November Revenue Numbers are Weak, but it’s Not All Sandy’s Fault
Although the administration’s still has not released its official monthly revenue report that was due out December 14, the Office of Legislative Services (OLS) has issued its latest Monthly Revenue Snapshot, and the picture it paints of this year’s collections isn’t pretty.
The key takeaways from the report:
• Overall revenue growth so far this year is basically flat (up 0.1 percent) even though the budget assumes growth of 8.4 percent. In order to hit the administration’s projections, we’d need to see 11.9 percent revenue growth through June 30 of next year.
• Superstorm Sandy had relatively little impact on November revenue collections. The trends experienced in November were simply a continuation of the trends prior to the storm.
• Income tax has grown by 1.8 percent this year, not the nearly 6 percent assumed in the budget. However, pending federal tax changes could have a positive impact on income tax collections as most firms will pay bonuses and investors will likely capture capital gains this month since a lower tax rate is guaranteed this year but uncertain next year. (The administration has never disclosed its budgetary assumptions about capital gains, so do not know what levels it had already assumed.
• December and January are two of the three most important months for income tax collections (along with April), so there will be a clearer picture available in late January.
• Sales tax contracted by 0.4 precent; the budget assumes growth of 6.3 percent. November sales tax collections were based on October sales, so there was likely little negative impact from the storm. In fact, the much of the pre-storm and immediate post-storm purchases occurred in October and may have helped to slightly boost even weaker sales tax collections.
• Something we do not know about the sales tax is whether there was a reduction in the number of actually taxpayers filing due to their businesses being destroyed.
• Corporate taxes are up by 6.1 percent this year, but that’s still nowhere near the 26.2 percent growth assumed in the budget. As with the income tax, December is a key month for the corporate tax, so we’ll keep a close eye on this figure.
• Casino taxes are now down by 9.8 percent for the year, which is likely somewhat related to the storm and the closure for the first few days of November. Prior to the storm, casino revenues were actually growing by 4.7 percent, though that was still substantially below the projected growth rate of 18.5 percent.
• Lottery revenues are up by 2.9 percent for the year; some of the growth can be connected to the supersized Powerball jackpot available a few weeks ago. The budget assumes growth of 15 percent for the year, though a significant portion of that growth was an anticipated $120 million payment for the outsourcing of lottery marketing and administration that has now come under the scrutiny of the legislature.
It will be interesting to see the administration’s spin on the numbers when it finally issues its press release – keep your eyes peeled for a late Friday news dump or even a Christmas Eve release. Will it blame the storm for the sluggish numbers, even though the OLS snapshot makes clear the storm’s impact was relatively small? Or will it finally acknowledge what outside observers have known for many months – that there is a major shortfall in revenue that could lead to a mid-year deficit approaching or exceeding $1.8 billion?
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