Louisiana’s tax and fee collections dropped $494 million – 42.7% – in April when compared to the same month last year.
The Department of Revenue's "Net Receipts Report for the month of April 2020" circulated among state government leaders Wednesday night, giving budget architects a first look at the actual receipts for the time Louisiana has stayed at home while businesses and institutions shut down to stem the community spread of the coronavirus.
Treasurer John Schroder said Thursday he’s been following the declining numbers for several weeks.
"This is the first time we’ve seen something (concrete) since the virus,” Schroder said, adding the state’s deposits, which he oversees, are almost $400 million less than what they were last year.
“When you look at these numbers, it’s surreal,” he said. "Even though it says April, you're looking at mostly March’s numbers. May's (report) is going to be nasty. It’ll show full month of April and in June has that same potential."
Schroder said he’d prefer that lawmakers get to work on the budget now – and not wait on federal aid – by cutting spending as other state legislatures have done.
Gov. John Bel Edwards issued “stay at home” orders beginning March 16. Fiscal leaders have warned for several weeks that without shops open, customers hunkering down, and employees being laid off, the numbers would look bad, really bad. They were correct.
The report reflects only the collections by the Revenue Department, which accounts for about 80% of the state's money. Taxes and fees from the gambling industry, which account for $800 million annually, are collected by a different agency and are not included. Casinos are also closed. Neither are the taxes collected on insurance premiums and some other sources included in the report.
This is the money that supplements law enforcement salaries, pays for roads, bridges, public schools, colleges and universities, provides healthcare for about 25% of the population, and all manner of other services. If the revenues come in short, then legislators must either reduce services or raise taxes.
Lawmakers are in Baton Rouge drafting the law that allows government spending for the coming fiscal year. A balanced state operating budget must be approved by July 1.
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The report shows that Louisiana’s economy was strong with collections running about 8% above the previous year. But now, collections for the entire year, so far, are about 4% lower, according to the report.
“Because we went in strong, we were hoping it wouldn’t be as hard a hit if the shutdown is short,” said Robert Scott, head the Public Affairs Research Council of Louisiana. May and June numbers could rebound and if that’s the case, state government could end the year with a manageable shortfall of a few hundred million dollars.
“If May and June look as bad as April, if we continue at this rate, it will catastrophic,” Scott added.
Both sales taxes and income taxes showed significant dips. But the Department of Revenue delayed the filing of income taxes, so a nearly $300 million decline in individual income tax collections – comparing last year to this year – may be because taxpayers have postponed sending in their checks. The number of individual income tax returns filed in April dropped by about half compared to the count of filed returns in April 2019. But the federal government extended its filing deadline to July 15 and the state followed suit. On the other hand, the lower number could also reflect people making less money now.
The two economists for the Revenue Estimating Conference, which determines how much money legislators can spend, use most of the line-item collections on the report in their forecasts. But they also collect data on revenues gathered by other agencies along with historical trends. The four members of the REC choose between the estimates of the Legislature's economist and the administration's economist. The budget will be built on the projections chosen. The REC is scheduled to meet at noon Monday
Greg Albrecht, the chief economist for the Legislature, says as bad as the reported collections are, several factors could improve the numbers.
“We are not yet really seeing, in the data, the impact of the COVID shutdown,” Albrecht said. Much of the decline in Revenue's April receipts report could be administratively based.
For instance, the report shows that sales tax collections dropped 14% from last April. Those numbers are largely based off of transactions that took place in March. His records show that March had about 55,000 transactions, roughly 52% below last year. But many retailers haven't submitted sales taxes. The state gave businesses more time to turn in sales tax receipts. The question remains how much more sales taxes will be turned over once retailers start paying, he said.
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