With only one month left in the fiscal year, Georgia’s revenues have dropped to a virtual “no-growth” figure that practically guarantees the state will have to use the “Rainy Day” Reserve Fund to balance the books on June 30.
May’s revenues, at -31.1 percent, showed a sharp drop, but even when held up and matched with April’s sharp increase 34.5 percent reflect that the state’s revenue growth has slowed to a trickle.
Individual income tax, 50 percent of state revenues, was at -41.89 percent or -$607 million compared to May 2007, although April’s individual income tax showed an increase of 96.7 percent or $464 million. So between the two months, revenues were negative at -$142 million.
Sales tax collections continue to be lethargic and were negative between the two months by $38 million.
The clearest picture of Georgia’s slowing economy comes in examining Year to Date figures. Overall, revenues (gains this year over last) stand for the first time at a minus -0.1 percent. So, as of May, we have taken in about $21 million dollars less than the first 11 months of 2007.
Individual income taxes are only $11 million over 2007, July-May or about 0.1 percent. One year ago, individual income taxes were up 45.4 percent or $453 million for the 11 months.
The state portion of sales taxes YTD is down 0.7 percent or $37 million. Interestingly, local sales tax collection, the 3 percent that local governments receive, is up $59 million or 16.4 percent. Of course local sales taxes include food and would take advantage of higher current food prices.
Corporate taxes are off by $24 million year to date, a decrease of 3 percent.
What a difference a year makes
One year ago, year to date total revenues were up $1.1 billion, or 7.6 percent, and individual income taxes were up 9.9 percent.
Inside the sales tax categories year to date, all categories are negative except food at a 5 percent increase, miscellaneous services at 1.7 percent and utilities at 2.1 percent. The largest decrease is in lumber, which dropped 12.9 percent.
Fuel taxes like prices are a matter of deep concern to all Georgians. Fuel tax revenues do reflect decreasing purchases. Excise taxes, 7 1/2 cents per gallon, are down $20 million or minus-4.5 percent through May. Sales taxes on fuel have increased by $57 million, or 13.2 percent YTD.
Of course June revenues are not accounted for yet but because June 2007 was such a huge month ($110 million increase, or 7 percent), it is hard to believe June 2008 can show a very large increase.
What these numbers mean
With the FY08 budget based on 2.78 percent growth exclusive of fuel taxes, the state could dip into the $1.5 billion reserve fund by $200 million to $500 million.
What’s ahead in FY 2009?
With the FY09 budget beginning in July, state leadership will have to act quickly if revenues continue to drag along with no growth. Reducing FY09 budget expenditures would definitely be an option. Combining the year end reserve funds needed with the mid-year education adjustment of $190 million, the reserve fund could be decreased to one half or less, before any deficits in the FY09 budget are addressed. Of course, oil prices don’t help our economy recover and are a drag on consumer and business spending.
In the longer term, you have to feel positive about Georgia’s ability to overcome these adversities. The military and civilian growth in Hinesville and Columbus, double digit growth in ports activity, unprecedented construction of warehouse space in Savannah and along I-16, and other commercial and manufacturing construction from the coast inland are all positive developments, indicate a quick recovery.
Additionally, the job announcements associated with the Kia plant in Troup County continue to grow and are at approximately 6,000 jobs at this writing. Obviously the homebuilding industry will be spotty in its recovery, focusing on areas of growth that may start to be affected by commuting distances to jobs.