Georgia State Tax Collections Down 9.4% In June
The outlook for Georgia is gloomy: Georgia ends fiscal year with $600 million shortfall.
With the economy continuing to sputter, state government is going to have to spend $600 million in reserves just to pay its bills for the recently completed fiscal year. And the outlook doesn't look a whole lot better for fiscal 2009, which started July 1. State tax collections were down 9.4 percent in June, the final month of fiscal 2008. They were off 1.1 percent for the entire fiscal year.Bleeding Not Going To Stop
Collections of corporate income taxes and sales taxes, particularly on materials used in construction, dropped the most. That decline mirrors a national housing downturn that has hobbled the economy in many parts of the country.
Gov. Sonny Perdue said because of the tax collection decline, the state will have to use $600 million of its $1.5 billion reserve fund to balance last year's budget. In anticipation of the slow economy, the governor already had ordered state agencies to come up with plans to cut 3.5 percent of their budgets this year.
Most state spending goes for education, public health care and prisons. For now, the governor has exempted most kindergarten through high school education as well as public health programs from those proposed cuts. But that exemption may not stick if the economy weakens further.
"If the bleeding doesn't appear to be stopping, we'll have to look at all those options," Perdue told reporters.
In the final three months of fiscal 2008, overall tax collections were down 7.3 percent over the same period in fiscal 2007, according to the Georgia Department of Revenue. Corporate income taxes plummeted 26.7 percent, and sales tax collections fell 8.6 over the same months in fiscal 2007.
Senate President Pro tem Eric Johnson (R-Savannah) said, "Georgia will do what families across this state are already doing, adjust our priorities and tighten the belt."
Let's be realistic. The bleeding is not going to stop. In fact it is going to double or even quadruple. I suggest Perdue start looking at the options now, instead of putting things off perpetually as does California Governor Arnold Schwarzenegger.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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