- The Washington Times - Monday, November 17, 2008

RICHMOND | State government tax collections in October were slightly better than Virginia Gov. Tim Kaine’s expectations for them last month.

But two revenue sources that are indicators of key sectors of the troubled economy, retailing and home sales, continued to struggle, according to the administration’s recent monthly report on state finances.

Total October operating revenues were $1.17 billion, down just 1 percent from slightly more than $1.18 billion in October 2007.

For the first four months of the current budget year, general fund revenues decreased by 3.5 percent to $4.8 billion, compared with $5 billion through October 2007.

However, the decrease is better than the newly revised forecast for a 4 percent annual decline in the revenues that pay for core government operations such as public schools, health care and public safety.

Projecting that state general fund collections could fall $2.5 billion short of budgeted spending for the two-year budget, Mr. Kaine, a Democrat, in October announced 567 state layoffs, cut college funding by at least 5 percent, ordered aging prisons closed and postponed state employee pay raises.

The projected shortfall will dominate the 2009 General Assembly starting in January, when lawmakers face more deep cuts, including areas previously spared, such as school funding. The shortfall also is expected to be the dominant issue in the 2009 race for governor and 100 seats in the House of Delegates.

Some Republican legislative leaders say Mr. Kaine was too optimistic when he scaled back projected decreases in state revenue from 4 percent to 2 percent.

Budgeted spending is based on estimates of revenue the state will collect.

October’s report was bolstered by a 4.1 percent increase in net individual income-tax receipts for the month. Income taxes constitute about two-thirds of the state’s general operations budget. Taxes withheld from salaries totaled about $808 million last month, compared with $763 million in October 2007. That was more than enough to offset a 11.4 percent drop in estimated payments paid chiefly on interest income and by the self-employed.

The trouble was in collecting retail sales taxes and the tax paid on real estate transactions.

Sales-tax receipts decreased 4.2 percent in the October report. Because merchants remit sales-tax receipts at the close of each month, the numbers represent September retail sales, much of it before this fall’s unsettling stock market losses and failures of Wall Street firms and banks deeply shook consumer confidence.

October’s sales-tax decline was the third in a fiscal year that is only 4 months old. Year-to-date collections of slightly more than $1 billion are 2.6 percent behind 2007.

The tax paid chiefly to record real-estate deeds decreased by double-digit percentages for the 15th month in a row. The “recordation tax” accounts for only 2 percent of the general fund, but it reflects Virginia struggling real estate and housing-construction industries.

Net recordation-tax receipts decreased by about 38 percent for the month, a figure that improves to about 31 percent when adjusted to reflect a share of the tax directed since July to transportation uses under a new state law.

For the fiscal year to date, net recordation taxes are down by about 32 percent - 25 percent when allowing for the new law. Nevertheless, with one-third of fiscal 2009 complete, this year’s $116 million total is the lowest since 2003, when collections through October were almost $91 million.

Total Virginia home sales dropped by 4.6 percent for the third quarter over the same July-September period of 2007, but the median home-sale price increased by 1.4 percent, according to the Virginia Association of Realtors. The association described house sales in the state’s largest market, Northern Virginia, as strong.

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