CHICAGO — For the first time since 2006, Ohio is enjoying an increase in revenue collections.
Revenues were up nearly $1.5 billion in fiscal 2011 compared to fiscal 2010, according to the Ohio Office of Budget and Management.
Rising revenues could signal that the state is beginning to recover from its record-long slump.
The last year that Ohio's revenues increased was 2006, budget analysts said. Revenues began a decline in 2007 that accelerated rapidly in 2009, when the state lost more than $2 billion. Revenues fell another $800 million in fiscal 2010. But in fiscal 2011, which just ended, revenue rose 9.1%, pushing general fund revenues to $17.7 billion from $16.2 million in 2010.
Income tax receipts drove the increase, rising 12%, or $873 million, in 2011 compared to 2010. Non-auto sales tax revenue jumped $407 million, or 6.6%, last year. The two taxes make up the biggest parts of Ohio's general fund.
"Those are the two main drivers of the increase," said a budget analyst who asked not to be named. "They are also the most sensitive to the economy and are the ones that suffered the biggest downturns in the 2008-to-2010 timeframe."
Last year's revenue rose above 2009 projections, which were used to craft the two-year budget that just ended. Income tax collections came in 7.3% above projections and non-auto sales tax came in 3.6% higher than expected.
The state's corporate franchise tax, which applies mostly to financial institutions, came in 79% higher than expectations — an increase budget analysts tie to banks' improving balance sheets.
Part of the 2011 growth in income tax revenue, however, is due to a policy change under former Gov. Ted Strickland, who balanced the 2010-11 budget in part by postponing by two years a scheduled income-tax decrease.
Originally set to take effect in 2010, the tax cut would have meant the loss of $400 million annually. The cuts are now part of the 2012-13 budget, and are expected to mean the loss of $440 million in income tax collections each year. The cuts moderated the budget office's recent revenue estimates covering the next two years.
The June revenue estimates predict that the state will continue to see growth, but at a somewhat slow pace. General fund revenues are expected to increase by $50 million in 2012 and by $375 million in 2013, the OBM said.
"From 2011 to 2012, our forecast is to have pretty modest growth," the analyst said. "Our net growth was watered down by a drop off in income tax revenue."
Some of that loss, however, will be offset by deep cuts in local government aid, much of which comes from income tax receipts.
