Business

US States Budgets Get Cash Relief

Published

15 years ago

October 19, 2009

Struggling states and towns got a dose of badly needed money this summer from a Cash for Clunkers program that poured hundreds of millions of dollars of tax revenue into their budgets.
Now, like the auto industry, recession-ravaged government are seeing revenue fall off as car buyers take a breather from the frenzied sales of July and August. That means less money for schools, roads, public safety and other projects that get much of their funding from states tax collections.
And while officials welcomed the shot in the arm, the extra clunkers money won’t come close to filling the gaping holes in their budgets or do much to solve the worst revenue downturn in decades.
“It is chump change,” said David Zin, an economist with the Michigan state senate’s fiscal agency.
State and city officials say their budget problems are too severe for one government programme to fix.
“Fifty-thousand is not to be sneezed at,” Dean Rich, finance director of O’Fallon, III, said of the city expected tax gain from its 16 car dealerships. But it’s not enough to prevent a job freeze and cuts to capital project for the town of 29,000 people.
“It’s not the windfall that is going to fix the $1 million shortage we have this year” he said.
Like most governments, O’Fallon suffered during the recession as people facing job losses, reduced pay, lost homes and general unease over the ecoomy snapped their wallets shut. That means big drops in sales tax, which makes up around half of many state budgets. Sales of cars and trucks, big-ticket items with high price tags, are a big component of sales tax collections.
Cash for Clunkers held some promise-customers bought nearly 700,000 new vehicles during late July and August, taking advantage of rebates of up to $4,500 on new cars in return for trading in their older vehicles. The programme ended up tripling the size of tis orginal $1 billion price tag due to its broad popularity. For government budget offices, that represented some rare good news.
The auto forecaster Edmunds.com estimated that the average clunker sales price was $26,321, meaning roughly $18 billion worth of new vehicles were sold under the programme. Multiplied by the average combined state and local sales tax of 7.5 per cent, the total tax bill amounts to a loose estimate of $1.36 billion.
But here’s some perspective – the budget shortfall of Michigan alone, the symbolic heartland of the U.S. auto industry, amounts to $2.8 billion. And it pales in comparison to the $240 billion that states collected in total general sales taxes in 2008.
“That’s more than a drop in the bucket…but not much more for state budgets,” said Robert Ward, director of fiscal studies for the Rockefeller Institute of Government in New York.
The taxes brought in by clunkers offered a summer shot of adrenaline for most states. The funds – often earmarked for school aid, highway repairs and law enforcement – came at a time when they were struggling with big shortfalls.
Kentucky reported that clunkers taxes propped up its Road Fund, which supports the state’s network of roadways. Motor vehicle usage taxes grew 11.4 per cent to $36 million in August, helping keep the fund flat for the month. The state estimates it can now afford to see receipts fall more than 4 per cent for the rest of fiscal year and still meet its budget forecasts.
Legislative estimates in Michigan show the state may have taken in $39 million from Cash for Clunkers. About a third of that money is devoted to education.
Massachusetts reported that motor vehicle sales tax revenue rose nearly 36 per cent in August from a year earlier, higher than the state’s monthly target. That gain, combined with a rise in the overall sales tax that month, pushed vehicle tax collections above the monthly goal.
The extra money may be a help, but state budget officials say it’s minor compared with their huge problems.
Kentucky officials have warned that until unemployment improves – about 11 per cent of states residents are now jobless – tax revenues will remain in the doldrums.
In Michigan, where the states sales tax is the major source of aid for schools, lawmakrers proposed cutting $218 per pupil from the aid the state government gives to local school districts. That’s despite the clunkers money and extra vehicle sales tax revnue from laid off auto workers who got vouchers for new cars as part of their severance. Sales tax collections are still down 9 per cent.
Auto sales nationally fell 41 per cent from August to September, a drop caused largely by people who would have normally waited a few months to buy a new vehicle rushing in to take advantage of the federal programme’s big rebates.
That hangover showed up in Massachusetts sales tax collections last month, which were 5 per cent below forecasts. That worries Robert Bliss, a spokesman for the state revenue department.
“Has the pool been drained as a result of this programme for the next couple of months? That is the question,” he said.

Business

NSIB, AAAU Sign MoU On Air Safety Training

Published

2 days ago

April 18, 2024

The Tide

As part of efforts to curb mishaps in the aviation industry, the Nigerian Safety Investigation Bureau (NSIB) has signed a Memorandum of Understanding (MoU) with the African Aviation and Aerospace University (AAAU) to deepen training on preventing and reducing accidents in Nigeria’s air transport.
Director, Public Affairs and Consumer Protection of NBIS, Mrs Bimbo Olawumi Oladeji, in a statement, said NSIB granted AAAU access to its facilities to facilitate an efficient exchange of resources and expertise.
According to the statement, the Director-General/Chief Executive Officer of NSIB, Captain Alex Badeh, who spoke at the ceremony held at the NSIB Training School, noted that the MoU sets the stage for facility sharing, capacity building, and collaboration between the Bureau and AAAU.
“I am confident that this MoU will enhance the effectiveness of our collaboration and commitment to promoting safer skies and operational excellence in the aviation industry in Nigeria and beyond”, Badeh said.
Registrar of AAAU, represented by the Director of Physical Planning and Works, Engineer Masud Aliyu Yerima, was also quoted in the statement, saying, “The journey of AAAU’s establishment and progress would have faced considerable challenges without NSIB’s generous support”.
He commended Badeh for his exemplary leadership and steadfast dedication in propelling NSIB to greater heights, and affirmed AAAU’s readiness to engage in mutually beneficial endeavours with NSIB.
“This partnership marks a significant milestone in fostering a culture of safety and excellence within Nigeria’s aviation sector, and both NSIB and AAAU are poised to leverage this synergy for the benefit of the industry and the nation at large.
“The African Aviation and Aerospace University, AAAU, is the first Pan-African university dedicated to aviation, aerospace, and environmental science.
“Addressing two critical needs within the continent’s industry, AAAU tackles the research and development gap in Africa’s aviation and aerospace sector while simultaneously cultivating a skilled workforce to propel it forward”, the statement added.

By: Corlins Walter

Business

Naira Rebound, Air Peace’s Expansion Deepens International Route Competition

Published

2 days ago

April 18, 2024

The Tide

he commencement of flights operations on the London route by an indegenous Carrier, Air Peace Airline, and the recovery of the local currency have sparked fresh competition on international routes.
Air Peace, Nigeria’s outstanding indigenous airline, may face a prolonged market battle with many foreign airlines with decades of experience in the industry following its entrance on the Nigeria-London route.
Some of the industry’s experts say the airline required support from the government and a strategic approach to stay competitive.
Analysts have also stated that the strategic move has garnered high praise from stakeholders in the aviation sector, considering that Nigerians were paying exorbitant prices to travel from Nigeria to London, but that sustaining this momentum will require more than just offering low prices.
On March 31, 2024, the 11-year-old airline made a bold statement with its inaugural flight, using a Boeing 777 aircraft, offering a capacity of 274 seats and carrying 260 passengers from Lagos to London.
It sold its tickets for N1.2m, a price way lower than the rates offered by most foreign airline operators plying the same route.
Just two weeks after entering the market, Air Peace’s Chief Executive Officer, Allen Onyema, complained on Arise TV that foreign airlines were undercutting prices in an attempt to push Air Peace out of the market.
Onyema said, “We are aware that there are devilish conspiracies. All of a sudden, airlines are pricing below the cost. One airline is advertising $100 and the other $350. If you peel up your entire aircraft and carry people on the wings, it is not even enough to buy fuel.
“Why are they doing that? Their government is supporting them because Nigeria has been a cash cow for everybody. The idea is to take Air Peace out, and the moment they succeed in taking Air Peace out, Nigerians will pay 20 times over. It would happen, God forbid, if they were able to take Air Peace out”.
It was gathered that an economy ticket for a flight scheduled for April 29, 2024, from Lagos to London costs about N679,375 on Ethiopian Airlines, an operator with 75 years of experience.
Air Peace priced the same ticket at N1,090,750. The difference is that on Air Peace, it will be a 6-hour non-stop flight, while on Ethiopian Airlines, it will take 16 hours with one stopover.
Last Friday, Ethiopian Airlines reduced the price of its London ticket by 0.77 per cent to N1,628,660 from N1,641,249 two weeks ago.
In the same period, Air France’s price dropped to N1,687,824, nearly halving from last month’s N2,482,138.
On March 4, 2024, Lufthansa offered the Lagos-London route for N1,966,165. Qatar Airways provided the same ticket for N2,016,824, and KLM priced it at N2,448,740.
This continuous decline in air ticket prices was also driven by the strengthening of the naira against the US dollar and the payments of airlines’ trapped funds by the Central Bank of Nigeria.
Minister of Aviation and Aerospace Development, Festus Keyamo, had confirmed that the Federal Government, through the CBN, had cleared all the trapped funds (foreign exchange backlogs) to the tune of about $160m.
Beyond the ongoing price war, the Air Peace Chairman had also lamented the challenges with ground handling and space allocation at the London Gatwick Airport, adding that no airline has faced such obstacles before.
He noted, “On the inaugural flight out of London, 24 hours before departure, the management of Gatwick Airport moved us to another checking area instead of the designated one.
“The area they provided had a malfunctioning carousel, forcing us to manually transport luggage 50 meters away, causing delays”.

Business

PH Airport Users Lament Down Turn In Flight Operations

Published

2 days ago

April 18, 2024

The Tide

Users and business operators at the Port Harcourt International Airport, Omagwa, have decried the downward trend in flight operations at the airport.
Some of the users and operators told The Tide that flight operations at the airport, rather than go upward, have steadily been irregular, and diminishing steadily.
A regular air passenger of the airport, Simeon Echeonwu, in a chat with The Tide, said many airlines, both domestic and international operators, that usually operate at the Port Harcourt airport, have stopped operations, whereas others that are still operating are no longer very stable as before.
Echeonwu noted that airlines such as Aero Contractors, United Nigeria, and Green Africa airlines, now operate about one flight, twice a week, unlike before that they flew every day on Lagos and Abuja to Port Harcourt.
Also speaking, former Chairman of the FAAN Accredited Car Hires Association, Clifford Wahunoro, lamented that the down turn in Operations has affected the business of car hires.
“If you have noticed, I have not been regular at the airport for some time now, because business is no longer flowing at the airport as before. I will not fold my hands and be sitting down doing nothing, so I have to look for other things, so I come when I think there will be something.
“You can see that between 12noon and 1pm, after that segment of flights, when you have few flights arrival, many people will close for the day, and when you wait till evening, flight like Dana may come very late at night, and sometimes, it will not arrive, and by that time, many people will not like to book for commercial vehicle”, he said.
Meanwhile, a travel agent, who wished to be anoyimous, decried the rate at which the airport is going down in terms of flights operations, noting that Port Harcourt airport ought to be competing with the other major airports like Lagos and Abuja.
He queried if such was a calculated attempt to bring the airport to its kneel in terms of flight operations, while other major airports have steady flow of flight operations both for domestic and international.
TheTide observed a continuous distortions in flight movement at the airport. Some of the airlines, like Max air, which many passengers patronize, have completely stopped operations, and no new airline has been added.
Apart from the Air Peace Airline that has maintained some level of stability in operations, other few operators have been involved in either steady rescheduling of flights, cancellation and regular delay, resulting in poor and unpredictable flight movement, which affects or determine other businesses in the airport.

By: Corlins Walter