A couple days ago I received the monthly revenue report from Finance Secretary Richard Brown. In a nutshell, the economic numbers for the state continue to be bleak.
General fund collections in May 2009 fell 15.6% compared with May 2008. Most of this is due to (i) drop-offs in non-withholding payments and (ii) increase in refunds owed. Each factor occurs when there is a recession.
Monthly revenues commonly fluctuate. This is due to a number of reasons, including deadlines for paying taxes or giving refunds or the number of “deposit days” in each month. However, after several months are aggregate, it’s possible to read the trend.
To date, after aggregating the numbers of January-May 2009, the state is receiving 9.3% less than last year, compared to the projected decline of 7.3%. In other words, we are again in a 2% deficit situation.
Here’s the good news: the Virginia economy seems to be stable. Unemployment continues to be slightly below 7%, which is well below the national average. Inflation is low. The state revenue deficits are largely a factor of economic conditions over the past 12 months which are now impacting the state (e.g. refunds that are owed in May 2009 for income earned in 2008). These are not new conditions.
The bad news: the stability reflects flat economic growth. Also I think that some market sectors have not yet been counted. A good example is the market for commercial real estate — which to my untrained eye is the worst since the early 90′s. I have not seen so many commercial vacancies in the heart of NoVA for many years.
Who is lending money with these buildings as security? I guess we will find out in the next few months.