1. THE COUNCIL ON REVENUES MET YESTERDAY AND LOWERED ITS FORECAST FOR STATE TAX REVENUES FOR 2012. HOW MUCH WAS THE REVISION, AND WHY DID YOU LOWER THE FORECAST.
In the September meeting last year, the Council had forecast tax revenues would grow by 14.5% from FY2011 to FY2012. The council decided to lower its forecast at yesterday’s meeting to 11.5% growth, a reduction of roughly $130 million. The reduction was primarily for technical reasons, but also because tax revenues appear to be growing more slowly than originally anticipated.
2. WHAT DO YOU MEAN BY “TECHNICAL REASONS”?
Last fiscal year the tax department implemented new procedures to accelerate processing of tax payments. As a result, tax revenue that would have been counted in FY2012 under the old processing procedures were counted in FY2011. The council estimated that this one time shifting of revenue amounted to roughly two percentage points of growth.
3. EVEN SO, A FORECAST OF 11.5% GROWTH STILL SEEMS VERY STRONG. IS OUR ECONOMY REALLY DOING THAT WELL?
The economy is improving slowly, some sectors such as tourism rebounding much faster than others, such as construction. The 11.5% growth in revenues would likely be closer to 5% if it were not for the lingering effects of the Lingle administration’s refund shifting and a whole variety of tax increases that went into effect this year.
4. WE ALSO GOT SOME GOOD NEWS FOR THE NATIONAL ECONOMY TODAY.
Thats correct, the jobs report from the Bureau of Labor statistics came in better than expected. The private sector added 212,000 jobs in December, while the public sector continued shedding workers resulting in a net increase of 200,000 jobs. The unemployment rate rate fell from 8.7% in Nov. to 8.5 in Dec. This was a good report relative to what economists expected, but is still very slow job growth relative to the number of unemployed workers. There are still 13.1 million unemployed workers, and 5.6 of them have been unemployed for more than 6 months. For all of 2011, the economy added 1.64 million non-farm jobs (137K per month).
– Carl Bonham