State tax revenue unexpectedly stable in October

State tax collections stabilized last month, but officials say the situation may only be temporary.

With the economy slumping badly in Georgia and across the globe, revenue collections last month slowed only slightly, down about $1.1 million or 0.1 percent over October 2007.

Income tax collections were down, and sales tax collections were up in October, according to the Department of Revenue. The two provide most of the state government’s revenue.

Kenneth Heaghney, Gov. Sonny Perdue’s fiscal economist, found it hard to get too excited about the numbers.

“If you look at this month in isolation, you would say things seem to be stabilizing, and that would give you a note of optimism,” Heaghney said. “We are concerned with the impact of the meltdown that hit the markets in late September, and then what that has done to consumer confidence and business confidence.

“The outlook is not that optimistic at this point.”

Senate Appropriations Chairman Jack Hill has been fairly upbeat despite a state budget shortfall of $1.6 billion to $1.8 billion. He noted that tax collections improved in September, so the state has seen two fairly decent months in a row.

But Hill, who runs a grocery store in Reidsville, said consumers are cutting back.

“People are shopping down, they are buying less expensive food. I don’t hear anybody I talk to say business is good. We’ve had two good months, but it kind of belies what we see going on around us.”

The Department of Revenue’s report showed:

• A 4.4 percent decline in income tax collections over the same period last year.

• A 2.7 percent increase in gross sales tax collections. However, while the state collected the money in October, most of the sales were actually made in September before the worst of the national financial crisis hit. Gross sales tax collections in October were about what they were in October 2006.

• Corporate income tax collections down 58.1 percent.

• For the fiscal year, which began July 1, collections are down 2 percent, or almost $111 million.

• Sales taxes on lumber, home furnishings and food remain well off of what they were in 2007. Automotive and apparel sales tax collections are down too, but not as much.

Most of the recent national data shows consumers cutting back on spending — something that portends more trouble for state budgets built on sales taxes. Some of the retail sales figures have been dramatically down. This past week, a series of stores reported dismal sales. On Tuesday, data from the International Council of Shopping Centers showed chain store sales down again last week. It was the weakest showing since April, according to Economy.com.

The slow economy will present state lawmakers with tough choices when they begin their annual session in January. Gov. Sonny Perdue has instructed state agencies to cut spending 6 percent, but Lt. Gov. Casey Cagle has said that could reach 10 percent.

For many of the state’s 100,000 employees, that has meant taking furloughs without pay and forgoing a promised pay raise. Hundreds if not thousands of jobs will be eliminated. And services, from health care and education to recreation, will likely be cut.

Georgia is one of 41 states that face budget shortfalls, either in the current fiscal year or in 2010, according to the Center on Budget and Policy Priorities. The longer and steeper the downturn, the worse the news will likely be for state budgets, said Iris Lab, deputy director of the center. “State deficits are very highly correlated to the economy,” she said.

Among the states with high-profile shortfalls are California , which has a projected gap of more than $20 billion in the next two years, New York, where the governor has proposed $2 billion in cuts and Wisconsin, where the government has warned that the deficit could exceed $5 billion deficit.

— Staff writer Michael Kanell contributed to this report.