A little madness in the Spring
An analysis suggests Emily Dickinson may have been envisioning Indiana's current revenue situation:
"The tone of this poem is both exhilarated and ironical. A fuller description of the tone might state that it expresses an impulse to joy that is curbed and made wary by a skeptical mind."
After falling short of monthly targets for 17 consecutive months, Indiana's March revenue collections exceeded the forecast. One month does not make a trend. It is, at best, an Experiment of Green. Regardless, green is a most welcome color after so many months of red.
It is fitting that a tender shoot of good economic news should arrive with spring. Now we must do what we can to protect it from a late frost.
Indiana operates on a two-year budget. The current budget period started on July 1 of last year and continues through June 30 of next year. The budget was based on a revenue forecast from last May. Through March, we collected $867 million less than what we had expected based on the forecast. The forecast was revised in December, and March exceeded the revised forecast by $48 million. We even beat the original forecast by $2 million. Still, we have a long way to go to catch up.
Perhaps the best news is that March revenues exceeded March 2009 revenues by $7 million. It's the first time in the current budget period that revenues have exceeded same-month revenues from the previous year.
There are six major categories of revenue; three were up and three were down. Sales tax was the biggest. It yielded $460 million in March, still missing the target by $16 million. Individual income tax was next. It brought in $285 million, exceeding the forecast by $54 million.
There is anecdotal evidence to suggest some of the gain in individual income tax can be attributed to early filing of tax returns. Taxpayers who expect to receive a federal refund - and many, such as those who qualified for the $8,000 first-time homebuyer tax credit, will be getting a big one - may have filed earlier than usual.
That could, of course, also be a sign of continued economic stress, if some of those early filers were rushing to file so they would have their refund to pay their mortgage or household expenses. Given the high level of unemployment, that is likely the case for some.
Then, of course, what will those who don't need their refund for living expenses do with the extra cash? Will they use it to pay down debt or save it, or will they go out and buy grills, patio furniture and landscaping materials? Spending would generate sales tax, which would boost state revenue. It depends on consumer confidence, which depends on employment, and unemployment remains high.
After individual income tax was the riverboat wagering tax, which came in at $63 million, missing the target by 9 percent.
Next was "other" - a catch-all category that includes taxes on cigarettes, alcohol, inheritance and riverboat admissions, among other things, along with interest and lots of other revenue sources - which brought in $49 million, a 6 percent miss.
Of the six major categories, corporate income tax was the best performer on a percentage basis. The $37 million collected was almost twice the forecasted amount.
Ahead of the forecast by several lengths was the racino wagering tax. Indiana has two horseracing tracks with slot machines - racinos - and March revenue from taxes on racino wagering was $13 million, exceeding the forecast by 12 percent.
For the first nine months of the budget period, the racino wagering tax is 7 percent ahead - the only major revenue category that is significantly above the forecast. Thanks to March, individual income is ahead for the year by less than 1 percent. The other four categories are all in negative territory.
March was the ninth month of the state's fiscal year and of the two-year budget. If the budget were a horserace, we'd be on the backstretch. It's when the horses are on the backstretch that it's most difficult for the crowd in the stands to see how they're running. And that's where our revenue horses are - on the backstretch.
By the time the legislature next convenes - in January - the horses will be in the homestretch, and we'll have a better idea of where we stand going into the next budget. No matter what, it will be a lean budget; how lean is the only question.
I hope to be able to continue to report good news, but it would be unrealistic to expect only good news. Going forward, at least for the next year or two, we'll be lucky if we have more up months than down months. After 17 months down, I'm ready for an Experiment in Green. Still, my impulse to joy is curbed and made wary by a skeptical mind.
Signs of economic improvement won't be the only signs you'll see popping up this year. It's an election year, and political signs are appearing almost everywhere, except in the many subdivisions that restrict them. That won't change for the primary election, but it will for the fall election.
The legislature passed a law this year that will prohibit homeowners associations from restricting political signs around election time. Regardless of subdivision restrictions, political signs will be allowed from 30 days before an election until five days afterward.