Stimulus checks may not have affected Shoals

Federal stimulus checks, meant to boost a lagging national economy, may have had a limited impact on the local economy, according to Shoals sales tax figures for June.

The checks, most of which were mailed in May and June to 130 million households, ranged from $600 for individuals to $1,200 for couples and more for couples with children.

The effect on the economy as determined by sales tax revenue has, to date, been miniscule.

Florence and Muscle Shoals, for instance, showed near flat growth in sales tax revenue for June 2008 compared to June 2007.

Florence sales tax revenue decreased 0.23 percent in June whereas Muscle Shoals' revenues increased a modest 0.5 percent over last June.

"I was disappointed in the economic stimulus," said Dan Barger, Florence city treasurer.

Both cities remained ahead of budget by slim margins for the fiscal year that will finish the end of September.

Florence remains ahead of budget by 0.01 percent, approximately $2,600, and Muscle Shoals, after three consecutive months of being behind budget, was ahead of its projected budget by $12,761.56.

Tuscumbia also experienced a slight increase in sales tax revenue - 0.16 percent over June 2007.

Though experts agree that retail sales tax is one of the best ways to track how stimulus checks affect an economy, high credit card and housing debt complicates the analysis.

"You'll never know what would have happened if the stimulus checks hadn't gone out," said Nick Johnson, director of the State Fiscal Project at the Center on Budget and Policy Priorities, a nonprofit fiscal policy think tank in Washington DC.

"The hardest thing is whether you can see anything because there are other things going on in the economy."

Any month-over-month analysis also depends on extraneous factors such as how many shopping weekends are available during the time: five in May and four in June, Johnson said.

Sheffield experienced a tax revenue decrease of 6.3 percent in June 2008 over June 2007.

"Any number of things could account for the small decrease in Sheffield even though there might have been stimulus checks floating around," said Sheffield City Clerk Clayton Kelly. One potential reason Kelly gave was the closure of Marvin's Home Supply.

Even with the month's decrease in sales tax, Sheffield remained 1.67 percent over expected budget to date.

"Our sales tax for the most part is relatively flat," Kelly said.

Muscle Shoals saw its biggest month-over-month increase in sales tax in May with 2.47 percent. He said he doesn't know where the increase came from, but it possibly stemmed from stimulus checks, which created a slight increase in spending.

"It had to help some, just from a practical standpoint," said Muscle Shoals City Clerk Ricky Williams. "There's just no way of knowing what people are doing with their money."

Even with the stimulus checks, the small sales tax revenue growth, the biggest source of funding for most city operations, concerns some.

"When you see a growth this small, you have to question if it's a growth in sales or a growth in inflation," said Barger. "The retail base has not shrunk, but it has not grown as it has in the previous years."

Barger said the modest sales tax growth likely reflected inflation, confirmed by federal data.

For example, what could be purchased for $10,000 in 2007 now requires $10,553.34 in 2008, an increase of 5.5 percent, according to the Bureau of Labor Statistics.

Fuel costs have increased 45 percent since the beginning of fiscal 2008 to June, but sales tax is not collected on gasoline.

Instead, across the nation, food and commodity increases have cost shoppers, such as the 11 percent increase in the cost of bread or the 8.4 percent increase in eggs during the current fiscal year, according to the Bureau of Labor Statistics.

In May 2008, sales tax revenue increased 5.03 percent over May 2007. Barger said month-to-month fluctuations can come from timing differences between when a retail transaction takes place and when the retailer pays the money back to the city.

Most cities are working on their budgets and may have little room to expand in an era of increasing fuel, utility and commodity costs.

"If revenues are flat this year, departments will have to cut back on non-essential costs to accommodate the increases in costs," Barger said. "It's almost impossible to budget level with last year because of those increases."

It may be too soon to tell the effects of the stimulus checks.

Across the Shoals, 3,683 individuals have yet to claim their stimulus checks, valued at $1,104,900. If the money were spent solely on consumer goods, the local sales tax revenue could total an estimated $40,000.

In Colbert County, 1,531 individuals and in Lauderdale County, 2,152 individuals are still eligible to receive stimulus checks.

Statewide, 112,004 individuals remained to claim $33,601,200 in the federal funds.

People who receive either Social Security assistance or benefits from Veterans Affairs may not have received their stimulus check, likely because they did not file the required 2007 federal tax returns, officials said.

"You have to file (an income tax return) for a stimulus check," said Dan Boone, media spokesman for the Internal Revenue Service, which administers the stimulus checks.

Also, none of the 120,000 Alabamians who filed for extensions will receive their stimulus checks until they, too, file 2007 income taxes.

"There are a lot of misconceptions surrounding the stimulus checks," said Boone.

Trevor Stokes can be reached at 740-5728 or trevor.stokes@TimesDaily.com.