FISCAL YEAR COMPARATIVE STATEMENT FISCAL YEARS 1996-1997 THROUGH 1998-1999
*The Executive Budget recommendation is predicated upon using the $135,014,000 undersignated general fund balance of 6/30/97 for the advance payment of debt reduces non-appropriated debt service general fund requirements for fiscal year 1998/99 by $59,700,000. This reduction in non-appropriated requirements will finance non-recurring expenditures in the Capital Outlay budget. More specifically, it will fund highway overlay and deferred maintenance at Higher Ed institutions and other state buildings. The fiscal year 1997/98 column is based upon the official forecast as of 12/10/97. On 2/18/98, the official general fund forecast for fiscal year 1997/98 was increased by $32,100,000.
COMPARATIVE STATEMENT OF OFFICIAL REVENUE FORECASTS AND ACTUAL REVENUE FISCAL YEARS 1993/94 THROUGH 1998/99 (IN MILLION $)
Economic Assumptions and Revenue Forecasts for Fiscal Years 1997/98 and 1998/99
The United States economy is expected to continue the growth it has experienced since 1991. Real gross domestic product growth should approximate 3.2% in fiscal year 1997/98 and 2.3% in fiscal year 1998/99. Inflation should also be in the 2% - 3% range during the forecast period. Real personal income growth is expected to taper off by nearly a full percentage point following the current fiscal year. Employment growth was approximately 2% during the two most recent years. Employment growth is expected to be slightly higher at 2.2% during the current fiscal year and slightly lower at 1.5% during the next fiscal year. The expected growth during fiscal year 1998/99 is 1% less than the average annual growth of the prior four year period and is more in line with the nation's long-term potential.
Louisiana employment has grown for ten consecutive years. Louisiana's employment has grown faster than the nation's during seven of the past eight years. Louisiana's annual average employment growth during the 90's is 2.3%, while that of the United States is 1.5%. Louisiana's average employment growth of the past four years is its highest since 1982. State economic growth is expected to slow and thereby approach a more sustainable rate of growth. Louisiana's employment is projected to increase by 1.5% during each of the next two fiscal years.
Since 1986/87, Louisiana employment on an annual basis has increased by 343,000. The service sector, led by the health sector and gambling industry, has provided more than half the additional jobs. Trade, government, manufacturing and construction have also contributed significantly to the employment gains. The manufacturing growth is impressive, in light of the fact that the nation's manufacturing employment declined during this period. Manufacturing jobs were created in the chemical, petroleum refining, and fabricated metal industries at the beginning of the decade. More continuous manufacturing growth has occurred in the machinery, food and transportation equipment industries. The table below itemizes the employment changes by industry.
In terms of an increase in the absolute number of jobs, the service and trade sectors are expected to lead in employment gains for the forecast horizon. In terms of percentage growth, mining and construction are expected to lead, with growth approximating 4% and 3%, respectively. Through the end of 1997, the high growth industries within the service sector are the legal, the social, and the repair services.
Louisiana Personal Income
Louisiana's personal income is projected to increase by 4.8% and 4.5%, respectively during fiscal years 1997/98 and 1998/99. Louisiana income growth during the 90's has averaged 6.0%.
Fiscal Year 1996/97
Available general fund revenue was $5,659 million in fiscal year 1996/97. Available general fund revenue increased by $502 million, which was 9.7% more than 1995/96. The following table ranks the revenue sources with the largest percentage growth and at least a $10 million increase over the prior year during fiscal year 1996/97.
Bonuses reached its highest level in 12 years due to improved exploration and drilling technology. Interest income reached its highest level in 6 years due to the large surplus of the prior fiscal year. Inheritance achieved its highest level ever as well as its highest growth since 1990. Severance tax benefited not only from a $21.30 oil price, but also from increased drilling activity of recent years, which actually increased annual mineral production. Corporate income tax collections reflect the fourth consecutive year of strong United States corporate profit growth. The individual income tax collections increased more than normal due to the moderate state economic growth in conjunction with large capital gains resulting from the surging values in securities markets. Riverboat revenue grew primarily due to the addition of 2 boats during the fiscal year. Royalties increased due to a 40 cent/mcf increase in natural gas prices, a nearly $4/barrel increase in the oil price, and increased mineral production. The corporate franchise growth resulted as the revenue source moved closer to its historical level following the aberration of fiscal year 1995/96. Sales tax revenue experienced a lull following the 9% growth achieved during fiscal year 1995/96.
The following table ranks the revenue sources with the largest annual percentage declines and at least a $10 million decline during fiscal year 1996/97.
Motor vehicle sales reflects its unsustainable growth of the previous 4 fiscal years. Excise license collections suffered from the acceleration of the phase in of various tax credits. The aging of the lottery in conjunction with competition from other gaming alternatives caused lottery collections to decline for the fourth consecutive year. The state received payments from the land based casino activity from May 1995 to November 1995.
Fiscal Year 1997/98
The Revenue Estimating Conference's official forecast of available general fund revenue is $5,594.7 million in fiscal year 1997/98. The forecast is $64.6 million or 1.1% below actual revenue for fiscal year 1996/97. The following table ranks the revenue sources with the largest expected annual percentage changes, which are expected to change by at least $10 million during fiscal year 1997/98.
Interest income year to date collections are the highest in six years due to the significant fund balances. Individual income tax growth is expected to be 1% less than the average growth of the prior three years. The decline from 9% growth to 8% growth is due to slightly lower employment growth.
Sales collections are expected to decline due to the tax cut, since exemptions (primarily those exemptions on food for home consumption and utilities) are suspended at a 3% rate vs. the 4% rate of the prior year. The decline in severance and royalty collections reflects lower oil prices as well as lower mineral production. The expected decline in corporate collections reflects the implementation of various tax credits. It also embodies the unsustainably high corporate tax growth of the past three fiscal years. Bonuses are not expected to reach their level of fiscal year 1996/97 which exceeded the fiscal year 1990/91 through 1993/94 annual average amount by a multiple of 5.
Fiscal Year 1998/99
The Revenue Estimating Conference's official forecast of available general fund revenue is $5,388.7 million in fiscal year 1998/99. The forecast is $216 million or 3.3% below the official forecast for fiscal year 1997/98. The following table ranks the revenue sources with the largest expected annual percentage changes, which are expected to change by at least $10 million during fiscal year 1998/99.
Individual income collections reflect approximately normal growth. Lower mineral production will cause a decrease in royalty collections. Interest income is anticipated to decline, because the significant fund balances are not assumed to continue. The sales tax base will be reduced, since the suspension of exemptions tax rate is scheduled to drop from 3% to 0%. The effect of the decreased sales tax rate is partially offset by normal growth.
NATIONAL ECONOMIC FORECAST SUMMARY BY FISCAL YEAR END JUNE 30
LOUISIANA INCOME & EMPLOYMENT BY FISCAL YEAR END JUNE 30
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