This week’s announcement of General Revenue (GR) collections for the first month of the new fiscal year (FY 2013) provided mixed news for both overall collections and the performance of particular major taxes.
- Overall GR in July was $382.7 million. This is $6.4 million, or 1.7 percent, above last year. However, as the chart below shows, state revenues have yet to fully recover from the collapse that accompanied the last economic downturn. This year’s July collections remain 15 percent below four years ago and are still not back to where they were a full six years ago.
- Most major taxes showed growth compared to last year, showing continued strength in the state economy. July sales tax collections were up 9 percent from last year and are 6.5 percent above their pre-downturn peak. By contrast, while income tax collections were up 20.7 percent from last year, FY 2013 income tax collections remain 20 percent below their peak in FY 2007. This reflects both the continuing impact of income tax cuts that have phased in over the past eight years and the allocation of an increasing share of income tax collections to the ROADS fund and other purposes.
- The gross production tax contributed nothing to General Revenue in July, compared to $34.6 million in gross production taxes last year and the certified estimate of $22.7 million. According to Office of State Finance staff, the state collected $14.6 million in natural gas revenues in July but the entire amount was distributed in deferred refunds owed to energy producers, along with other mandatory allocations. Under an agreement reached in 2010, the state is on the hook for $297 million over a three-year period in refunds for horizontal and deep well drilling in recent years. Along with the refunds, low natural gas prices and the ongoing shift in production towards horizontal drilling, which is largely exempt from state tax, account for low gross production tax revenues. Meanwhile, as in previous years, none of the gross production tax on oil was directed to GR in July (click here for an explanation of how gross production tax on oil is apportioned).
State Finance Director is justified in saying that, “Our July General Revenue fund collections provide more evidence that our recovery from the recession has been more broad-based than some may think.” Yet the fact that, three years into the economic recovery, revenues remain below where they were before the recession, combined with weak gross production tax collections, are worrisome reminders that the state’s protracted fiscal crisis is still not over.