State tax revenue falling short of expectations - East Valley Tribune: News

State tax revenue falling short of expectations

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Posted: Friday, May 30, 2008 9:01 pm | Updated: 9:04 pm, Fri Oct 7, 2011.

State taxes are continuing to come in below expectations, potentially threatening to put next year’s budget even deeper in the red. New figures Friday show that April tax collections were $73.5 million less than the same month in 2007. That includes a $24 million drop in sales taxes.

But the real concern in the report by the staff of the Joint Legislative Budget Committee is that revenue is more than $9.9 million less than estimates prepared just months ago when they enacted fixes to a $1.2 billion shortfall for the current fiscal year.

The report says that revised budget has enough of a cushion to ensure that even if the trend continues, the state will end the budget year June 30 without having to make further alterations.

But Richard Stavneak, director of the JLBC staff, pointed out that the consensus of economists has been that tax revenue for the coming fiscal year will increase just 1.2 percent above this year.

If that proves to be true, he said, next year’s anticipated deficit will actually be $2.2 billion, versus the $1.85 billion now projected.

Senate Majority Leader Thayer Verschoor, R-Gilbert, said the new numbers should be a wake-up call.

“We keep wanting to pretend like this isn’t a real problem,” he said. He said the news just keeps getting worse. Verschoor pointed out that when Gov. Janet Napolitano first proposed a budget for the coming year she pegged the gap between revenue and expenses at just $1.3 billion.

“It’s time that the governor’s office starts to recognize that this isn’t just going to be a short-term issue,” Verschoor said. “We’re going to have to have some permanent solutions.” That, he said, means sharply trimming some state programs or services — or eliminating them outright.

Gubernatorial press aide Jeanine L’Ecuyer said Napolitano’s staff is reviewing the numbers. But she said any projections of what they mean for next year’s revenue projections are “speculative at this point.”

L’Ecuyer also said Napolitano has provided lawmakers with a “comprehensive plan” that will balance next year’s budget while preserving needed state services and also allowing the state to invest in the future.

Verschoor, however, said the governor’s plan, which she has not made public, includes only $250 million in permanent cuts. Napolitano wants to bridge the difference with borrowing for school construction and taking more money from the state’s rainy day fund.

Napolitano also hopes to save $60 million by having some criminals convicted of low-level felonies serve their time in county jails — at county expense.

She also has plans for generating new revenue. For example, Napolitano said allowing the Arizona Lottery to spend more on advertising would convince more people to play, generating an additional $10 million. The governor also said the state Department of Revenue can collect more taxes that are owed but not paid.

And Napolitano said rolling out photo radar cameras on state roads would generate a net $90 million this coming budget year if none of the cash is shared with local governments.

Verschoor said Republicans recognize there will be a need to borrow some money. But he said that should be kept to a minimum given the poor budget prognosis, as anything borrowed will have to be repaid with interest.

He is particularly critical of a couple of budget maneuvers that are one-time fixes.

One would delay $300 million the state owes to public schools in June 2009 until the following month. That takes the expense off the books for the upcoming fiscal year but leaves the state on the hook for the money.

Another does the same thing, but in reverse: It would require more companies to pay sales taxes collected in June 2009 in the same month rather than the following month as now permitted. That increases revenues in the coming budget year by $55 million — money that would normally be collected in the following fiscal year.

The one bright spot in the April figures was in income taxes, where collections were running nearly $37 million above the forecast.

But the report warns that is not a trend. Instead, it says the Department of Revenue is simply doing a faster job processing income tax payments that otherwise might not be booked until May.

The lower-than-forecast numbers could affect more than budget negotiations for the coming fiscal year. It also comes as Napolitano is pushing them to let the state’s three universities borrow $1.4 billion for new research facilities and catch up on overdue maintenance, borrowing that would add $82 million a year to the state’s obligations for the next 25 years.

University officials are arguing for approval anyway, saying the payments could be structured so the first payment from state tax dollars is not due until 2011 or 2012, when they believe the fiscal picture should be better.

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