WASHINGTON -- Virginia's revenues for the first quarter of fiscal 1993 are running 8.3% ahead of last year, but Finance Secretary Paul W. Timmreck warned that the economic outlook over the next nine months is "very uncertain."
In a memorandum on revenue collections that was distributed to state legislative leaders on Friday, Timmreck said revenues for July, August, and September exceeded the annual estimate by 2.7% and the quarterly target by 0.3%
He attributed the strong growth over last year's level in part to a weak first quarter in fiscal 1992. "At that time, the lingering effects of Operation Desert Storm meant reduced employment and retail sales in the commonwealth," Timmreck said in the memo.
Timmreck said he and other finance officials are "cautiously optimistic about the short-term prospects of the Virginia economy," but cautioned against reading too much into the first-quarter results.
"Although first-quarter collections were slightly ahead of the forecast and year-to-date collections are running 2.7 percentage points ahead of the official annual estimate, one should not conclude that revenues are destined to exceed the forecast by almost three percentage points," he said.
"A stalled or nearly stalled recovery makes the U.S. and the Virginia outlook very uncertain over the next nine months."
Employment figures provided a mixed picture for state officials. In his memo, Timmreck cited a survey of employers conducted by the Virginia Employment Commission, which found that state nonagricultural employment declined by 7,000 jobs in August and was 0.7% below levels at the same time last year. But the state's unemployment rate fell 0.3% in August to 6.1%, comparing favorably with the national figure of 7.3%.
Revenue growth for the first quarter was fueled in part by a greater-than-forecast increase in individual income tax collections and by strong sales tax collections.
Net individual income tax receipts through September increased 8.4% from fiscal 1992, exceeding the annual estimate of 5% and the quarterly target of 7.5%. However, taxes withheld from payrolls in September grew only 0.1% compared with last year, lowering year-to-date growth of withholding to 7.3%.
The year-to-date figure is above the official forecast of 4% for the year, but is below the quarterly target of 8.7%, Timmreck said in the memo.
The slower growth in withholding was offset by strong non-withholding receipts, which were up 12.6% in September. The receipts brought year-to-date growth to 9.1% well above the quarterly estimate of a 0.2% decline. The official forecast calls for year-over-year growth of 10%.
Also helping to shore up individual income tax receipts was a decline in tax refunds. Refunds for the first quarter of fiscal 1993 were down 7.5% from last year. Officials had forecast a 5.5% increase in refunds from levels posted in the first quarter of fiscal 1992.
Timmreck reported that sales tax receipts for September were 5.8% higher than in September 1991, adding that the year-to-date growth of 6.1% is only slightly off officials' forecast of a 6.3% increase for the year and the quarterly target of 6.4% growth.
He said that business at restaurants and sales of furniture, lumber, and building supplies showed strength, and that a "turnaround in home-related purchases and tourism apparently occurred as forecasted." Timmreck added, "The next critical juncture in sales tax collections will be the all-important Christmas shopping season."
On a year-to-date basis, corporate income tax receipts were down 2.6%, off from the quarterly target of 13.2% growth and the official annual estimate of an 8.8% increase.
Timmreck explained that "significantly fewer corporations are filing quarterly estimated payments," a trend that has been afoot since 1989, when state law was changed to require that corporations pay no more in estimated payments than the previous year's tax liability.