Transcript Revenue Update

Revenue Update
A Briefing for the
Virginia Association of Government Accountants
John R. Layman
Director/Chief Economist
Office of Revenue Forecasting
Virginia Department of Taxation
March 19, 2008
Mid-Session Revenue Forecast
•
Due to the increased uncertainty about growth prospects for the U.S.
and Virginia economies, the Governor called an interim meeting of the
Governor’s Advisory Board of Economists (GABE).
•
At its February meeting, the GABE reviewed the January standard and
alternative low-growth forecasts for Virginia.
– In the standard forecast, the Virginia economy was expected to
grow near trend over the forecast horizon, similar to the October
forecast on which the introduced budget was based.
– In the alternative low-growth scenario, a deeper housing recession
and high oil prices result in a significant slowdown in employment
and income growth, particularly in fiscal year 2009.
•
Overall, the GABE recommended the “most probable” path for the
economy as somewhere in between the January standard and lowgrowth scenarios.
– None of the GABE members recommended the January standard
forecast, with three recommending the alternative low-growth
scenario in the short term.
1
Key Virginia Economic Indicators
October Standard and GABE Forecasts
(annual percent change)
06
Fiscal Year
07
08
09
10
10-year
Average
Employment
October Std. ('07)
GABE
2.1
1.4
1.1
1.1
1.5
1.0
1.8
1.8
1.8
Personal Income
October Std. ('07)
GABE
6.4
5.2
5.6
5.2
5.9
5.4
6.2
6.2
6.0
Wages & Salaries
October Std. ('07)
GABE
6.2
5.4
5.5
5.2
5.2
4.8
6.0
5.9
6.2
Average Wage
October Std. ('07)
GABE
4.0
3.9
4.4
4.0
3.7
3.7
4.1
4.0
4.4
2
Mid-Session Revenue Forecast (cont’d)
•
The GABE economic outlook served as the basis for the February
GABE revenue forecast that was presented to the Governor’s Advisory
Council on Revenue Estimates (GACRE).
•
Overall, the GACRE supported GABE’s “most probable” path for the
Virginia economy.
•
Based on comments of members of the GACRE, one additional
revision was made to the February GABE General Fund revenue
forecast.
– The sales tax growth outlook was reduced from the standard to the
low-growth for FY09 and FY10. The downward revisions reflect
weaker prospects for housing, specifically a delay in the recovery
from the fourth quarter of 2008 to the first quarter of 2009.
3
Summary of the February Post-GACRE
General Fund Revenue Forecast
Major Source
As a % of
Total
Revenues
Fiscal Year 2008 (a)
% Growth
$ Change
Fiscal Year 2009 (b)
% Growth
$ Change
Fiscal Year 2010
% Growth
$ Change
Withholding
56.2 %
5.2 %
Nonwithholding
19.0
3.2
(188.6)
6.5
(222.3)
8.4
(230.2)
(10.4)
9.6
28.6
4.3
(12.0)
2.2
(9.8)
Refunds
Net Individual
Sales
$
(31.4)
5.5 %
$
(95.3)
6.3 %
$
(72.4)
64.8 %
3.9 %
$ (248.6)
6.0 %
$ (305.6)
7.6 %
$ (292.8)
19.5 %
1.6 %
$
(39.6)
4.2 %
$
(73.7)
5.1 %
$
(96.6)
Corporate
4.6
(20.5)
(48.8)
0.6
(40.2)
3.2
(58.2)
Wills (Recordation)
3.2
(15.0)
(24.8)
(23.1)
(68.6)
9.0
(74.7)
Insurance
2.5
8.7
15.0
(29.5)
10.6
7.6
11.4
All Other Revenue
5.3
(1.8)
7.5
(18.7)
(42.6)
5.8
(21.3)
Total
100.0 %
1.2 %
$ (339.3)
2.2 %
$ (520.1)
6.8 %
$ (532.2)
* The February Post-GACRE forecast is based on the January 2008 Global Insight Standard outlook and the corresponding Virginia state forecast
developed by the Department of Taxation and incorporates input from the GABE and GACRE and revenue collection data through January.
Notes:
(a) Adjusted for the Estate Tax repeal, underlying growth is 1.4%.
(b) Adjusted for the Estate Tax repeal and HB 3202 (Transportation Plan), underlying growth is 4.1%.
4
Total General Fund
Fiscal Year Percent Change
Percent Change
20
15
10
5
0
-5
81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10
Total General Fund
* FY08-10 is forecast
5
The Governor Is Proposing An Additional $162.4 Million
Withdrawal From The Revenue Stabilization Fund In Fiscal
Year 2008…
Revenue Stabilization Fund -- June 30 Balance
FY 1995-07 Actual and FY 2008-10 Forecast
(millions of dollars)
Millions of Dollars
1,400
History
Forecast
1,190
1,200
1,065
996
1,000
1,039
936
800
716
575
600
482
472
361
400
340
247
224
200
157
80
85
0
FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07
6
FY08 FY09 FY10
Current Economic Conditions
National Economy
•
National indicators continue to depict deteriorating economic
conditions, as the housing shock and credit crunch spread through the
economy. Some analysts believe the economy has entered a
recession.
– The job market weakened significantly in February – payroll
employment fell by 63,000 jobs for the month, and January’s loss
was revised up from 17,000 to 22,000.
– The manufacturing sector contracted in February. The Institute of
Supply Management index fell from 50.7 to 48.3, the second
reading below 50 in the past three months and its lowest level since
April 2003.
– The Conference Board’s index of consumer confidence dropped
from 87.3 to 75.0 in February, its lowest level since November
1993. Both the expectations and current conditions components
fell sharply.
7
Current Economic Conditions
Virginia Economy
•
The Virginia Employment Commission has released re-benchmarked
employment data for calendar years 2006 and 2007. The revised data indicate
that job growth in Virginia was slower than earlier estimates had indicated.
Payroll employment increased 0.9 percent during calendar year 2007, below the
rate of 1.5 percent growth previously reported.
•
Statewide, employment grew by 0.7 percent in January. Jobs grew by 1.0
percent in Northern Virginia, and 0.7 percent in Hampton Roads and RichmondPetersburg.
•
The unemployment rate rose from 3.2 to 3.8 percent in January. A large
increase between December and January is fairly normal as retailers transition
from the holiday shopping season and colleges and universities close for winter
break.
•
The Virginia leading index fell 0.4 percent in January, its fifth decline in six
months. All three components of the index contributed to the decline. The
regional indices fell in eight of Virginia’s eleven metropolitan areas in January.
Northern Virginia’s index was unchanged, while Blacksburg and Roanoke were
the only metropolitan areas where the indices increased.
8
Growth in Withholding Tax Collections
FY08 Monthly and Year-to-Date
12%
10%
8%
6%
Forecast: 5.2%
4%
2%
Monthly
Year-to-Date
0%
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
•
Collections of payroll withholding taxes grew 4.8 percent in February.
•
Year-to-date withholding growth is 5.7 percent, slightly ahead of the
projected annual growth rate of 5.2 percent.
9
Nonwithholding Tax Collections
FY07 and FY08 Monthly
Millions of $
800
FY07
FY08
700
600
500
400
300
200
100
0
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
•
February is not typically a significant month for nonwithholding collections. A total of $27.0
million was collected in February, compared with $51.9 million in February of last year.
•
To date, about 40 percent of the nonwithholding forecast has been collected, and collections
during this period are 5.3 percent above the same period last year, which is ahead of the
revised annual estimate of 3.2 percent. The majority of the remaining collections in this
source will occur in April and May, with both final payments for tax year 2007 and estimated
payments for the current year due May 1.
10
Individual Income Tax Refunds
FY07 and FY08 Monthly
Millions of $
450
FY07
FY08
400
350
300
250
200
150
100
50
0
Jul
•
•
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
TAX issued $414.3 million in individual refunds in February 2008, compared with
$318.8 million in February 2007. The extra day from leap year contributed to the
large increase.
Year to date, refunds are 17.4 percent ahead of the same period last year,
ahead of the annual forecast of a 9.6 percent increase. For the filing season
beginning January 1, 964,000 refunds have been issued compared with 873,500
in the same period last year.
11
Growth in Sales Tax Collections
FY08 Monthly and Year-to-Date
20%
15%
10%
5%
Forecast: 1.6%
0%
-5%
-10%
Monthly
Year-to-Date
-15%
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
•
Collections of sales and use taxes, reflecting January sales, fell 6.4 percent in February.
February receipts include post-holiday sales and gift card purchases, completing the holiday
shopping season. Based on collections for December, January, and February, reflecting
taxable sales for November through January, sales during the holiday season fell 2.2
percent from last year, the worst holiday shopping season since the sales tax was
implemented.
•
On a year-to-date basis, collections of sales and use taxes have increased 0.9 percent,
trailing the revised annual estimate of 1.6 percent growth.
12
Net Corporate Income Tax Collections
FY07 and FY08 Monthly
250
FY07
FY08
200
150
100
50
0
-50
Jul
•
•
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
As with individual nonwithholding, February is not a significant month
for corporate income tax collections. Corporate income tax collections
were $38.3 million in February of 2008 compared with $9.7 million in
February of 2007.
Year-to-date collections are down 15.6 percent compared to the same
period last year, ahead of the annual projected decline of 20.5 percent.
13
Growth in Recordation Tax Collections
FY08 Monthly and Year-to-Date
0%
Monthly
Year-to-Date
-5%
Forecast: -9.0%
-10%
-15%
-20%
-25%
-30%
Note: Growth rates correspond to Wills, Suits, Deeds, and Contracts, of which about 90% is Recordation Tax.
Jul
•
•
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Recordation tax collections fell 28.2 percent in February as the housing
market continued to slow.
On a year-to-date basis, collections in this source declined 19.2 percent
from last year, compared with the revised estimate of a 15.0 percent
annual decline.
14
Pending Home Sales in Northern Virginia, Hampton Roads, and Richmond
Levels
Seasonally-adjusted 3-month moving average
5,500
5,500
Average Sale Pric e
5,000
4,500
Nor the rn Virgin ia
Hamp to n Roa ds
Richmo nd
De c-06
$50 7,3 36
27 6,1 04
27 0,1 72
Dec-07
$4 88,342
2 81,066
2 25,000
% Gr owth
-4%
2%
- 17%
5,000
4,500
4,000
4,000
3,500
3,500
Hampton Roads
Northern Virginia
3,000
3,000
2,500
2,500
2,000
2,000
1,500
1,500
1,000
1,000
Richmond
500
500
0
0
Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07
Northern Virginia
Hampton Roads
Richmond
(% share of total home sales in Virginia)
30%
24%
15%
•
Pending home sales in the three major metropolitan areas,
representing about 70% of total recordation taxes, are down 27% from
prior year levels.
15
Summary of Fiscal Year 2008 Revenue Collections
July through February
Major Source
Withholding
Nonwithholding
Refunds
Net Individual
Sales
Corporate
Wills (Recordation)
Insurance
All Other Revenue
Total
As a %
of Total
Revenues
57.2 %
18.2
(10.9)
64.6
Percent Growth over Prior Year
YTD
February 2008
Actual
Estimate
Variance
5.7 %
5.2 %
0.5 %
5.3
3.2
2.1
17.4
9.6
7.8
4.5
3.9
0.6
19.7
4.4
3.1
2.7
5.5
0.9
(15.6)
(19.2)
17.9
10.8
100.0 %
2.4 %
16
1.6
(20.5)
(15.0)
8.7
(1.8)
1.2 %
(0.7)
4.9
(4.2)
9.2
12.6
1.2 %