State Revenues Continue to Fall

stock-down-arrow3Non-Partisan Fiscal Services Disagrees with the Governor’s Assessment of State Budget

On June 16, Fiscal Services released the Twelve-month Total Net Tax Receipts memo. As was the case in the June 1 revenue memo from Fiscal Services, the news was not good.

According to Jeff Robinson, an analyst for Fiscal Services, there is a $34 million drag on receipts caused by a combination of a $12 million to $15 million drop in the tax insurance companies pay on their premiums, a decrease of at least $10 million income tax quarterly estimate payments and a calendar issue that boosted withholding taxes in May at the expense of June.

Robinson said June probably won’t be as negative as April and May. In May, net state receipts fell by 12.4 percent and pushed tax collections into the negative column by 4.5 percent, below the Revenue Estimating Conference (REC) estimate of -2.6 percent.

Based on current numbers, Robinson predicted the state will spend all of the $45 million ending balance legislators anticipated when they adjourned in April. Governor Culver has the authority to transfer $50 million from the Economic Emergency Fund and can transfer unspent Medicaid funds to cover the shortfall. Robinson was doubtful that this would be enough to cover the potential shortfall.

Robinson said there is plenty of money in state reserves to cover the overage, but Culver will have to go to the Legislature to get more than the $50 million he can draw on his own authority.

The Governor…said that concerns…were partisan political attacks. This is an interesting comment considering the information came from a non-partisan fiscal analyst.

Not surprisingly, the Governor’s spokesman said it is premature to speculate on what the final budget numbers will look like. “There are always ups and downs during the fiscal year, but there is no clear evidence that this is anything more than a normal month-to-month variation,” Troy Price said. (Des Moines Register, June 17, 2009)

The Governor himself said that concerns about revenue and the state’s budget were partisan political attacks. “It’s important for people to separate the political, partisan rhetoric from the facts,” he said. (Quad City Times, June 19, 2009)

This is an interesting comment considering the information came from a non-partisan fiscal analyst.

On Wednesday, July 1, Fiscal Services will release the numbers on gross revenue and tax refunds for FY 2009. The full extent of the problem won’t be known until after the books close at the end of August.

The talking points on the budget remain the same. The Democrats spent too much, cut too little and once again are likely to be left with two budgets that are likely out of balance (FY 09 and FY 10) and a third (FY 11) that has a $1 billion spending gap.