Friday, November 15, 2019
NOTES FROM THE SENATE, NOVEMBER 15, 2019
STATE LOOKS FOR ANSWERS WITH REVENUE DEFICIT
A negative revenue collection month in October of -1.6% has forced state leaders to begin study of a number of revenue issues as Year to Date figures point to alarming totals for the first 4 months of the Fiscal Year.
Individual Income Tax Revenues are flat for October coming in at 0.1% increase. Inside those numbers, Withholding Payments declined by -$52.6 million, while Individual Income payments were up $51.7 million. Refunds were up $17 million. Corporate Income Taxes were up $11.3 million for October.
SALES TAXES NEGATIVE FOR FIRST TIME
Net Sales Taxes were a negative -0.4% for October for the first time in memory as Sales taxes have been relatively strong over the past two years. Title Ad Valorem Taxes were down some minus $19.1 million for the month. Tobacco and Alcoholic Beverages were both positive, at increases of 2.8% and 21.7%
MOTOR FUEL TAXES/FEES
Motor Fuel Taxes/Fees, Impact Fees and Hotel/Motel Fees were up slightly, $413,000 or 0.2%.
YEAR TO DATE REVENUES UNDER BUDGET SUBSTANTIALLY
After 4 months, fully one third of the budget year, the state has dropped alarmingly below budget spending levels. No longer just flat for the year, total revenues now lag 2018 revenues for the first 4 months by $11.1 million. This means when you apply the FY 2020 budget increase, that spending has now exceeded what the state has collected by some $233 million. Each month that goes by accumulates another $50 million or so in spending above last year.
INCOME TAXES SLIGHTLY NEGATIVE
The top category of state revenues, Individual Income Taxes, is now negative for the first 4 months, -0/3%. This category normally accounts for about half of state revenue.
Corporate Income Taxes are positive YTD, at 4.2%.
The Sales Taxes category has been a relatively stable area of growth for the state the last couple of years. But this fiscal year, Net Sales Taxes have grown an anemic 1.0% YTD.
Title Ad Valorem Taxes are negative some -$35.5 million YTD and Tobacco Taxes are negative -4.3% while Alcoholic Beverages category is positive at 5.4%.
EVEN FUEL TAXES/FEES ARE NEGATIVE
For the first time, I believe, since the fuel tax was updated under HB 170, we have a period of time where Motor Fuel Taxes/Fees are slightly negative, -$1.5 million or -0.2 % for the first 4 months of the Fiscal Year.
CLARITY IS LACKING
No one seems to have the answer as to why state revenues are not even growing a little bit over the first one third of the fiscal year. While it is true the State Income Tax Rate was cut this past January to 5.75%, it is not clear that we have the full effect of that cut on revenues so far this year. Even so, that cut would not explain the Net Sales Tax collections dragging along at 1% growth where normal has been 3-5% over the past two years.
And none of this explains why the Fuel Tax/fees category should be negative for the year so far. Nothing in the economy that we can put our collective fingers on points to a smoking gun that would unequivocally explain this turn in revenues.
The economy is the state continues to hum along and all of the signs of the problems of the world economy have yet to find their way into our calculations, but yet our revenues tell us something is clearly not well with the state economy.
GEORGIA CONTINUES TO TRAIL SOUTHEAST IN REVENUE GROWTH
These July-October revenue growth numbers point to the dilemma in Georgia as we struggle to figure out why we are not growing as the state has in the past and why Georgia continues to trial other Southeastern States.
Texas 23.3% Growth July- October
Virginia 8.2% Growth July- October
Tennessee 7.7% Growth July- October
Alabama 7.6% Growth July- October
South Carolina 6.2% Growth July- October
Louisiana 4.9% Growth July- October
Mississippi 4.8% Growth July- October
Florida 4.8% Growth July- September
Arkansas 4.1% Growth July- October
Kentucky 3.4% Growth July- October
Georgia -0.1% Growth July- October
West Virginia -1.7% Growth July- October