Arizona sees large drop in tax revenue

Arizona tax collections remain far below projections as consumers worried about the economy continue to try to keep their money in their pockets.

New figures Wednesday from the Joint Legislative Budget Committee put November sales tax revenue at about $317.5 million. That is almost $49 million less than the same month a year earlier - and more than $67 million below what lawmakers forecast when they put together the $9.9 billion state budget.

Those figures reflect what consumers were buying in October, as retailers pay their sales taxes the following month.

Actual sales figures for November will not be available until later this month, with December sales reported in February. But retailers both locally and nationwide reported relatively lackluster Christmas season sales.

Income tax collections, a reflection of the money withheld from worker paychecks, also is off by close to $35 million from November 2007, and more than $50 million below estimates. And the chances of that picture improving in the near term also are bleak.

Arizona shed more than 83,000 jobs between November 2007 and November 2008, putting the state jobless rate at 6.3 percent. Researchers at the state Department of Commerce are predicting the unemployment rate will definitely top 7 percent and might even hit 8 percent before the state economy turns around.

The state's deteriorating employment situation is mirrored in another new report, this one from the U.S. Bureau of Economic Analysis.

It shows total state income - money from all sources to all residents - actually declined by 0.3 percent between the second and third quarters of 2008 despite the increase in the number of people living here. Utah was the only other state to experience negative growth.

Year-over-year income growth was just 2.2 percent, better than only Florida and Connecticut. Legislative budget staff members said 1954 was the last time Arizona had a lower annual growth rate in personal income.

Overall income for the state for the first five months of the fiscal year is almost $574 million below projections. That figure, coupled with weak projections for the coming months, suggests that even the estimate of a $1.2 billion deficit for the current year may prove to be too optimistic.

No segment of the economy appears to be immune from the slowdown in consumer spending.

Particularly hard hit is the automotive industry, with taxes from the sale of vehicles and parts down almost 29 percent from the same period a year earlier.