Ohio state income tax off $97.7M

January revenue drop creates red ink 7 months into fiscal year

COLUMBUS - Ohio's books are back in the red. For the first time since the state enacted its two-year budget in July after dramatically lowering its revenue expectations, tax coffers contain less than the amount officials had projected at this point. The primary culprit was the income tax, off 15.6 percent in January. For the first seven months, income-tax collections were off 2.3 percent, or $97.7 million. Income taxes provide more than 40 percent of the state's revenue. Tax collections as a whole are off 1.1 percent, or just under $100 million, to date with five months left in the fiscal year. "One month does not a trend make," said J. Pari Sabety, state budget director.

Ms. Sabety said collections had been close to their target for the first six months.

She said she does not know what was at play in the large income-tax dip or whether it had something to do with the delay in printing and mailing of tax booklets this year. "The decline isn't across all the revenue sources," she said. "It's only one tax, so we're taking a look at the data to determine exactly what the cause is. We'll talk to other states to see if they've seen similar patterns. It's just three days after the close of books." The state had just managed to stay ahead of projections through December, but January's total tax collections were off 6.5 percent, thanks in large part to the income-tax dip. April is the crucial month when it comes to gauging income-tax collections. "We've had six months of revenue performance right on target, so this is the first month we've seen any aberration in that," Ms. Sabety said. "A lot of things are happening around us, the job stimulus bill, how we're recovering from the recession itself, unemployment patterns. There are optimistic signals in some areas of the economy as inventories are restocked." One bright spot in January's numbers was the auto sales tax, which came in 11.3 percent higher than expected and holds at 6.4 percent ahead of projections for the year. Other sales and cigarette taxes are largely either meeting or exceeding their targets. Income-tax booklets were delayed this year because lawmakers did not finalize the 2009 income-tax rate until mid-December. At Gov. Ted Strickland's urging, lawmakers shelved the last 4.2 percent installment of a five-year tax cut implemented at the start of 2009. The last increment - part of a total 21 percent, five-year income-tax cut - was undone at the last minute to help fill an $851 million hole in the two-year budget. The hole was created when the state's plan to install slot machines at racetracks ran afoul of the Ohio Supreme Court. At that point, some lawmakers predicted it would only be a matter of time before they'd be back to patch another shortfall. It remains to be seen whether the January numbers are an indication that the state's budget problems may continue.