County budget and finance officers met on January 9, 2012 to hear from the Director of the Bureau of Revenue Estimates David Roose, and State Department of Assessment and Taxation Director Robert Young, regarding revenue and assessable base estimates for FY 2013. The manager of the Revenue Administration Division, George Freyman, also attended the meeting to discuss the income tax formula distribution and its effect on future distributions.
Revenue Estimates and Income Tax Formula Distribution
Mr. Roose provided revenue estimates for FY 2012 and 2013 as of December 2011. The State’s General Fund is expected to grow by 3.8% in FY 2012, dropping to 2.6% in FY 2013. He said that the State will continue along at a low growth rate for the next few years.
Mr. Roose also provided information on employment growth and individual income tax revenue. This prompted discussion on the income tax distribution formula and why the distribution was larger than usual in November 2011.
The percentages used in the formula are reset every year for the November distribution. This is done by seeing what the actual amount collected of the total was, based on the previous year’s tax liability using actual returns received by November. This process works well when there is little change in the percentages used from year to year. However, the last few years have been very volatile and the formula percentages have changed quite a bit. These formula changes have created an overstating of revenues which could result in a dramatic reduction in the summer of 2012 and a resetting of the formula a year from now that could cause revenue shortfalls if counties are not careful.
It is important to realize that this increase in income tax revenues and the resulting surplus it will generate is not an economically driven surplus, but rather a formula driven surplus. If counties were to use the revenue collected in FY 2012 as a base and project increases above that level for FY 2013, they we could find themselves with a severe revenue shortfall in FY 2013 and 2014.
Assessable Base Estimates
Mr. Young provided a series of tables showing the estimated taxable assessable base at the county level for FY 2012 through 2014. The estimated real property assessable base drops from FY 2012 to 2013, but then stabilizes in FY 2014. This same trend occurs at the State level.
Lastly, Mr. Young discussed outreach efforts to ensure homeowners complete the Homestead Tax Credit application prior to the December 31, 2012 deadline.