Thursday, September 11, 2014

Below Expectations, Again

Like a broken record, the state office of Management and Budget (MMB) has issued another monthly state revenue total that falls below its forecast.  For the month of August 2014, state government revenues fell $10 million below expectations, with individual income tax receipts representing most of the shortfall. 

For the first two months (July and August) of the new 2014-15 fiscal year, revenues are running 3.3 percent below forecast, with collections falling $79 million short, so far.

So, for those scoring at home, July’s report marked the sixth consecutive (1, 2, 3, 4, 5, and 6) monthly report that came in below forecast.  (There was not a monthly report issued for June.)

Six out of seven months below forecast does not sound like a state with a booming economy.  At some point, all of these monthly shortfalls will add up, and we will be faced with a new budget deficit.  At present, they are still being dismissed as “variations” that will even out over time.  Quoting MMB,

All results are preliminary and subject to revision.  Monthly revenue variances should be interpreted with caution.  Wide swings in variances may be caused by variations in the rate at which receipts are received and refunds are issued.

I don’t know about “wide swings,” but for 2014 all of the variations have been in the same direction (down).  If our economy really were the strongest in the nation, then tax collections would be running ahead of forecast every month.

More significantly, the fact that individual income tax receipts are leading the plunge does not bode well for the future.  Labor is more mobile than capital, so what we are seeing is people voting against the Mark Dayton economy with their feet.  Corporations (and their tax payments) will be following quickly behind.

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