Those fine days of large state tax surpluses may be over.
Unlike recent years of extra cash, a new state tax projection says the current fiscal year, now just three months old, could end up with a $135 million deficit come next July 1.
Or a $75 million surplus.
It just depends on how bad the U.S. economy – especially housing and the federal budget fight – works out over the next nine months.
Just this past fiscal year, which ended June 30, the state brought in nearly $250 million – a quarter of a billion dollars – more than legislative and executive budgeters guessed (OK, estimated is a more official word) when that budget was adopted by the 2012 Legislature.
The 2013 Legislature, which ended this past March, was fiscally optimistic, believing – as GOP Gov. Gary Herbert has been more than happy to brag about – that Utah is leading nationally state recovery from the Great Recession.
But the state economists that put together the October revenue update discussed Tuesday (which includes the first guesses, errrr, estimates of the current fiscal year) are no longer wearing rose-colored glasses.
The report (seen here) says that the General Fund, mainly made up of the state sales tax, is at greater jeopardy than the Education Fund, fueled by personal and corporate income tax.
“Flagging consumer confidence” and lower than expected tax collections in fiscal 2013 are to blame for the economists saying the GF could be in the red by $130 million come June 2014.
This, of course, is not good news.
Most of the non-education costs in state government are in that fund – like public safety, Human Services, parks and such.
In fact, several special transfers of monies was the only reason that the GF in fiscal 2013 only came up $0.3 million short.
The GF really fell short by almost $16 million last year.
Funding both state and county and city roads continue to be a challenge.
The report says: The Transportation Fund ended FY 2013 $7 million above what was expected during the legislative session. Looking forward to FY 2014, we anticipate revenue to the Transportation Fund to come in between $5 million below and $5 million above the current FY 2014 target.
Across the board, economic growth – which often turns into increased state tax take – is slowing, the report shows.
One example: Utah’s job wage growth rate was 2.4 percent last year – and GOP state officeholders crowed about it.
But the economists estimate wage growth at only 1.4 percent this coming year – nearly half of what it was.
Retail sales jumped by 8.1 percent in 2012, but will be only 4.6 percent growth this year and 4.5 percent next year.
Legislative Fiscal Analyst Jonathan Ball asked lawmakers to note that, as far as the new revenue estimates go, there is more red ink predicted than black.
“Consumer confidence is down,” said Ball. “This is a fair warning for our next general session.”
As cautionary as Tuesday’s revenue update is, backstopping all Utah state budgets is more than $400 million in two Rainy Day funds.
Thus, if there are revenue shortfalls next year, the state should still be in a good position to pay any unfunded bills.
Finally, you have to love how economists speak.
In the report they wrote: “Overall, downside risk is greater than upside risk right now.”