By Lyle HillyardUtah State Senator, District 25 and Senate Chair of the Executive Appropriations Committee
You can get the gist of what I've written below by listening to the audio blog we recorded this afternoon. Click on Senate Radio
to listen (then minimize the screen to stay on this page).
One of the reports that I follow very closely is the TC23, issued by the State Tax Commission each month.
Take a look:
TC-23 - July, 2006
The latest report shows our account balances at the end of our fiscal year, June 30, 2006. It shows Utah State’s income from specific sources and compares them to last year’s revenue collections, and to our original projections for this year.
You will see some interesting things; most very positive with a few items that should cause some concern.
On the first line you will notice that our sales and use tax collections are up 10.2% (from $1.634 B. to $1.8 B.). You will see in column two that we had projected that figure at $1.7 B. for the full 12 month period, thus we ended up receiving $56.9 M more than estimated.
On the second line you will notice that the individual income tax is up 17.8% or $162.6 M. The typically volatile corporate franchise tax has experienced the largest percent growth of 85.6% or $113.5 M. This gives us a tentative year-end surplus balance of $351.3 M.
The positive things are that the income and corporate franchise tax continues to grow. People are earning more income and corporations are making more profit. Great! Great!
On the other hand, the sales tax, which is the chief source of money for our General Fund, is not growing as fast. These figures do not yet reflect the 2 cent reduction of the sales tax on food, which will take effect January 1, 2007.
The Motor Fuel tax collection is down slightly which indicates people are not driving as much. That trend will probably reflect itself in the future with reduced sales tax income on the purchase of cars.
These figures may change slightly before we get to the real surplus amount. There will be some adjustment for lapsing balances. At least 50% of the General Fund surplus will be transferred into the Rainy Day General Fund account. 25% of the money in the Individual Income and Corporate Franchise tax surplus will go into the Rainy Day Educational Fund, thus reducing the TC-23 projected figures by approximately $100 million.
I have learned from experience that you cannot look at the increase and automatically assume we will continue to have these types of increases in the next fiscal year. Too many factors need to be considered. It is very difficult in January of 2007, to project what the economy will be doing eighteen months later. If the economy starts to slow down or change in any regard, especially in the sales tax or income tax area, it will impact our projections.
I am thankful the revenues are up. I am glad our people are doing better than expected. The investments we are making are working. It would not be wise, however, to begin making plans to spend the "new" money until final figures are given.