Report shows Va. finances took hard blow in April

By Bob Lewis

RICHMOND

Virginia's state tax collections fell sharply in April from worsening unemployment, weak retail sales and a heavy load of refunds.

April revenues were one-fifth lower than they were for the same month a year ago. That's low enough to drive year-to-date collections well below even the meager reduced estimate on which the state budget is based.

For the year to date, taxes that support the general fund, which pays for such basics as schools, public safety and health care, are 8.6 percent below what they were at the same point last year.

That's bad news because April is a significant month for tax collections, with taxpayers trying to meet a May 1 state filing deadline.

It also means the state has only two months left for collections to rebound or for Gov. Timothy M. Kaine to figure out how to close a shortfall projected to range from $190 million to more than $220 million below forecast annual revenue of $14.6 billion.

Kaine warned legislative budget writers last week of early indications that April would be grim and told reporters Monday that a new round of state cuts is probably on the way.

The income tax that is paid largely on investments and by the self-employed fell last month by nearly a third from a year ago. Income tax withheld from salaries and wages was up slightly, but slightly lagging the forecast goal.

April's poor income tax collections were influenced by a 2.4 percent drop in payroll employment in March, the sharpest such decline since September 1991, Finance Secretary Richard D. Brown wrote in his monthly summary to the governor.

Because income taxes account for nearly two-thirds of the general fund, any weakening of those receipts is serious.

Sales tax receipts, which comprise about one-fifth of general fund, were down by almost 10 percent from April of 2008. For the year so far, sales tax collections are 4.8 percent lower than they were last year.

Because merchants remit their collections at the end of each month, April's receipts represent retail activity in March. Because Easter was in March last year and in April this year, a holiday sales bump may have made 2009's results look poorer in comparison, Brown said.

Not only is the state receiving less than it did a year ago, it's also handing out more money as tax refunds than last year. In April, the state sent taxpayers almost $88 million more in refund checks than it did the previous year, a 21 percent increase.