Georgia’s Revenue Outlook

Joint Appropriations CommitteesJanuary 19, 2010

Ken HeaghneyOffice of Planning & BudgetGeorgia State University – Fiscal Research Center

Agenda

• FY 2010 YTD Revenue Performance

• Economic Outlook

• Revenue Estimates – Amended FY 2010 & FY 2011

Individual Income Tax: YTD Growth Equals -11.5%

-35.0%

-25.0%

-15.0%

-5.0%

5.0%

15.0%

25.0%

Jul-

07

Sep

-07

No

v-07

Jan

-08

Mar

-08

May

-08

Jul-

08

Sep

-08

No

v-08

Jan

-09

Mar

-09

May

-09

Jul-

09

Sep

-09

No

v-09

% C

han

ge

Ove

r Pri

or Y

ear

(3 M

on

th M

A)

Individual Income Tax Revenue Growth

• High volume of refund payments has had major impact; increase in refunds paid reduced YTD performance from -5.6% to -11.5%

Sales Tax: YTD Growth Equals -16.2%

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

Jul. 2007

Aug. 2007

Sept. 2007

Oct. 2007

Nov. 2007

Dec. 2007

Jan. 2008

Feb. 2008

Mar. 2008

Apr. 2008

May 2008

June 2008

July 2008

Aug 2008

Sep 2008

Oct 2008

Nov 2008

Dec 2008

Jan 2009

Feb 2009

Mar 2009

Apr 2009

May 2009

June 2009

Jul 2009

Aug 2009

Sept 2009

Oct 2009

Nov 2009

Dec 2009

Sales Tax Revenue Growth 3 Month Moving Average

Gross Net

Corporate Income Tax: YTD Growth Equals -24.4%

-60.0%

-40.0%

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%Ju

l-07

Sep

-07

No

v-07

Jan

-08

Mar

-08

May

-08

Jul-

08

Sep

-08

No

v-08

Jan

-09

Mar

-09

May

-09

Jul-

09

Sep

-09

No

v-09

% C

ha

ng

e -

3 M

on

th M

ACorporate Income Tax Revenue Growth

YTD DOR Revenue Growth = -13.7%

-40.0%

-35.0%

-30.0%

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

DOR Reported Revenue Performance(Yr / Yr % Change)

FY09 FY10

Agenda

• FY 2009 YTD Revenue Performance

• Economic Outlook

• Revenue Estimate – Amended FY 2010 & FY 2011

US Economy has Begun to Grow and Georgia’s Economy is Stabilizing

• US GDP grew in the 3rd quarter of 2009 and is expected to post a stronger performance in the 4th quarter.

• Housing markets have improved with sales up and inventory down

• Consumer spending has begun to show signs of life

• Labor markets have not yet turned the corner to sustained growth

Real GDP Grew 2.2% in the 3rd Quarter

Housing Sales Have Improved

Inventory for Sale is Down

Home Prices have Regained Some Traction

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

S&P Case Shiller Home Price Indices(% Change over Prior Year)

Composite 20 Atlanta

Foreclosures still pose a risk to recovery

Consumer Spending is Showing Signs of Life

Auto Sales Growth has Persisted After The Cash for Clunkers Program

Labor Markets are Healing but have not Turned the Corner to Sustained Growth

Georgia’s Labor Market is Also Stabilizing

Economic Scenario

1. US economy has turned the corner to growth but recovery will be slow – it is a long way back to the prior peak

2. End of the inventory drawdown and output increase in manufacturing are helping boost economic performance

3. Job growth is expected to resume before the end of FY 2010 – this will help sustain modest improvement in consumer spending

Agenda

• FY 2008 YTD Revenue Performance

• Economic Outlook

• Revenue Estimate – Amended FY 2009 & FY 2010

Amended FY 2010

Key Points:

1.Motor fuel prepaid rate re-set on Jan. 1 2010. The new rate for gasoline is 9.44 cents per gallon vs. 5.66 cents per gallon on Jan 1, 2009, an increase of over 65%

2.Super Speeder fine took affect Jan. 1 and is expected to add $23 million to revenue

3.Second half performance is expected to benefit from weak benchmarks for comparison and economic stabilization.

FY 2009 FY 2010 FY 2010

Reported Current Amended Vs. FY 2010 Vs.2009

Total Taxes $15,780,727,640 $16,124,723,957 $14,752,750,447 -8.5% -6.5%

Total Regulatory Fees and Sales $985,934,164 $869,330,294 $797,011,758 -8.3% -19.2%

Total General Funds $16,766,661,804 $16,994,054,251 $15,549,762,205 -8.5% -7.3%

Other Funds Available $1,065,703,810 $1,575,619,295 $1,867,517,198 18.5% 75.2%

TOTAL REVENUES AVAILABLE $17,832,365,614 $18,569,673,546 $17,417,279,403 -6.2% -2.3%

AFY 10 Growth

FY 2011

Key Points

1.Economic recovery is expected to strengthen in FY 2011

2.Revenue growth is boosted by proposed new fees.

3.General Fund revenue growth absent these fees is expected to be about 3.6%

FY 2010 FY 2011 FY 2011 vs.

Amended Estimated AFY 2010

Total Taxes $14,752,750,447 $15,405,222,927 4.4%

Total Regulatory Fees and Sales $797,011,758 $1,400,958,133 75.8%

Total General Funds $15,549,762,205 $16,806,181,060 8.1%

Other Funds Available $1,867,517,198 $1,350,254,760 -27.7%

TOTAL REVENUES AVAILABLE $17,417,279,403 $18,156,435,820 4.2%

Long-Term Outlook

$0

$5,000,000,000

$10,000,000,000

$15,000,000,000

$20,000,000,000

$25,000,000,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Fiscal Year

Total General Fund Revenues

• General Fund revenues are not expected to reach FY 2007 peak until FY 2014