November 13, 2013 / 9:01 PM / in 4 years

Virginia's revenues fall again on federal budget fights

WASHINGTON, Nov 13 (Reuters) - Virginia’s revenues fell 5.4 percent in October from the year before, the fourth decline in 2013, as the partial federal government shutdown took a bite out of withholding tax collections, and corporate, sales and recordation taxes tumbled, Governor Robert McDonnell said on Wednesday.

For the fiscal year that started in July, revenues are up a slim 0.6 percent, behind the forecast for 1.5 percent growth.

“The federal government continues to fail at the most basic of functions, including most recently failing at just the simple act of remaining open,” said the outgoing governor, a Republican, in a statement. “This is having a direct impact on the finances of Virginia’s residents and our state government.”

Individual income tax withholding, which makes up nearly two-thirds of the state’s revenues, rose only 0.5 percent in October from October 2012.

“Although federal employees were paid, the impact on federal contractors may have dampened growth in this source,” said Virginia Finance Secretary Ric Brown.

Sales taxes, which make up about a fifth of revenues, fell 1.7 percent and corporate income tax collections, providing 5 percent of revenues, were down 60 percent.

Virginia steamed through the 2007-09 recession with few economic problems because of its proximity to the nation’s capital. Along with being home to a multitude of federal workers and contractors, the state is the site of many military installations. From July 2011 through December 2012, Virginia’s revenues only fell three times.

In 2013, they have also fallen in February, March and August, after the federal budget cuts known as sequestration took effect. Then, in October, congressional deadlock led the federal government to furlough employees and suspend some spending.

McDonnell said the sales tax drop reflected retail activity in September, and the effects of the shutdown on shopping will likely appear in next month’s report.

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