State tax revenues continue their slide

RICHMOND | Virginia tax collections in October continued a steady decline, reflecting the lingering weakness in the economy, the monthly revenue report released Friday shows.

Revenues that pay for core programs such as public safety and schools were down by 8 percent last month compared with October 2008, according to the monthly summary that Finance Secretary Richard D. Brown sent to Gov. Tim Kaine.

It was the 15th month in a row that general-fund receipts have finished lower than overall collections for the same month a year earlier, and the 19th time it has happened in two years.

Every major source of revenue except the corporate income tax decreased from last October, while individual income tax refunds continued to exceed expectations, Mr. Brown noted in a somber assessment to Mr. Kaine.

Four months into the 2010 fiscal year, the continued fiscal weakness is a troubling sign that still more government spending cuts are likely. Virginia is 7.6 percent below what it collected at the same point a year ago and well short of the revenue target on which the current state budget is based. Fiscal year-to-date collections total slightly less than $4.5 billion, meaning the state needs to collect more than $9 billion in the next eight months to meet the recently revised revenue target of $14 billion under the current budget.

In September, Mr. Kaine announced nearly $1.4 billion in budget cuts, including 600 layoffs. The worst economy since the Great Depression has forced more than $5.5 billion in budget reductions in a little over a year. Even more trouble looms for a new two-year budget that Gov.-elect Robert F. McDonnell and legislators must assemble beginning in January. A shortfall of at least $1 billion already confronts that budget before work begins.

October’s individual income tax collections were down nearly 10.5 percent, the seventh monthly decrease in a row reflecting a job market that continues to struggle. Virginia’s unemployment rate increased slightly, from 6.5 percent to 6.6 percent, but is down from a June high of 7.3 percent. The national jobless rate this month hit 10.2 percent, the highest in 26 years.

Individual income taxes constitute at least two-thirds of the general-fund budget, and October represented the first double-digit decline since May. Factor in a 45 percent increase in tax refunds the state paid out last month compared with October 2008, and net income tax receipts show an overall decline of 13.6 percent.

Sales taxes fell by 5.4 percent for the month, reflecting retail activity in September. The one-month lag occurs because merchants remit their sales tax collections to the state at the end of each month.