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Georgia’s Revenue Outlook
i i i iJoint Appropriations CommitteesJanuary 21, 2009
Ken HeaghneyKen HeaghneyOffice of Planning & BudgetGeorgia State University – Fiscal Research Center
AgendaAgenda
• FY 2009 YTD Revenue PerformanceFY 2009 YTD Revenue Performance
• Economic Outlook
• Revenue Estimate – Amended FY 2009 & FY 2010& FY 2010
YTD DOR Revenue Growth Equals -2.7%YTD DOR Revenue Growth Equals 2.7%
15 0%
DOR Revenue Growth
10.0%
15.0%
4.5%
‐0.1%
1.4%
0.0%
5.0%
‐6.6% ‐7.0%
‐5.0%
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr* May* Jun
‐8.9%‐10.0%
FY08 FY09 *Apr/MayResults Averaged
Improving Performance Through November But December was Very
Growth in DOR Revenues(Yr/Yr % Change - 3 Month Moving Average)
November But December was Very Weak
15.0%
20.0%
5.0%
10.0%
15.0%
-10.0%
-5.0%
0.0%
Jul-0
7
Aug
-07
Sep-
07
Oct
-07
Nov
-07
Dec
-07
Jan-
08
Feb-
08
Mar
-08
Apr
-08
May
-08
Jun-
08
Jul-0
8
Aug
-08
Sep-
08
Oct
-08
Nov
-08
Dec
-08
-20.0%
-15.0%
Individual Income Tax: YTD Growth E l 3 0%Equals -3.0%
Individual Income Tax Revenue Growth
40.0%
50.0%
A)
20.0%
30.0%
r Yea
r (3
Mon
th M
A
-10.0%
0.0%
10.0%
Jul-0
6
ug-0
6
ep-0
6O
ct-0
6
ov-0
6ec
-06
an-0
7
eb-0
7M
ar-0
7
Apr
-07
ay-0
7
un-0
7Ju
l-07
ug-0
7
ep-0
7O
ct-0
7
ov-0
7ec
-07
an-0
8
eb-0
8M
ar-0
8
Apr
-08
ay-0
8
un-0
8Ju
l-08
ug-0
8
ep-0
8O
ct-0
8
ov-0
8ec
-08
Cha
nge
Ove
r Prio
-30.0%
-20.0%
J Au Se O No
De Ja Fe M A Ma
Ju J Au Se O No
De Ja Fe M A Ma
Ju J Au Se O No
De
%
Sales Tax: YTD Growth Equals -0.9%Sales Tax: YTD Growth Equals 0.9%
Sales Tax Revenue Growth
15.0%
20.0%
3 Month Moving Average
5.0%
10.0%
‐10.0%
‐5.0%
0.0% Sept. 2006
Oct. 2006
Nov. 2006
Dec. 2006
Jan. 2007
Feb 2007
Mar 2007
Apr 2007
May 2007
June 2007
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
‐15.0%
Gross Net
Corporate Income Tax: YTD Growth E l 18 4%Equals -18.4%
C t I T R G th
100.0%
120.0%
MACorporate Income Tax Revenue Growth
20.0%
40.0%
60.0%
80.0%
nge
-3 M
onth
M
-60 0%
-40.0%
-20.0%
0.0%
-06
-06
-06
-07
-07
-07
-07
-07
-07
-08
-08
-08
-08
-08
-08
% C
han
60.0%
Jul-
Sep-
Nov
-
Jan-
Mar
-
May
-
Jul-
Sep-
Nov
-
Jan-
Mar
-
May
-
Jul-
Sep-
Nov
-
AgendaAgenda
• FY 2009 YTD Revenue PerformanceFY 2009 YTD Revenue Performance
• Economic Outlook
• Revenue Estimate – Amended FY 2009 & FY 2010& FY 2010
US and Georgia are Mired in Deep E i R iEconomic Recession
• Housing correction led to massive losses on mortgage backed securities d d i d l b l fi i l k tand undermined global financial markets
• Unprecedented government intervention has improved conditions in financial markets but markets remain unsettled
• Labor markets weakened precipitously in late 2008Labor markets weakened precipitously in late 2008
• Consumers have pulled back sharply on spending, particularly on durables such as autos
• Global slowdown has harmed domestic manufacturing as exports have fallen
• Countervailing forces
• Massive liquidity injection to free up financial markets and stimulate investment and spendinginvestment and spending
• Massive fiscal stimulus expected early in the new administration
• Commodity prices, including gasoline, have plummeted reducing pressure on household budgetsp g
Median Home Price Down Over 23% f th P k
220 0
S&P / Case‐ Shiller Home Price Index
from the Peak
200.0
220.0
160.0
180.0
120.0
140.0
100.0
Jan‐04
Mar‐04
May‐04
Jul‐0
4
Sep‐04
Nov
‐04
Jan‐05
Mar‐05
May‐05
Jul‐0
5
Sep‐05
Nov
‐05
Jan‐06
Mar‐06
May‐06
Jul‐0
6
Sep‐06
Nov
‐06
Jan‐07
Mar‐07
May‐07
Jul‐0
7
Sep‐07
Nov
‐07
Jan‐08
Mar‐08
May‐08
Jul‐0
8
Sep‐08
Atlanta Composite‐20
Financial Markets are Improving But R i St dRemain Stressed
Spread Between LIBOR and 90 Day TreasuryBill Rate
3.00
3.50
4.00
Spread Between LIBOR and 90 Day Treasury Bill Rate
1 50
2.00
2.50
0.50
1.00
1.50
0.00
1990
M1
1990
M6
1990
M11
1991
M4
1991
M9
1992
M2
1992
M7
1992
M12
1993
M5
1993
M10
1994
M3
1994
M8
1995
M1
1995
M6
1995
M11
1996
M4
1996
M9
1997
M2
1997
M7
1997
M12
1998
M5
1998
M10
1999
M3
1999
M8
2000
M1
2000
M6
2000
M11
2001
M4
2001
M9
2002
M2
2002
M7
2002
M12
2003
M5
2003
M10
2004
M3
2004
M8
2005
M1
2005
M6
2005
M11
2006
M4
2006
M9
2007
M2
2007
M7
2007
M12
2008
M5
2008
M10
Job Markets have PlungedJob Markets have Plunged
Unemployment has Risen RapidlyUnemployment has Risen Rapidly
Consumer Expenditures are Growing Very Sl lSlowly
Durables are Bearing the Brunt of the Sl dSlowdown
Exports have Dropped as Global E i h Sl dEconomies have Slowed
Countervailing Forces: Monetary PolicyCountervailing Forces: Monetary Policy• Fed Funds target rate reduced to a range of 0 to 25 basis points
• Created new lending facilities to provide short-term liquidity to g p q ysound financial institutions
• Term Auction Facility, Term Securities Lending Facility, Primary Dealer Credit Facility
• Currency Swap Agreements with foreign central banks
• Provision of credit directly to borrowers and investors in key credit markets
• Purchase high quality commercial paper
• Lend against AAA-rated asset-backed securities
h l i i• Purchase longer-term securities
• $100 billion in government sponsored entity (GSE) debt
• $500 billion in GSE mortgage-backed securities$ g g
Countervailing Forces: Fiscal StimulusCountervailing Forces: Fiscal Stimulus
• Large fiscal stimulus effort expected from the new administration – press reports suggest $750+ billion
d 2spread over 2 years.
• Details are uncertain, speculation is that the stimulus will consist of tax cuts, aid to state & local governments, direct gspending on infrastructure and other programs
• On a per capita basis, Georgia’s share would be on the order of $11.9 billion per year – or about 3% of Georgia’sorder of $11.9 billion per year or about 3% of Georgia s GDP
Countervailing Forces: Falling C dit P iCommodity Prices
At Current Levels, the Decrease in Gasoline Prices will Free Up about $10.7 Billion in Annual Spending Power in Georgia$ p g g
Economic Scenario
1. Recession will continue through end of fiscal year
2. Job losses will continue but should moderate and consumer expenditures will grow slowly
3. Global downturn will harm manufacturing3. Global downturn will harm manufacturing
4. Economy should begin to recover in second half of calendar 2009 but recovery will be slow
5. Risks to the outlook are large. Policy makers continue to wrestle to calm financial markets. Size, timing and composition of fiscal stimulus is g puncertain. Oil prices are very low but could spike on geopolitical concerns.
AgendaAgenda
• FY 2008 YTD Revenue PerformanceFY 2008 YTD Revenue Performance
• Economic Outlook
• Revenue Estimate – Amended FY 2009 & FY 20102009 & FY 2010
Amended FY 2009
% Growth % GrowthAmended versus versus
FY 2008 FY2009 FY2009 FY 2008 FY 2009FY 2008 FY2009 FY2009 FY 2008 FY 2009Reported Estimated Estimated Reported Estimated
Total Taxes $17,695,117,754 $19,144,419,118 $16,920,041,585 -4.4% -11.6%
Total Regulatory Fees $1,032,694,869 $973,169,321 $983,955,258 -4.7% 1.1%
Total General Fund $18,727,812,623 $20,117,588,439 $17,903,996,843 -4.4% -11.0%
Other Funds Available $1,061,990,695 $1,048,294,077 $1,299,249,167 22.3% 23.9%
Total Funds Available $19,789,803,318 $21,165,882,516 $19,203,246,010 -3.0% -9.3%
Key Points
1 Revenue estimate includes $50 million from RSR1. Revenue estimate includes $50 million from RSR
2. Revenue growth of -5.3% is required over January through June to reach revenue estimate
FY 2010% Growth
versusAmended AmendedFY2009 FY 2010 FY 2009
Estimated Estimated Estimated
Total Taxes $16,920,041,585 $17,288,273,764 2.2%
Total Regulatory Fees $983,955,258 $1,193,351,799 21.3%
Total General Fund $17,903,996,843 $18,481,625,563 3.2%
Other Funds Available $1,299,249,167 $1,712,349,327 31.8%
Total Funds Available $19,203,246,010 $20,193,974,890 5.2%
Key Points
1. Revenue estimate includes $408 million from RSR
2 Mild economic recovery to begin in second half of 2009 is projected to add2. Mild economic recovery to begin in second half of 2009 is projected to add about $368 million in revenue growth
3. Health care provider fee strategy and super speeder fine add about $240.7 million to funds available
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