State's drop in tax collections spurs concerns

The state's finances continue to crumble as Arizona consumers curb their buying habits, especially for shiny new wheels.

New figures Friday from the Joint Legislative Budget Committee show total tax collections for October of less than $600million. That is $84.2 million less than the same month a year earlier and nearly $120 million below the projections used when lawmakers and the governor put together the $9.9 billion spending plan.

That puts total tax collections for the first four months of the fiscal year $442million below projections, on track for the latest forecast that the state needs to plug a $1.2 billion hole in its budget.

The new figures come as the nation's governors are going to Philadelphia on Tuesday to meet with President-elect Barack Obama. And one of the primary issues on the table is a plea for more money from the federal government.

Arizona Gov. Janet Napolitano is planning to attend.

Napolitano has been at the forefront of efforts to get Congress to enact a new stimulus package. But the governor said this money, unlike the earlier $600 checks to individuals, should go to the states.

The governor wants some of that in the form of direct cash. She specifically is asking for Washington to increase its share of the Medicaid program, which provides free care for the needy.

That program, called the Arizona Health Care Cost Containment System here, now gets about $2 in federal cash for every state tax dollar.

But Napolitano also wants the Obama administration to jump-start new construction projects, with federal dollars used by the states for roads, bridges and other infrastructure. She said that translates to new jobs in Arizona, which, in turn, means more people with money to spend.

That lack of spending is what is undermining the state budget.

Sales taxes make up nearly half of what the state collects each year.

The state anticipated sales tax collections in October of nearly $374 million. Actual receipts, however, were $337.3 million.

Leading that drop is the category the sales of vehicles and related supplies. Total sales are down year-over-year by more than 27 percent.

What makes that significant is that taxes from these sales make up more than 20 percent of annual state revenue.

The decline in construction of new homes and sales of existing ones also has put a dent in state income.

Sales of building materials is off by almost 14 percent. A separate levy on contracting is down close to 18 percent.

And home furnishing sales are off by more than 12 percent.

Separately, individual income tax collections - mostly the money being withheld from employee paychecks - is off more than $14.8 million from anticipated levels.

That goes to the issue of creating new jobs through federal spending.

Obama, in a press conference earlier this week, said his economic plan would include "fast-tracking some of these projects."

"The best way for us to do that may be in some cases to see what projects are already being undertaken by state and local governments, and making sure that they have the funds to continue those projects," the president-elect said.

He also promised to work "very closely with governors" as well with mayors.

"This economic recovery plan will require their input, their participation," Obama said. "And you know, part of our job is to make sure that we are listening to what's happening on the ground, where the rubber hits the road, and not simply designing something out of Washington."