South Georgia at the State Capitol

June revenue figures show continued economic slump

 

By State Sen. Greg Goggans

 

Evidence of the nation’s economic problems could be seen in the Fiscal Year 2008 state revenues, which were release last week.  Revenue numbers fell into negative territory for the first time in five years, as the June figures closed out the fiscal year.  While it recently became apparent that the state would not make the revenue growth estimate and that dipping into the reserves would be necessary, the June revenues were a negative $168 million in what was expected by many to be a positive revenue month.  Thus, Georgia will be forced to draw down reserves of $590 million out of the $1.5 billion total to balance the books for FY ‘08.

 

There are some positive things about this result news:

• Unlike the federal government, Georgia must balance its books yearly and cannot just continue spending or printing money.  So, the state faces its problems head on and takes the action necessary to balance its budget.
• Due to the foresight of Governor Sonny Perdue and legislative leadership, Georgia has a robust revenue shortfall reserve and the $590 million will not present a problem.
• The Legislature did not listen last session to those who proposed huge tax cuts funded out of the Reserve fund.

June revenue report

June revenues were down from June 2007 by $168 million.  For the first time, it seems individual income taxes did not drive the month’s revenue.  A small increase of 1.7 percent was recorded in that area, but the $13 million gain was washed away by a $97 million reduction in sales tax revenues.  Another oddity was that the 15 percent of the budget made up of other revenues, including corporate income taxes, tobacco taxes, alcohol taxes and motor vehicle fees, combined for a negative total of some $82 million.  This caused a substantial increase in the deficit for the month.  So, FY ‘08 went out with a whimper ($1.68 billion in total revenues), compared to 2007 when the fiscal year closed with a huge month of almost $1.8 billion in revenues.

 

FY 2008 revenue report

FY 2008 total revenues showed a drop of -$189,975 over 2007.  If the Governor’s revenue estimate had been met, total revenues would have shown an increase of $703,147,357.  And this was after a $245 million reduction in the revenue estimate during the 2008 Session.

 

Personal Income taxes were up only marginally at 0.3 percent or only $24 million.  Every other revenue category was negative for the year.  For example, sales taxes were down by -$134,652 when the payout to local governments was calculated.

 

Incidentally, local governments are the beneficiary of rising food prices.  The 3 percent sales tax that the state collects and distributes to local governments rose by $74 million in FY 2008 and this is most likely tied to food sales tax collection.

 

Other sales tax categories showed decreases over 2007 including automotive at -0.7 percent, home furnishings at -1.0 percent, lumber at -13.4 percent and manufacturing at -2.7 percent.  Recent years had shown high, single-digit increases in these categories.  Tobacco and alcohol taxes also showed decreases for the year.

 

Corporate income taxes, a growing category in the past few years, slumped to a decrease of $76 million or -7.5 percent.  This total of $943 million fell below the $1 billion total in 2007.

 

Fuel taxes reflected decreasing tax collections for the excise tax on per gallon sales, going down by 4.1 percent or -$20 million for the year.  As the price for fuel rose, the sales tax (now capped) rose also.  This amounted to a $92 million increase over 2007 for a net total going to the roads and bridges budget of $72 million or $1.01 billion for the year.

 

In all, FY ’09 has begun with the state in an unenviable position.  If the 2009 budget were being written today, there would be no new funds appropriated and the budget would be flat.  But the 2009 budget actually contains expected new funds that will likely not be there.  One thing is clear, it will be necessary to make some difficult decisions over the next 12 months without an upturn in the economy.  However, because of the fiscal stewardship of state leaders, Georgia is in a much better position than other states in the nation, and ready to bounce back when the time is right.

 

As always, I’d like to thank members of the Senate staff, who contribute regularly to my column.  Please contact me in my office at the Capitol with your questions, comments or concerns.

 

 

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Sen. Greg Goggans represents the 7^th Senate District, which includes Atkinson, Bacon, Berrien, Clinch, Coffee, Echols, Lanier, Pierce and Ware counties and a  portion of Cook County