General Fund Revenue Below REC Estimate for FY 2009
On May 1, 2009, Fiscal Services released the revenue numbers for the first ten months of the fiscal year. Despite the Revenue Estimating Conference (REC) decreasing the gross revenue estimate to -2.6 percent, revenue did not meet those expectations.
Through April, year-to-date revenue growth is -$148.3 million, or -3.1 percent compared to actual FY 08. The new REC estimate for the entire year is -$158 million, or -2.6 percent.
While the fact that estimated receipts for the year are running behind the REC estimate is distressing enough, even more alarming is the fact that April receipts were down a whopping 15.1 percent compared to April, 2008. This was due to large decreases in personal income tax, corporate income tax, inheritance tax, interest fees and cigarette tax revenue.
Personal income tax revenue grew year-to-date by $45.1 million, or 1.7 percent above FY 08. However, for the month of April, personal income tax revenue fell by $17.7 million, or -5.3 percent compared to April 2008. If similar decreases occur in May and June, there is no way revenue will meet the estimate.
Sales and use tax receipts grew by $305 million, or 19.3 percent. Almost the entire increase is due to the state sales tax being increased from 5 percent to 6 percent on July 1, 2008.
Corporate income tax decreased by $47 million, or -12.9 percent. This is actually above the REC estimate of -15.8 percent. Other tax receipts were down $4.3 million, or -12.8 percent compared to FY 08. This was due primarily to large drops in inheritance tax and cigarette tax revenue.
Under the current balance sheet, the FY 09 ending balance is projected to be $44.6 million. This assumes $12.5 million in operating reversions. Since the state departments are still dealing with implementing the across the board cut, it is unlikely that reversions will reach that mark.
Also, in the 2001 Budget Reform Act, the Legislature granted the Governor the authority to transfer up to $50 million from the Economic Emergency Fund (EEF) in the event of a budget shortfall at the end of the fiscal year. (This was done because Governor Vilsack previously asserted unlimited transfer authority from both the EEF and Cash Reserve Fund.)
That means Governor Culver and the Democrats had a cushion of between $82 million and $95 million to deal with any potential shortfall in FY 2009 general fund revenue.