FY13 state revenue worries grow

With state tax collections for the first three months of the fiscal year falling $95 million below the forecast, concerns are growing about keeping the fiscal 2013 budget in balance.

Tax collections through the end of September totaled $5.1 billion, eking out only a token $15 million increase over the collection amount from a year ago.

While some of the first-quarter shortfall is due to a shift in the timing of payments that added to fiscal 2012 collections at the expense of fiscal 2013, according to state revenue department officials, the new numbers have state finance officers watching economic and financial trends closely.

In an Oct. 15 letter to the governor and the chairs of the House and Senate Ways and Means and Revenue committees, Administration and Finance Secretary Jay Gonzalez wrote that he would not be changing the tax forecast for the year at this point, but was aware of potential risks that might require adjustments later on.

Gonzalez said that the first quarter tax numbers and new economic forecasts suggest that collections could end the year below the forecast. He also noted that it’s possible that the automatic personal income tax rate reduction under state law could be triggered again this year, reducing the rate from 5.25 percent to 5.2 percent effective on Jan. 1, which would have a negative impact on fiscal 2013 revenues.

How the federal government addresses the “fiscal cliff” created by expiring federal tax cuts and automatic budget cuts scheduled for Jan. 1 under federal law could have a major impact on state revenues if the result is a new recession, as many economists think is likely, Gonzalez said.

The next review of state tax revenues for fiscal 2013 is slated for the fiscal 2014 “consensus” revenue hearing scheduled for December, when state finance officials will have almost two more months of collections and economic news to review and inform forecasts.

• Download letter from Administration and Finance Secretary Jay Gonzalez (32K PDF)