State revenue down, but better than expected

DES MOINES – State fiscal experts are fairly certain tax collections for fiscal 2010 will finish better than projected by June 30, but still well below the previous year's state receipts.

Net state tax receipts through May were down 5.2 percent compared to a year ago with one month remaining in the fiscal year, according to a Legislative Services Agency report issued Tuesday. However, the nearly $5 billion year-to-date total was $185.6 million higher than where the state Revenue Estimating Conference expected to be at this point.

“It looks better than it did in early March when the REC met, that's for sure,” said Jeff Robinson, a tax analyst with the Legislative Services Agency.

Positive growth in sales tax collections and personal income tax withholding payments for May were good-news indicators that Iowans are getting more pay or back working and making more purchases, he said. The bad news, however, continued via a double-digit drop in payments with income tax returns in May, a double-digit decline in estimated personal income tax payments and a 22 percent dive in corporate income tax collections.

Once those numbers shook out, state net income tax receipts came in 8.8 percent below a year ago in May – which represents the largest month for state tax collections with April 30 marking the deadline for filing state tax returns. May gross tax receipts totaled $756 million, down $43 million from May 2009, while net tax collections settled at $644 million, which represented a $62 million drop from the previous year, according to the LSA report.

Dick Oshlo, Gov. Chet Culver's budget director, said state officials expected May would be a tough month but he noted encouraging signs that state revenues are trending upward, with the 3.5 percent decline in gross receipts through May considerably better than the 5.7 percent decline that REC members projected in March.

“We will have no problem balancing (fiscal) 2010 because of the economy and the steps the governor took,” Oshlo said.

The bad news in the Iowa revenue report is the overall picture of a 2010 fiscal year that was hard hit by a national recession that caused state tax collections to plunge and precipitated a 10 percent across-the-board budget cut that Culver ordered last October. The good news, Robinson said, is the “here and now” that shows signs that the economy is bouncing back.

Both Oshlo and Robinson expected state net tax collections to finish the fiscal year on June 30 above the 8.7 percent yearly decline set by the revenue estimating panel last March.

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