August Revenue Exceeds Projections $4.2 Million Extra Good Sign For Idaho, Chief Economist Says
A second straight monthly surge in paycheck withholding coupled with the first strong sales tax collections in 10 months helped push overall tax receipts well above projections for August.
Michael Ferguson, the Batt administration’s chief economist, said the two were “positive indicators for the health of Idaho’s economy.”
The Division of Financial Management said revenue in August was $4.2 million higher than anticipated, erasing the fractional $100,000 cash deficit at the end of July.
The strength comes on the heels of an $18 million surplus for the 1997 budget year that ended June 30 and reinforces prospects that the existing tax system can accommodate budget demands Gov. Phil Batt must meet this winter in the last legislative session of his term.
But continued spending pressure from the prison system has set the stage for a decision by the new governor on a major state tax increase after the 1998 election.
The difference from 1987, when the last major tax hike was approved, is that Idaho was locked in a near depression while today the economy is still growing, albeit slower than the boom years of the early 1990s.
Paycheck withholding, a key sign of the strength of the labor force and a major component of personal income tax collections, was $2 million higher than predicted for August. But that strength along with $1.6 million more than expected in July withholding marked a break from four straight months of payments below the benchmark.
And $1.6 million more than anticipated in sales tax collections, Ferguson said, “is welcome relief from the trend of weakness that began in late 1996.”
Sales tax receipts, which reflect consumer confidence, fell $10 million short of the forecast for the last budget year that ended June 30. For the year, they were up a relatively anemic 3 percent.
Collections were another $700,000 lower than expected in July, casting a shadow of the administration’s somewhat optimistic projection for a 4.5 percent increase. The performance in August breaks a trend that began in October 1996.
Typically volatile corporate tax collections, which finished $6 million over last budget year’s benchmark that was slashed dramatically because of depressed computer chip prices, were $2.2 million higher than expected for August because of strong estimated quarterly payments.
xxxx ON DECK Continued spending pressure from the prison system, which has been siphoning cash from education and other programs, has set the stage for a decision by the new governor on a major state tax increase after the 1998 election.