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Alabamians spending less, except for alcohol

MONTGOMERY — State tax collections for the first three months of the fiscal year show Alabamians are spending less, except when it comes to alcohol.

A state financial report covering October, November and December shows the state’s sales tax collections dropped nearly 10 percent from the same period a year earlier.

But beer tax collections were up 4 percent and income from state liquor stores, including taxes and profits, increased 10 percent.

“People don’t like to give up their alcohol,” said Robert Pandina, director of the Center of Alcohol Studies at Rutgers University.

Pandina said Monday it’s customary for alcohol sales to go up in difficult economic times, and several other states that keep close track of alcohol taxes have experienced the same trend as Alabama.

Alabama’s beer tax is a good indication because it is based on volume rather than price. That means the increase in beer tax collections reflects greater sales, rather than higher prices.

Tax collection figures have huge consequences because Alabama is one of about 40 states experiencing budget woes because of the national recession.

The state’s new budget year began Oct. 1 with revenue trailing appropriations. In December, Gov. Bob Riley ordered spending cuts in the state education budget and placed a hiring freeze and other restrictions on non-education agencies financed by the state General Fund budget.

For October, November and December, corporate tax collections were down about one-third from same three months a year earlier. Individual income tax collections were nearly level, and sales taxes were down nearly 10 percent.

Those figures show Alabamians are still working and having income taxes withheld from their paychecks, but they are spending less.

“A lot of discretionary spending is being trimmed,” said Mickey Gee, a marketing professor at the University of Alabama at Birmingham. He attributes that to declining consumer confidence due to job losses and the fear of job losses.

In Alabama, stores send sales taxes to the state in the month after they are collected. That means the sales taxes collected by stores in December — and the outcome of the Christmas shopping season — won’t be available in Montgomery until later this month.

Gee, who owns four clothing stores in the Birmingham area, said the Christmas season figures will give a better picture of the state’s financial condition.

Gee is expecting a decline from last Christmas, possibly 8 to 10 percent.

“The consumers held onto their pocketbooks pretty tightly,” he said.

Sales and income taxes are the primary ingredients in the state education budget.

A quarterly financial report from the state Finance Department shows education revenue was down 12.6 from the same three months a year ago.

Revenue for the state General Fund budget was down 20.3 percent, primarily due to a dramatic decrease in income from state investments rather than declining tax collections.

At the current rate, Gov. Bob Riley may have to make more state spending cuts. But his administration is waiting to see if Congress and President-elect Barack Obama agree on an economic stimulus plan to help states.

A stimulus plan of $800 billion to $1 trillion that helps build roads and schools and provides more funding for Medicaid could have a huge effect, Riley’s state finance director, Jim Main, said.

“I’m very hopeful,” he said Monday. “They are serious about stimulating the economy.”