State tax collections $115 million below forecast
Although state tax collections for the recently ended fiscal year were up, the amount is about $115 million less than predicted, validating concerns of state officials who say government must keep a close eye on spending.
A look at state tax collections for the 2007 fiscal year, which ended June 30. Each percentage point equates to about $45 million, according to the House Finance Committee.
» Actual tax collections: $4.58 billion, up 3.4 percent from $4.43 billion in fiscal year 2006
» May Council on Revenues forecast: 4 percent increase
» March forecast: 6 percent increase
» January forecast: 6 percent increase
Tax collections for fiscal year 2007 were $4.58 billion, up 3.4 percent from $4.43 billion the previous year, the state Tax Department reported yesterday.
But that 3.4 percent increase is below the 4 percent forecast by the Council on Revenues in May and well below the projection of 6 percent in March.
Lawmakers had based the $10.5 billion, two-year state budget on a forecast of 6 percent, but Democratic leaders said they were wary of a potential economic slowdown and passed a fiscally conservative budget plan.
"We heard a lot of debate in session about whether we should've given greater tax breaks," said House Majority Leader Kirk Caldwell (D, Manoa). "The governor, at the end of session, said we should've done a lot more.
"I think this shows that if we would've followed her financial plan and given greater relief -- which in one way we'd like to do -- we would also have a major negative impact today."
House Speaker Calvin Say (D, St. Louis Heights-Palolo Valley-Wilhelmina Rise) said he expects the lower tax collections to result in "tremendous restrictions" over the next two years.
Lingle already has warned state departments of that possibility. In a June 27 letter to state agencies, Lingle said she would be releasing their funding for only the first quarter of the fiscal year, which began July 1. The administration will re-evaluate budget allocations after the state Council on Revenues meets in September to update the state's fiscal condition.
"This two-step plan is to allow for more definitive information on tax collections and revenue forecast to become available," Lingle wrote. "Please be alerted that budget restrictions may be imposed in September should the current revenue condition continue."
The policies are similar to those Lingle enacted during her first years in office, when the state was running deficits.
"There's not going to be a shortfall," said state Budget Director Georgina Kawamura, "but obviously, as we proceed with spending now in the new fiscal year of 2008, we are going to be cautious."
Ted Liu, director of the Department of Business, Economic Development and Tourism, said other economic indicators, such as gross domestic product and personal income growth, remain strong.
"I think the economy is very, very healthy," he said. Liu also noted that the modest growth of 3.4 percent comes on the heels of more sizable increases of the past four years.