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September's a negative
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Revenues hit a bump in the road with September figures. Although individual income taxes were up 5.1 percent, a reduction in gross sales taxes caused the month to basically break even showing a negative 0.1 percent or $2.2 million decrease over September 2006.

Other categories were positive including corporate income taxes at 7.1 percent or $10.6 million increase over September of FY06.  
Year to date gains still satisfactory
So where is Georgia’s revenue after a quarter of the fiscal year? At the end of fiscal year 2007, reserves totaled 6.2 percent of revenues or $1.2 billion. This does not include the approximately $180 million that will be allocated to meet enrollment growth for K-12 education. The state only needs 3.34 percent growth (without motor fuel tax collections) over 2007 collections to make the 2008 budget.     

With collections coming at 5 percent, it looks like there is a good margin of safety. But 3.34 percent only allows the state to make budget. An additional 1 percent is needed to fund the K-12 enrollment growth needed in the following fiscal year’s budget. And if the goal is to bring reserves up, we should strive to add at least .5 percent yearly. Based on these needs, growth needs to be at least 4.84 percent. With revenues only at 5 percent, 4.84 percent is actually only treading water.

But individual income taxes are showing good strength YTD. Withholding taxes are up 6.9 percent, a good barometer of business activity. Estimated tax payments are up 5.9 percent.
Fuel taxes
Year-to-date, motor fuel tax collections reported an increase of 10.2 percent or $23 million. The prepaid portion reported an increase of 14.5 percent or $17 million, and the excise tax reported an increase of 5.9 percent or $7 million.  The preliminary number of gallons reported during YTD September 2007 totals 1.710 billion gallons compared to 1.707 billion gallons YTD September 2006, an increase of 3 million gallons.
Sales taxes still problematic
Sales tax categories continue to be generally negative over the same period year-to-date in FY06.

Although food is up 6.2 percent, that 20 percent of Georgia’s sales taxes only goes to local government. While utilities are up, that is probably more of a reflection of rates increasing rather than growth. Only general merchandise increased as a category and only by 2.5 percent, a fraction of increases a year ago.

The other categories of apparel, automotive, home furnishing and equipment, lumber, miscellaneous services and manufacturing are all negative compared to the first quarter of FY 2006 — not a good sign.
Corporate tax collections
Corporate tax collections, while only 4.9 percent of total revenue, have also been rising, increasing 38.8 percent YTD. While corporate collections are cyclical, this number is probably a good indicator of economic growth.

Conclusion — Some bright spots, some concerns
Since individual income taxes make up 50 percent of Georgia’s revenues, that category is all important. Continued gains of 5 percent are generally sufficient to meet projections.  After one quarter, though, the state has negligible increases to contribute to surplus beyond the projected addition of .5 percent.
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