An update of state tax collections released today suggests that the March Miracle some budget writers are dreaming of may not materialize.
March 17 is when the next state revenue forecast will be approved and it is that report that will be used to write the 2011-13 budget. Some have been hoping that it will show a sooner-than-expected economic recovery and a higher-than-predicted revenue estimate. Any amount that is above the November forecast would be welcome.
But Friday’s February update shows that collections are actually down from what was projected. While some of that is due to non-economic reasons (such as a change in how and when the state collects some taxes) the collections would be down anyway.
“Major General Fund-State (GF-S) revenues for the January 11 – February 10, 2011
collection period were $105.9 million (8.4%) lower than our November forecast, but most
of the negative variance in this period is estimated to have been due to a change in the
payment pattern of Revenue Act taxes,” said the report of the state Economic and Revenue Forecast Council.
“In addition, there was a $26.6 million refund of retail sales and use taxes during the current collection period. Without this refund, the forecast variance would have been -$79.3 million (-6.3%).”
Timing of payments rather than a declining economy is likely to blame for the fact that January collections – covering sales and activities in December – was $106 million less than expected. That is more than enough to negate October and November collections that had been a robust $61 million over projections.
The forecast warns that it is no longer as easy to assess the vigor of the holiday shopping season. One reason is that much occurs in November rather than December. And the growth of gift cards also shifts sales tax collection from December to the new year.
“A clear picture of the holiday season will not be in focus until the next reporting cycle,” the report stated.
All that said, state forecaster Arun Raha was relatively buoyant about the state economy.
“The Washington economy ended the last year on a positive note with improvements in
both the housing and job markets,” the report concluded. “Consumer price inflation in the Seattle area remains moderate in spite of a jump in energy prices; and migration into Washington State appears to be picking up.”
“The national economic recovery continues, albeit at a gradual pace,” the update concluded. “The data present a mixed picture, but on balance the news is generally positive. Uncertainty remains, so we will continue to watch the progress very carefully one month at a time.”