State revenues still far behind pre-recession levels

Georgia’s state tax revenues were up 2.1 percent in May from May 2011. We’ll probably end fiscal year 2012 with a 5 percent increase over FY 2011.

These are pretty soft numbers. The total from individual income tax collections in Georgia was down .4 percent last month compared to a year ago, and gross sales and use tax collection was up only 1.8 percent, less than the pace of inflation. Alan Essig of the Georgia Budget & Policy Institute notes that the growth is insufficient fot fund reserves. Rockefeller Institute data shows that state revenues across the country are generally increasing but that the pace of increase has clearly slowed from a year ago.

But we have fallen into a regrettable habit of judging current economic activity (state revenue is a good barometer) by comparing pretty weak years to even weaker ones.

In May 2006 (six years ago!), Georgia’s gross sales and use tax was $946,473,000. After adjustments and distributions to local municipalities, the state ended up with $509,680,000. In May 2012, the gross collection was $821,996,000, and the state’s net collection was $448,739,000.

That suggests a decline in sales activity in the state of 12 percent or so over the last six years. Adjusted for inflation, the decline is more than 20 percent. Through May of FY 2007, Georgia had almost $16 billion in revenues. Through May of FY 2012, the state has about $14.5 billion in revenues.

These are clear signs of a statewide economy still lagging far behind its pre-recession level.

I give state leaders real credit for minimizing the impacts of the resultant budget cuts to some degree, but these steep declines raise all sorts of questions about funding for education, infrastructure, and other state functions.

I doubt any of the transportation tax proponents will make it a particular point of emphasis, but there’s certainly an argument to be made that the new sales taxes would be one way of making up for a huge amount of lost ground.

 

11 comments

  1. wicker says:

    Wow. I didn’t know that the revenue picture was anywhere near that bad. And with Europe still spiraling out of control and the election of Mitt Romney making a military strike against Iran much more likely, things might get worse before they get better. I guess I will have to retract my already ambivalent support of T-SPLOST. We really can’t afford it right now. There are some things that should be done during prolonged periods of declining revenue that will help make you more competitive when the rebound occurs, but transit isn’t one of them. Georgia should concentrate on the Savannah harbor project, and perhaps on things like energy and education instead.

    • wicker says:

      While I am no fan of Obama – who has done almost as much damage in 3.5 years as George W. Bus h did in 8 – the governor and state legislature are primarily responsible for a state economy. The GDP of 11 states grew 2% last year: http://247wallst.com/2012/06/08/the-states-with-the-fastest-growing-economies/

      Of course, many of those 11 states are oil states (Texas, North Dakota) but that shows just how ridiculous those of us in non-oil states are for allowing ourselves to be led around by the nose by the national neo-cons by refusing to promote alternative energy. On energy, what is good for the Club For Growth and for the talk radio and conservative magazine/blog outlets – all of whom receive huge financial support from the oil companies – isn’t good for the rest of us.

      And not just the oil states either. Oregon and Michigan had significant growth in their manufacturing sectors last year, and Connecticut had growth in the financial services sector. Instead of just blaming the folks in Washington, we need to take care of our own business in the state. That’s what happened in the 90s, remember? While the rest of the nation was going through a severe recession, metro Atlanta was booming thanks to transportation, finance, technology and the buildup to the Olympics. What we’re seeing now is the result of “governance” by the “if we can just cut taxes enough then good things will happen” crowd for the last 10 years.

  2. Charlie says:

    A couple of things about those retail sales numbers that deserve some further detail to see where the problem is.

    2006 was the peak of the building boom, from which we’re still suffering quite a hangover. Sales tax is charged on all the raw materials that go into building and furnishing a home.

    The declining numbers also point to a growing share of retail sales being diverted to online sales. It’s understandable why the state wants to find a way to capture the taxes due on those transactions.

    • Bill Dawers says:

      As of 2009, the Census pegged e-commerce at about 4 percent of total sales. I’ve never seen any Georgia-specific data on that, but it’s entirely plausible that we were right around the national average then and probably at 5-6 percent today.

      You’re obviously right about the building boom and I think a lot of the measurements of housing’s impact on the economy don’t take adequate account of the big furnishing sales — carpets, appliances, etc. A faster pace of household formation probably boosts auto sales too.

      A couple of other factors I didn’t go into: population growth of better than 1 percent/year, which makes the dropoff from 2006 look even worse, and the impact on gross sales tax collections of new SPLOSTs (if the transportation taxes are approved anywhere, that will obviously impact the numbers but I don’t know if those will be recorded as local distributions or not).

  3. saltycracker says:

    The underground economy is growing while tax winners and loosers are carefully legislated.

    Any talk of max. public salaries & bonuses ?
    Any talk of getting a grip on educational costs without punishing students ?
    Any talk of getting the taxpayer out of the guarantee of pension fund returns/payouts ?
    Any talk of overhauling the tax code including subsidies and eliminating deductions/checks beyond taxes paid ?
    Any hope of getting medicaid & unemployment support back to shore ?

    “Georgia has a total state debt of approximately $97,478,050,000, when calculated by adding the total of outstanding official debt, pension and other post-employment benefits (OPEB) liabilities, Unemployment Trust Fund loans, and the budget gap.”

    http://sunshinereview.org/index.php/Georgia_state_budget

    • saltycracker says:

      Re: revenue down, spending going up ? The 2013 $19.3 budget compares to last year’s $18.3 or so. And the state took an $815 settlement from banks in 2012 for foreclosure fraud for a rainy day.

      • Bill Dawers says:

        I agree with the need to look harder at many parts of the budget, but the budget increase from 2012 to 2013 is pretty much in keeping with the 5 percent year-over-year increase in revenues that we’ve seen of late.

        • saltycracker says:

          It’s ok for the budget to be in lockstep with the revenues as state debt increases by not funding for future obligations ? Is that $97.5 billion state debt less than last year ?

          The below may not be the top budget issues but they were just obvious from the links:

          Funding for state retirees health care is virtually unfunded at 4%.
          (pensions 80 something, not bad by comparison but getting worse).

          For funds like the pension investments, Georgia presumes a 7.50% return rate.
          In the last 10 years have folks – investing conservatively – made that kind of return ?

          If the state issues a 7.5% bond with the citizens of the state guaranteeing the return, it’ll sell well. Isn’t that what we are doing for state employees ?

          • Bill Dawers says:

            You raise some great questions, and I’d love to see a full audited accounting of all those future obligations with full weight given to the current economic realities without incorporating probably-inflated projections of future growth.

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