2007 state revenue forecast revised down
The revision was expected, lawmakers say, and will not affect the budget just passed
The state might wind up with less tax money than previously predicted, but lawmakers say that should not affect the $10.5 billion, two-year budget passed earlier this month by the Legislature.
Uncertainty over tax collections for May and June led the state Council on Revenues to lower its forecast for the current fiscal year to 4 percent, from 6 percent forecast in March.
TAX COLLECTIONS STILL STRONG
A look at tax collections through the first 10 months of the current fiscal year. The state Council on Revenues revised its forecast for economic growth in fiscal year 2007 down to 4 percent, from 6 percent.
2006-07: $3.611 billion
2005-06: $3.510 billion
Increase: 2.9 percent
Source: State Tax Department
"The fact is that the tax collections, for reasons that we don't completely understand, are coming in at a rate that is lower than what we had forecast and lower than what we think the economy is doing," said Jack Suyderhoud, a University of Hawaii economics professor and vice chairman of the council. "I think the best way to characterize it is probably as a reluctant lowering of the growth rate to recognize that reality."
Each percentage point in the council's revenue forecast equals about $47 million in state tax dollars.
Senate Ways and Means Chairwoman Rosalyn Baker said yesterday that lawmakers took a conservative approach to crafting the biennium budget, based on the council's cautious prediction of growth in March.
The panel of economists has warned since December of a potential slowing of the state's economy due to lower inflation and the end of an economic boom spawned by home building.
"We had actually worked off of a lower projection ourselves, wanting to be conservative in the final analysis, because of what we were concerned might be a trend," said Baker (D, Honokohau-Makena).
Gov. Linda Lingle said she was not surprised by the council's revision. "I have already begun reviewing the release of money, and will take a hard look at releases based on need," she said.
The Tax Department reported last week that collections through the first 10 months of the fiscal year, which ends June 30, were up 2.9 percent from last year.
The slower growth comes after two consecutive years of double-digit increases.
Tax collections for later fiscal years remained the same, although the overall amount will be lower than previously forecast because they are calculated on a lower base.
State Tax Director Kurt Kawafuchi said he expects collections to approach the original forecast of 6 percent, noting that general excise tax collections -- a good economic indicator -- are strong so far. They are up 10.9 percent over the first 10 months of the fiscal year.
"That indicates the economy is still pretty strong and healthy," Kawafuchi said.
One reason for the lower figures this year is that tax collections in May and June 2006 were very robust, Kawafuchi said. Also last year, the Tax Department was able to increase delinquent tax collections.
Star-Bulletin reporter Richard Borreca contributed to this report.