State revenue picture worsens, cuts expected

Following a sharp downturn in October tax collections, the governor’s chief finance officer told local officials that there’s a high likelihood of a reduction of the revenue forecast for fiscal 2013 as well as mid-year spending cuts.

Speaking at the Nov. 13 meeting of the Local Government Advisory Commission, Administration and Finance Secretary Jay Gonzalez said a review of options was under way and decisions would have to be made soon – within a few weeks. He did not say how much the tax forecast might be reduced or what possible combination of budget cuts and state reserves may be used to keep the fiscal 2013 budget in balance.

Gonzalez said the state has imposed hiring and spending limits and asked departments to develop contingency plans in preparation for possible budget cuts.

Tax collections through the end of October, one-third of the way through the fiscal year, were below the fiscal 2012 amount and $256 million below the forecast set for this point in the year as part of the fiscal 2013 budget process. Collections were weak across all the main categories of taxes, led by a $155 million shortfall in the state’s personal income tax. Sales tax and business and corporate tax collections also lagged behind benchmarks.

The fiscal 2013 state budget is based on a revenue forecast of $22.01 billion.

When he announced the October revenue report on Nov. 5, Gonzalez said the rate of economic growth has slowed markedly, which is putting a drag on tax collections. He said that worries about economic conditions in Europe and uncertainty about how the federal government will respond to the “fiscal cliff” have contributed to a slowdown in business activity.