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Idaho fell 60% short on April's tax collection projections. The problem? Coronavirus

Idaho Statesman logo Idaho Statesman 5/8/2020 By Cynthia Sewell, The Idaho Statesman

State budget analysts got their first look at how coronavirus is affecting Idaho’s economy — and it is not pretty. April tax collections fell 60% short of projections.

This blow comes after the tax receipts for February and March exceeded projections, indicating Idaho’s economy was churning.

But that came to a screeching halt when Idaho Gov. Brad Little ordered a temporary statewide shutdown on March 25 to combat the rapidly spreading coronavirus.

How rapid? On March 25, Idaho had reported 150 coronavirus cases but no deaths, and the nation had reported about 65,000 cases and 1,000 deaths. Today, Idaho reports 2,158 cases, 66 deaths. Nationwide, the reported cases top 1.25 million with nearly 75,000 deaths as of Thursday afternoon.

March’s tax receipts came in higher than expected and were 27.9% above the previous March and 13.3% higher than the forecast. It was the second consecutive month revenue has significantly exceeded expectations.

But then came coronavirus, and April’s numbers started to reflect its effect on Idaho’s economy: Income tax collections are 71.6% below forecast; corporate tax collections are 72.5% below forecast; and sales taxes are 3.1% below.

But, as Idaho budget guru Alex Adams explains, part of the reason income and corporate taxes are down is the tax filing deadline has been extended from April 15 to June 15, which means much of that revenue the state typically receives in April has been delayed to June.

“When I look at these numbers, I don’t see this as much as a loss of revenue as much as I see it as a shift,” said Adams, who is the Division of Financial Management administrator.

How Idaho’s May revenue projections could shake out

But that all could, and likely will, change next month when Adams and his crew get May’s numbers.

Typically, sales tax collections and income tax withholding reporting lags by one month. For example, sales taxes collected in April are transmitted and reported in May.

Adams said while sales taxes collected within the state may drop, online sales taxes are increasing due to people shopping from home due to the pandemic, so overall sales tax collections may not take as hard of a hit.

But one factor, of which the effect has not yet hit state coffers, is the record number of recently unemployed Idahoans. Many lost their job in April, so that means employers are withholding less income tax, which will start showing up in May’s numbers.

Idaho workers filed 125,306 initial claims for unemployment benefits during the seven weeks of the COVID-19 state of emergency — 2.1 times the total number of initial claims filed in all of 2019, Idaho Department of Labor reported Thursday.

April’s income tax withholding payments “actually became very close to what we were anticipating,” state chief economist Derek Santos said. “But we think a lot of that reflects what took place in March. So, we’re going to have a much better read of it next month when we have activity from April start really showing up,” Santos said.

Fortunately, the state is nearing the end of its budget year, which concludes June 30, so much of the premised revenue upon which that budget was built has already been received and the state is in good position to end this fiscal year balanced, Adams explained.

But the new budget year beginning July 1 will start under Idaho’s now upended economy and could present some challenges.

Adams says the state does not anticipate any budget cuts for the rest of this fiscal year, but state agencies have been forewarned to expect one after July 1.

“We’ve asked agencies to prepare for an up-to-5% hold-back,” Adams said. “No formal action has been taken at this point.”

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©2020 The Idaho Statesman (Boise, Idaho)

Visit The Idaho Statesman (Boise, Idaho) at www.idahostatesman.com

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