Revenue dip may mean more cuts

State tax collections dropped again in March and have fallen 19 percent for the first quarter of 2009.

If the trend continues, the more than $3 billion in spending cuts lawmakers made during the 2009 session may not be enough to keep state government’s books balanced in the coming year.

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State tax collections fell 14.5 percent, or $167 million, in March, compared with the same period a year ago. The March numbers marked the fourth consecutive drop for a government already struggling with the worst fiscal crisis since the Great Depression.

“That’s an extraordinarily bad run of months,” said Kenneth Heaghney, the state’s fiscal economist.

For the fiscal year, which ends June 30, tax collections are down $1 billion, or 8 percent.

In February, the tax take was down by about one-third, the worst decline on record, Heaghney said.

The news comes only a few days after state lawmakers passed a budget for the upcoming fiscal year that was balanced with $1.3 billion in federal stimulus money and $1.6 billion worth of spending cuts. Lawmakers cut another $2 billion or so from the midyear budget for the current fiscal year.

The poor collections in March included an 18.8 percent drop in income tax collections and a 5.9 percent decline in the sales tax take. Income and sales tax collections make up the largest share of the state’s revenue.

Economists had predicted that the first quarter of 2009 would be among the worst periods of the recession.

Heaghney said there are signs nationally of stabilization in the economy, but a recovery isn’t likely before late this year or early 2010.

That’s bad news for a state government that helps fund the education of 2 million students and provides health care to 1.5 million Georgians.

Tax collections generally lag economic recoveries by a year or more.

Lt. Gov. Casey Cagle said the March numbers suggest the state will have to dip further into reserves to balance the books.

While those reserves will cover any shortfall the rest of this fiscal year, Heaghney said, “If we continue to turn down, additional steps would have to be taken … more stringent actions could be required.”

House Speaker Glenn Richardson (R-Hiram) warned as much near the end of the 2009 session, saying lawmakers may have to return to Atlanta this fall to cut the state budget even more.

“With revenues declining as they are … we’re going to have to say we’re going to have to cut some services,” Richardson said at the time. “We may close some museums. We may close some universities or colleges. We might have to close parks.”

Cagle, president of the state Senate, didn’t go that far on Wednesday.

“It really speaks to the underlying reason we took the actions we did, and that’s cutting state spending at every turn,” he said. “It is my belief if things don’t worsen to a greater degree, we are going to navigate through this.”

Shortly after the March figures were released, Alan Essig, executive director of the Georgia Budget and Policy Institute think tank, urged Gov. Sonny Perdue to veto tax-cut bills lawmakers passed during the 2009 session.

The tax cuts would reduce revenue for the state, although they would have relatively minimal impact in fiscal 2010, which begins July 1. Most of the revenue loss would come in later years.

Essig said, “Governor Perdue has been a good and reliable steward of Georgia’s budget. He is the last chance Georgia has to prevent worsening the impending deficit.”