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If you’re looking for a clear signal of how the state economy is doing, official projections for state revenue provide great indications. The Department of Taxation today posted the latest – an important state document that sets official expectations for tax revenue.

Last Friday we posted about the initial results of the Council on Revenue’s meeting, and today the Council, along with the Department of Taxation, has released the official projections in a report. This latest report anticipates raised revenue for the fiscal year ending June 30, 2010, based on the distributions of tax refunds that straddle fiscal years 2010 and 2011. The official numbers expect general fund tax revenue to grow by 4 percent in fiscal year 2010, ending June 30 this year, and by 6.2 percent in fiscal year 2011.

The report includes an official letter to the governor from the council, which provides more context for its decision making. Read about, for instance, which specific new tax laws affected the projections and how tax refund distributions presented unusual factors to models. Other interesting tidbits include:

• Projections should be considered “tentative” since the governor’s tax refund plan could still change.
• Estimates are even higher than the high end of the council’s economic models: “This is solely a reflection of what the Council anticipated—given what was known prior to its May 27 meeting — with respect to the refund payout timing plan,” says the report.
• This month’s report is actually “very little changed from (the council’s report) one year ago.”
• “Those patterns of economic recovery are increasingly broad-based in Hawaii,” says the report, citing a rise in payroll employment, tourist volumes and activity in home sales, among other factors.
• The report takes into account economic uncertainties in Europe: “Still, recent economic uncertainties within the European Union do not seem to be radiating beyond investor confidence, while the pace of recovery in North America and Asia remains compelling.”

The positive numbers seem to be a sign of recovery in the state economy.

The state economists’ numbers are subject to change, however, depending on how tax refunds are ultimately distributed by the governor (at this time, $150 million of the $275 million will be handed out before the end of this month, the close of this fiscal year).

Of particular interest in the report is this chart which shows the relationship between revenue projections and general expectations for the economy:

DISCUSSION: Come talk story at our money discussion page.