July economic update: Revenues below forecast again; FY09 collections 8 percent below a year ago

According to the July 2009 Economic Update (PDF), Minnesota revenues for fiscal year 2009, which ended in June, were off $150 million (1 percent) from February’s revised forecast. The numbers would have been worse if not for business tax collections that exceeded February expectations by $53 million. Income tax receipts for FY09 were a cumulative $232 million (3.2 percent) below forecast levels. Sales tax receipts fell short of forecast by a more modest amount: $16 million (0.4 percent).

Although these preliminary FY09 revenues were only 1 percent below the February predictions, the year-over-year actuals tell a bleaker story. The state’s total collections for FY09 of $14.84 billion were 8.1 percent below fiscal year 2008 revenues (PDF) of $16.26 billion. Current projections for fiscal year 2010, which began on July 1, anticipate a total of $14.72 billion in state collections, a figure that may yet be revised downward when the next scheduled forecast is released in late November or early December.

It’s hard to say how that 8.1 percent year-over-year decline compares to the revenue shortfalls in other states, because states are still in the process of analyzing and reporting FY09 numbers.

"We are in the process of doing our annual state budget update," notes Arturo Perez, the head of the of National Conference of State Legislatures’ fiscal affairs program. "We had hoped to release it by next week, but it will be later than that because of the complexities of figuring out the impact of the federal dollars on state budgets."

But Perez adds that Minnesota’s rate of revenue decline is unlikely to be very different from the national norm. "Is [8.1 percent] on the extreme side? I would guess no," he says. "Minnesota shares in a number of problems that other states have as well. i think we’re going to see a number of comparable declines."