April revenues: Collections have stabilized but remain well below pre-downturn levels

April General Revenue collections were announced this afternoon and provided further confirmation that while the fiscal free fall has now stopped, the return to pre-downturn levels is likely to remain long and slow. Overall, April’s collections of $512.3 million were almost exactly the same amount as last year’s collections of $513.4 million. Gross production taxes were up considerably compared to one year ago (+$21.4 million, 65.8 percent), while income taxes remained down (-$32.3 million, -11.5 percent).

However, comparing collections to last April, when the worsening economy had sent revenues plummeting, only tells part of the story. The graph above compares April’s GR to the average April GR over the past five years; we find that this month’s collections are only 83 percent of their historical average. Collections would have had to hit $618 million – or $106 million more than actual – to be back to their five-year average. Although last month’s collections suggested that the rebound to pre-downturn levels might happen quickly, it now seems more likely that March’s strong revenue performance was somewhat anomalous and that the recovery will take longer.

So what does this mean for the budget for next year that is still being negotiated as the legislative session approaches its scheduled adjournment in under three weeks? Almost nothing. We’ll repeat the reminder we provided last month, that these monthly revenue collections have no direct impact on the amount of revenue available for appropriation for FY ’11:

… regardless of how strongly revenues recover during these latter months of FY ’10, it has no bearing on the amount of revenue that is available to the Legislature for appropriation in FY ’11. The final, binding revenue estimate was certified by the Board of Equalization in February.  There is no authority and no opportunity to recast the die and alter that certification based on economic conditions or economic projections.

However, changes to revenue-related laws approved by the Legislature during session can lead to a revised certification. This means that the various revenue enhancements that Governor Henry proposed in his FY ’11 budget, or those that OK Policy has recommended as worthy of consideration in our just-released issue brief, could still be used to mitigate the extent of next year’s budget cuts.