OLS says revenues remain well below projections

The state Office of Legislative Services said revenues continued to trail projections, seeing only 3.4 percent growth through the month of April, well below the 8.4 percent growth projection the administration was forecasting.

To make up for the continued shortfall, OLS projects that 9.9 percent growth in revenues would be needed to keep pace with those optimistic forecasts.

The gross income tax collection appears to be 9.9 percent higher from the same time last year. However, there are two important payment timing issues influencing the year-over-year collections pattern, OLS said. First, in Fiscal Year 2012 about $60 million of quarterly estimated payments were delayed into November due to Hurricane Irene.

Second, in FY 2013 a weekly withholding payment (worth about $100 million) shifted from November to October, an accounting shift that occurs several times each year depending on the number of Wednesdays that fall in each month, OLS reported. Combined, these two effects artificially boost the current cash flow by about $160 million compared to last year’s baseline. Compensating for this distortion reduces the effective GIT growth rate to about 3.4 percent, OLS said.

The office anticipates that these two factors will be corrected after the November income tax payments are complete. The certified year-end target assumes growth of 5.7 percent for the entire fiscal year.

*Sales Tax –  sales tax collections remain very weak, with receipts through the end of October totaling $2.0 billion, down 0.3 percent from the same period last year (October collections reflect September economic activity because this tax is subject to a one-month payment lag). The certified target assumes 6.3 percent growth for the year.

* Corporation Business Tax (CBT) cash collections of $536.4 million through October represent 1.1 percent growth from the same period last fiscal year. The certified CBT estimate requires 26.2 percent growth rate for FY 2013 over FY 2012.

• Casino revenues of $78.2 million are down 0.9 percent through the end of October. The certified target for FY 2013 requires growth of 18.5 percent. October cash receipts fell 17.8 percent  below last October, with an unknown portion of this decline attributable to the recent storm.

• Revenue impact of Superstorm Sandy is uncertain. The major storm that hit New Jersey Oct. 28 to 30 had a significant adverse impact on lives and property in the state, but the state revenue implications are unclear, OLS said.

There was some negative impact from the closure of Atlantic City casinos, but most other October revenues were already paid by the time the storm hit, based on prior economic activity.

Certain state revenues during the next two months may decline below the levels that would have otherwise been expected. On the other hand, an infusion of resources and reconstruction activity may spur growth by the spring of 2013, OLS stated.

In Louisiana, state revenues received a post-Katrina bounce from the economic impact of reconstruction, according to OLS.

Earlier coverage:

Revenues continue to trail projections

OLS says revenues remain well below projections