State revenues slowly inch positive

DES MOINES – State tax collections are beginning to inch in a positive direction but continue to cause heartburn for fiscal 2011 budget architects.

Now eight months into the current fiscal year, net state tax receipts are running about 6.5 percent below the same period a year ago, according to the nonpartisan Legislative Services Agency. The good news is that's about 2 percent better than expectations.

“That's encouraging news,” said Sen. Bob Dvorsky, D-Coralville, chairman of the Senate Appropriations Committee. “I think that reflects what's going on in the economy -- that it's slowly doing a little better.”

February receipts were off 7.4 percent from a year ago and the official LSA report indicates year-to-date revenues are down 7.5 percent. But LSA analyst Jeff Robinson said a deposit issue due to the month's last two days following on a weekend skewed the numbers by up to $30 million. Once adjusted, the overall receipts are lagging by about 6.5 percent.

Robinson said the figures indicate Iowa's economy may be at the recessionary bottom but they are not indicating things have turned around.

“There's a slowing in the drop,” he said. “The U.S. is not bouncing back. Neither is Iowa bouncing back. Withholding was going to be down even without the deposit issue. Sales tax was going to be not very good at all, even with the deposit issue. Those two things are big drivers, but they aren't terrible.”

The monthly report showed February personal income tax collections were off 7.2 percent and sales/use tax receipts were down 9.8 percent. Overall, net state tax receipts are $292.4 million below the first eight months of fiscal 2009 – led by declines of $91.5 million in personal income tax collections and $62.9 million in sales/use receipts.

The state Revenue Estimating Conference is scheduled to meet March 11 to consider whether to revise its current estimate that tax receipts will finish the current fiscal year 8.5 percent below the current year.

Sen. Steve Kettering, R-Lake View, ranking Republican on the Senate Appropriations Committee, said he did not expect much of a revision would be needed, even though state officials say there's uncertainty surrounding the refund projections heading into the tax filing season.

“I think they're pretty close to on target,” he said. “I don't see anything in the current numbers that would cause them to alter their estimate very much one way or the other.

I'd say thus far in this fiscal year, they've called it pretty close.”

Kettering said he is more concerned that savings estimated at up to $270 million that are tied to state government reorganization, early retirement and other efficiencies “won't materialize” though June 30, 2011, forcing the need for adjustments during the fiscal 2011 budget year.

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