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Erie County consumers don't seem to be buying more in 2004 than they did in 2003, creating a problem for County Hall and for any local government that expected more sales tax money this year.

It's also a problem for 2005, since the Giambra administration sees a higher sales tax as the best way to avoid layoffs and huge cuts in county services. A budget official said he might rethink his estimate that a 1 percentage point increase will generate $125 million annually.

County Comptroller Nancy A. Naples told budget officials days ago that sales tax income could end the year $13.3 million behind estimates. She says collections have lagged 2 percent, "in stark contrast" with hopes they would grow 5 percent this year, to $258 million.

She urged Budget Director Joseph Passafiume to "exercise caution when estimating sales tax revenue for 2005."

Passafiume said the state Department of Taxation and Finance, which distributes sales tax income to county governments, withheld $7 million from an Erie County payment early this year, apparently to correct for a prior year's excess.

He said he's still trying to obtain an explanation and wonders if other adjustments are causing the shortfall more than consumer attitudes.

"It could be a problem, absolutely, before we close the books on 2004," said Passafiume, who's focused this week on preparing the 2005 budget, which must arrive at the County Legislature's doorstep by Wednesday.

"I want Albany to give me a full reconciliation with how they came up with the prior-period adjustment," he said. "It distorts my forecasting for 2005."

A department spokesman said it's not uncommon that certain businesses are charged too much in sales tax, and the department corrects it by withholding payments to counties later.

Spokesman Thomas Bergin also said sales tax income is up statewide, but the state and some counties have expanded sales taxes to balance budgets. Using just the state-levied portion of the sales tax as a snapshot, September income rose 1.6 percent over the same month last year.

Erie County adds a 4 percent sales tax to the state's 4.25 percent. Three of Erie County's pennies are shared with other local governments and school systems. But the income generated by the fourth penny -- added to solve a budget crisis in 1985 -- is kept by county government.

That penny was projected to generate $125 million this year. Similarly, County Executive Joel A. Giambra expected that a new penny he has proposed adding to the sales tax, bringing it to 9.25 cents on the dollar, would raise a new $125 million.

In the spring, it had looked as though governments would reap a windfall since the price of gasoline had risen so dramatically, by about 50 cents a gallon. But Passafiume says that consumers facing steep increases in energy costs are just as likely to cut back elsewhere, so governments don't end up reaping more.


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