General Fund revenue dips in June; ETF awaiting income tax payments

General Fund revenue dips in June; ETF awaiting income tax payments

By MARY SELL, Alabama Daily News

Revenues collected in the state General Fund were down about $4.8 million, or 4.15%, in June compared to the year prior, but overall, collections are up for the year. 

“The story on the General Fund is that growth has slowed over the last three months since COVID-19,” Kirk Fulford, deputy director of the fiscal division of the Legislative Services Agency. “With over 40 revenue sources dedicated to the General Fund, it can withstand a few sources slowing down without causing an enormous impact if other sources are growing. Through February, year-to-date growth was $100 million, 11.5% and now stands at $106.5 million, 7.3%, growth through June.” 

Many of the decreases are easily attributed to COVID-19 shutdowns and slowdowns of both businesses and government offices: sales taxes on automobiles, lodging taxes at hotels and court costs. 

Because many taxes are collected in arrears, much of the June collection represents May activity. 

Some of the decreases are part of larger trends, Sen. Greg Albritton, R-Range said. He’s chairman of the Senate General Fund budget committee. The state’s tax on oil and gas production was down $1.7 million in June, but had been trending down prior to COVID-19 and is down -38.27% compared to the prior year.  

“The best thing I can tell you is that there weren’t any surprises,” Albritton said about the June receipt report. “Our estimates were pretty darn close.” 

But down is down, he said, and that’s why General Fund committee meetings have been called for next week.

“We want to get these numbers out publicly and discuss them,” Albritton said. 

Albritton and Fulford both pointed to a new bright spot in the General Fund, the Simplified Sellers Use Tax. The 8% use tax on goods bought online saw an increase of receipts of about 84% in June, amounting to more than $6 million. For the year, SSUT is up 111%, Fulford noted.

“I think that it has proven to be a source of revenue that we did not have previously and it’s been important to keeping the General Fund healthy,” Albritton said. 

Earlier this week, Alabama Daily News reported on educators’ concerns that increases in the SSUT were to the detriment of traditional sales taxes on goods bought in stores. Those tax dollars support education.

ETF down, for now

Revenue to the Eduction Trust Fund was down significantly in June, about 12.3%. In May, it was down 8.3%. 

But officials aren’t yet overly concerned about those losses. Because of COVID-19, the income tax filing and payment deadline was extended from April to mid-July. 

“We will know a lot more once the July numbers are in, particularly the income tax because we know what a banner year 2019 was for taxpayers,” Sen. Arthur Orr, R-Decatur, said about the strong economy and high employment. He’s chairman of the Senate education budget committee. Income tax is the largest source of revenue for the ETF and year-over-year, it’s down about $320 million.

Meanwhile, the second largest source, sales tax, was up 6.75% in June.

“It is a pleasant surprise,” Orr said. Year-to-date, sales tax collection is down about .5%, according to the Alabama Department of Revenue. 

Some of that increase can be attributed to some small businesses being able to delay until June sales taxes collected in February, March and April. But those taxpayers represent only about 20% of sales tax revenue, Orr and Fulford said.

Current ETF revenue reports comes with another large caveat: The year-over-year increase of 1.09% is because of a March transfer of about $301 million from the Budget Stabilization Fund.

The Rolling Reserve Act, created by lawmakers nearly 10 years ago to prevent mid-year budget cuts, allows the state finance director to transfer funds from the reserve stabilization fund into the ETF during the first six months of a fiscal year to alleviate cash flow issues, Fulford explained. That was done in March, the sixth month of the fiscal year, when decisions to delay tax payments were made in response to the economic slowdown caused by COVID-19.

Normally, the act requires that money be repaid within 90 days of the transfer, which would have been in June. In May, in a supplemental appropriation bill, lawmakers extended for this year that deadline to 180 days, essentially the end of the fiscal year.

“I do not anticipate the funds will be needed after next month,” Fulford said.