Tax Collections Lagging

Montana’s tax revenues lagged budget estimates in the first four months of fiscal 2010, according the Legislative Fiscal Division.

Revenue collections fell 21.9% to $331.4 million in the four months ended Oct. 31, compared to the same period in fiscal 2009. The state’s budget was prepared assuming a 1.9% drop in revenue during the period.

“Collections through October have not improved and are considerably worse than indicated in previous reports,” Terry Johnson, the principal fiscal analyst, said in a report.

That means general fund revenues for the fiscal 2010 could be $50 million to $130 million below budget levels. The annual general fund budget is almost $1.8 billion.

The state budgeted for a $282.4 million ending fund balance for the fiscal year and it has a rainy-day fund of $788 million, suggesting it has room to absorb revenue declines that it’s endured so far.

The main reasons for the revenue decline are sharp drops in individual and corporate income tax collections. The state corporation tax brought in $23.3 million in the first four months of the fiscal year, down 53% from the prior year. Personal income tax collections, Montana’s biggest revenue source, fell 18% to $204 million from $284 million.

On the bright side, oil and gas production taxes are coming in stronger than expected because oil prices are higher than anticipated in the budget. That could provide the state $14 million in unanticipated revenue this fiscal year.

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