TAX NEWS - JUNE 2010

Indiana tax revenue slips in May after 2 months of gains

After exceeding projections for the previous two months, state revenue missed its forecast for May, but just slightly.

Tax revenue for the month totaled $981.6 million, or $1.1 million below projections. The miss came after revenue exceeded the state forecast by $119.6 million in April and $48.3 million in March.

Although revenue has improved over the past 90 days, State Budget Director Chris Ruhl warned that the overall picture 11 months into the state's fiscal year is still grim.

Revenue over the past three months has been close to the revised forecast Gov. Mitch Daniels ordered in December, but tax receipts continue to lag far behind what lawmakers anticipated when they passed the state's two-year budget in 2009.

So far, revenue for the fiscal year has fallen $1.032 billion, or 9 percent, below the budget passed by the legislature, forcing Daniels to order spending cuts and tap into hundreds of millions of dollars in reserves.

"Revenue collections have been below budget for 10 of the 11 months of the current fiscal year," Ruhl wrote in his analysis of May's revenue. "The average monthly miss has been dramatic -- nearly $100 million, with all but two months registering a miss of greater than $60 million."

Still, the past three months have shown signs of the state's income starting to stabilize.

For example, overall tax collections for May came in above total collections for the same month a year ago, which has not been the case all year. Sales tax revenue also continues to rebound, totaling $494 million in May, $18 million above the 2009 total for the same month, but overall remains 4.4 percent below 2009.

Income tax revenue for May also increased, coming in $29 million over the amount for May 2009, but still lags 9 percent below 2009 for the fiscal year.