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Last updated 11:12PM ET
March 7, 2021
Growth Could Slow After Record-Setting Tax Collections
(APR - Alabama Public Radio ) - Alabama ended fiscal 2007 with record tax collections, but there are indications that the state, like the nation, is seeing the rapid growth of recent years slow down to normal levels.

Fiscal 2007 ended Sunday. On Monday, the state Revenue Department reported the state took in $8.15 billion in taxes after making refunds. That was up nearly 4 percent from the previous fiscal year. But it was slower than the 10 percent growth the state experienced in fiscal 2006.

State Budget Officer Bill Newton said the final numbers showed that the General Fund, which supports non-education programs, fared better than expected, but revenue for education programs came in slower than projected.

Education revenue primarily the state income and sales taxes totaled $5.85 billion. That was up 6.5 percent, or $356 million, from the previous year, but state officials had expected about 9 percent growth, Newton said.

For the year, individual income tax collections were up 9 percent and sales taxes 2.5 percent from the previous year, but corporate income tax collections fell 3.5 percent.

Joe Garrett, tax policy administrator for the Revenue Department, said the individual income tax collections were better than expected because the state's unemployment rate remains very low, but the sales tax collections were below expectations.

The sales tax growth of 2.5 percent compared with 9 percent a year ago and is a probably an indication "things are slowing down a little bit," Garrett said.

The overall growth of education revenue by 6.5 percent would look great in normal economic times, but the revenue had been increasing about 10 percent annually in recent years, Newton said. The lower growth rate indicates Alabama is following the national trend of slower economic growth, he said.

The General Fund relies on taxes that aren't closely tied to the economy, like insurance premium taxes and cigarette taxes.

The General Fund took in $1.634 billion for fiscal 2007. That was down 1.3 percent from the previous year, but the previous year's budget was pumped up by lots of one-time revenue. When comparing recurring revenue from each year, the fiscal 2007 General Fund took in about $35 million more than expected, Newton said.

"The General Fund had a good year," Newton said.

Besides taxes, another major ingredient of the General Fund is interest earnings on state deposits, which grew by 23 percent.

Newton said there is enough revenue to carry over from fiscal 2007 to fiscal 2008 to make sure the new education and General Fund budgets should be fine. But he said if the slower economic growth continues, then the Legislature will have to be cautious when it convenes in February to write the state budgets for fiscal 2009.

"The appropriations for fiscal 2009 are not going to have the large increases the departments have become accustomed to these last three years," he said.
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