, this month mirrors the strong first month of a year ago, where July 2011 showed a 7.3 percent increase and was 102.5 percent of the budget target for the month.

While there may be variables that affect the numbers, before we even look further into the month’s revenues, you have to be encouraged that the first month of the fiscal year was this positive. With the FY13 budget based on a 5 percent growth rate, we start out the year in pretty good shape.

Individual income tax collections totaled $698.1 million for an increase of 6.3 percent. Payments coming in were up 6.5 percent but individual refunds were also up 22.8 percent.

Gross sales tax receipts for the month were only slightly positive at 0.9 percent, but an “Adjustment” entry added $11.5 million which made the net sales tax increase for the state show a 3.1 percent gain on net revenues of $460.3 million.

Sales tax categories showing increases were: accommodations, 18.0 percent; automotive sales, 13.8 percent; construction, 19 percent; food/bar/store, 5.6 percent; and general merchandise, 2.7 percent. Showing decreases for the month were: home furnishings, -0.8 percent; manufacturing, -5.9 percent; retail trade, -0.7 percent; utilities, -9.1 percent; and wholesale trade, -3.9 percent.

Motor fuel taxes were negative overall at -6.5 percent total for July on revenues of $80.1 million. Excise taxes were actually up at 1.0 percent, with fuel sales taxes down 11.9 percent.

Corporate income taxes showed a second consecutive positive month, a rarity, with positive collections of $17.9 million. The smaller categories of tobacco and cigars and alcohol were both negative at -23.8 percent and -1.0 percent, respectively.

All in all, July, while a small month in total, is encouraging since it matched the percentage of increase from July on 2011. Each month will be critically important in tracking revenues this year since cuts to departments will have to make up the difference if revenues fall short of projections.

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