A report released earlier this month shows that the revenue the state received in the 2010-11 fiscal year was very close to the amount predicted by the Legislative Fiscal Bureau (LFB).
Preliminary data from the Department of Revenue shows that tax collections in 2010-11 were 6.4 percent higher than the previous year and 0.1 percent less than the LFB predicted. General fund tax collections were $12.9 billion. These new figures show the accuracy of the LFB’s budget predictions, but also show that there has not been a large improvement in the economy.
More income and sales tax was collected during this fiscal year than was projected. An additional $10.6 million in income tax revenue was received while sales tax revenue was higher by $19 million. This was offset by lower than expected corporate and franchise tax collections and less cigarette tax revenue coming in. Corporate and franchise tax revenue was $27.1 million less than expected, while cigarette tax revenue was $15.2 million less than expected.
The cigarette tax revenue was less than was predicted and analysts at the LFB point to a few reasons for this. One is that there has been a national trend toward less smoking. Another possible reason was the impact of the statewide smoking ban. Finally, cigarette tax revenue is normally stable month to month, but for some reason there were some large swings in revenue collected in a couple of months, making it more difficult to predict.
The reason the state took in less corporate income tax than expected is even less clear. The LFB explained that it was not caused by changes in tax law, but that sometimes the predictions are just off. They make their revenue projections based on past history and national economic forecasts.
These tax figures are part of a preliminary report made by the Department of Revenue. The final report will be made next month when the Annual Fiscal Report is released by the Department of Administration.
To understand how this revenue is used, consider this: income, sales, corporate, cigarette and excise taxes make up about 44 percent of the state’s budget. This general fund revenue is spent largely on local assistance. A little bit more than 50 percent of it goes to local assistance, in the form of aid to school districts and local governments; 22.4 percent of it goes to aid to individuals and organizations; 60 percent of the aid to individuals is medical assistance. Other programs funded in the “aid to individuals and organizations” range from choice and charter schools to foster care.
General fund revenue, the taxes listed above, represents only a portion of total state spending. In fact, it is less than half of all state spending.
Another 29 percent of all state spending comes from revenue from the federal government. Program revenue, or user fees, accounts for 13 percent of spending, segregated revenue is 11 percent and bond revenue is approximately 2.6 percent. Segregated revenue is similar to program revenue except that it is specifically set aside for certain purposes by law.
Approximately 36.8 percent of state spending goes to education, 37.5 percent for human services, 10.7 percent for environmental resources and 7.6 percent for aid to local governments and tax relief. This means that 92.6 percent of all state spending is for these four areas. This is why it is difficult, if not impossible, to hold major spending areas, like schools and medical assistance harmless from budget cuts. These percentages also show how much the state values our schools, taking care of those in need and protecting our natural resources.