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Revenue drop is cause of concern

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By Mike Hasten

BATON ROUGE — Louisiana is already $140 million short of last year’s collections in the biggest categories of state revenues, says State Treasurer John Kennedy, but a state economist says it’s too soon to be concerned.

“We’re now three months through the fiscal year that began July 1 and although this is not dispositive of how the full year will go, being down 15 percent is not a good sign,” Kennedy said. Last year was bad, too.”

Personal income and corporate income and franchise taxes are the major problem, the treasurer said. Corporate tax collections are down 67 percent ($91 million) from a year ago and personal income taxes are down 8 percent ($51 million).

But Greg Albrecht of the Legislative Fiscal Office says he’s not too concerned at this point because “money doesn’t flow in smoothly over the year. Having weaknesses at one point doesn’t mean there’ll be weaknesses over the year.”

“We look at revenues all year,” Albrecht said, and Kennedy’s report, based on Department of Revenue numbers, doesn’t tell the whole story. He said the state gets revenue from other sources that aren’t on the revenue report, such as $1 billion from the Department of Public Safety in gambling receipts and vehicle fees.

While corporate taxes were down for the quarter, “in September, they were 200 percent more than September of last year,” Albrecht said. “This could be the beginning of a wonderful trend.”

Kennedy said general sales receipts are down $122 million from the $633 million received in the first quarter last year and last year’s collections were lower than the year before that.

“Part of it is the drilling moratorium, but it’s larger than the moratorium,” Kennedy said. “This is a very fragile economy, probably the worst I’ve seen since the 1980s. The trend is clear, but hopefully we’ve hit bottom.”

Asked if he’s seen signs that it has his bottom, the treasurer said “Nope.”

General severance tax revenues for FY 2010-2011 to-date are $185 million, for a decrease of $10 million or 5 percent compared to last year, Kennedy’s report says. General severance tax cash receipts this time last year were $195 million, which was $150 million less than the prior year — a decrease of 43 percent.

Albrecht said that Kennedy’s figures don’t include income on royalties and rents paid on oil wells.

While there’s a 5 percent drop in severance tax revenue, there’s a 50 percent jump in royalty payments.

Louisiana grants a tax break for directional drilling, originally enacted to promote reopening of old wells. Because all natural gas production in the Haynesville Shale is through directional drilling, it is exempt from severance tax for the first two years.

However, the state collects bonuses on all leases and royalties on state property involved in drilling.

Kennedy says that with a bleak revenue future and massive losses of revenue expected next year presenting “not a pretty picture,” the Legislature and the Jindal administration should set priorities and eliminate things the state can’t afford.

Written by demon53

October 12, 2010 at 3:20 pm

Posted in Uncategorized

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