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Friday, September 16, 2016

NOTES FROM THE SENATE, SEPTEMBER 16, 2016

FIRST DIRECT COMPARISON MONTH SHIELDS SLIDE IN REVENUES

It's always tricky to try to establish trends early in the new fiscal year at least until we get through one quarter. But this is a significant month since, for the first month, revenues include the HB 170 new collections from a year ago compared to August of this year. A year ago, collectors of excise taxes did not report the new revenues until the next month so little revenues were reported in the July 2015 report. August was the first full collection month and so this year's succeeding months will give us a clear margin of revenue.

Overall, revenues were up 6.8% for August over August of 2015. Individual Income Taxes, not affected by the fuel excise tax collection, were up a healthy 9.5%.

INDIVIDUAL INCOME TAX CATEGORIES STRONG

Individual Withholding Payments, a sign of economic growth, in my opinion, were up $122.4 million or 15.3%. This statistic is not affected by refunds withheld or issued. Non-Resident Income Tax Returns increased $10.2 million or 145.8 percent. Individual Income Tax Refunds were also up $53.3 million. The Revenue Department reports that all refunds filed have now been released. Corporate Tax collections, erratic lately, were up for the month, 4.2%.

SALES TAXES UP SURPRISINGLY

Net August Sales and Use Taxes showed an increase of $21.2 million or 4.7%, affected by a decrease in local distribution. Tobacco was up 5.4% and Alcoholic Beverages were negative at minus 9.2%. Title Ad Valorem Taxes showed a $5.0 million gain or 6.4% on revenues of $82.8 million.

MARGINAL INCREASE IN DOT FUEL EXCISE TAX AND FEES

Fuel Excise Taxes showed a small increase of $3.2 million or 2.2% on total collections of $147.2 million. Highway Impact Fees totaled $1.0 million but gained $163,000. Hotel/Motel Fees increased $874,000 for a total of $15.8 million. Altogether, Fuel Taxes/Fees totaled $164.1 million for the month, an increase for the month of $4.2 million.

So August was a pretty good month, taking in $1.69 billion with an overall increase of $108.006 million.

HARD TO SET A TWO MONTH TREND

After two months, some things are becoming clear, but it is still early and probably one more month's figures, which will complete a quarter of the year, will be more revealing. But it does feel like revenues have slipped a little bit. Overall, total revenues of $3.296 billion YTD show an increase of $134.6 million or 4.3%. It is interesting and noteworthy where the increase came from. Individual Income Taxes are up only 1.1%. Guess we would blame this on refunds held out till July, but $40 million really would not have had that much effect, seems to me.

But, if you subtract out the increase for the two months, of the Fuel Tax increase ($59.1 m), Highway Impact Fee increase ($471,000) and Hotel/Motel Fee Increase ($15.7 m), that total, $75.3 million, is over half of the $134.6 million gain for the first two months of the Fiscal Year. Still early, but notable, all the same.

OTHER CATEGORIES LOOKING PRETTY GOOD

Net Sales Taxes are showing an increase of $33.1 million or 3.6% after two months. Corporate Taxes are down $15.0 million. Title Ad Valorem Taxes are positive by $20.6 million or 13.4%. Tobacco taxes are up 1.1% but Alcoholic Beverages are down minus 1.5%

As mentioned earlier, Fuel Taxes total $326.1 million, an increase of $79.3 million including July's gain of one month not reported a year ago in 2015.

"TWO MONTHS DOES NOT A TREND MAKE"

I could launch into a cautionary list of factors that could be starting to affect state revenues...from China's problems to BREXIT to nervousness in the export market to another quarter of slow recovery....but I am not going to do that. Maybe we should all take a deep breath, thank the Governor and the Department of Economic Development for several encouraging job creation announcements and sit back and await another month's report, thereby completing a quarter of the year. All of that before breaking out in a complete sweat over the downturn in revenues that I am pretty sure is there somewhere.

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