State’s revenue passes forecast

November posts $14.9 million gain

State general revenue in November increased by $14.9 million over the same month last year to $427.6 million in what the state’s chief fiscal officer described as the latest evidence of an improving economy.

Last month’s collection exceeded the state’s latest forecast on Nov. 15 by $4 million, the state Department of Finance and Administration said in a report released Tuesday.

The state’s two largest sources of general revenue are individual income taxes and sales and use taxes, and last month’s collections for each source exceeded collections in November 2011.

November’s general revenue collection “reflects what we said when we raised the forecast [on Nov. 15], that we see the economy improving slowly,” said Richard Weiss, who is the state’s chief fiscal officer and director of the state Department of Finance andAdministration.

“It is not an even recovery, but it seems to be in a good recovery mode,” he said. “And we expect and hope that that will continue.”

Richard Wilson, an assistant director of research for the Bureau of Legislative Research who monitors state tax collections for lawmakers, added: “The economy continues to walk, not run.

“The job market and the housing market are showing a glimmer of hope, but consumers and investors are waiting for positive news from Washington,” he said, referring to Congress and President Barack Obama resolving what has been described as the “fiscal cliff.”

According to the finance department, November’sgeneral revenue included:

An $8.8 million (4.8 percent) increase in individual income tax collections over a year ago to $192.5 million. That exceeded the state’s forecast by $4.9 million (2.6 percent).

The state’s chief eco-nomic forecaster, John Shelnutt, said individual income tax withholdings increased at the same rate as overall individual income tax collections.

The increased individual withholdings over a year ago mean more people are working and more people are working longer hours, he said, but “I don’t know if it is bonuses being paid out through payroll or not.”

“We know it’s not coming from major increases in COLAs [cost-of-living adjustments for employees],” Shelnutt said.

According to the state Department of Workforce Service’s latest report, Arkansas’ unemployment rate ticked up to 7.2 percent in October, from 7.1 percent in September.

However, Arkansas’ unemployment rate for October was lower than the 7.9 percent national rate and nearly a percentage point lower compared with the same month a year ago, when the state rate was 8.0 percent.

A $6.3 million increase (3.8 percent) in sales and use tax collections over a year ago to $173.2 million. That fell short of the state’s forecast by $0.6 million (0.4 percent).

Weiss said sales and use tax collections “are still weak, but [there was] marginal growth in November from a year ago.”

A $0.5 million increase (4.7 percent) in corporate income tax collections over a year to $10.6 million. But that’s $0.9 million (7.4 percent) below the forecast.

Weiss said corporate income tax collections often fluctuate each month and that’s “not really an indicator” of the state of the economy.

Last month’s general revenue of $427.6 million increased by 3.6 percent over a year ago and was 0.9 percent above the forecast.

But the month’s collections fell short of the record for the month of November - $480.7 million, collected in 2009, said state tax analyst Whitney McLaughlin.

The record collections for any month occurred in April2012 when the state reported collecting $718.2 million in general revenue, she said. Historically, the state’s best month for general revenue is the one in which state tax returns are due. In recent years, that month has been April, though it was May in earlier years.

During the f irst f ive months of fiscal 2013, the state’s gross general revenue totaled $2.308 billion, an increase of $54 million (2.4 percent) over the same period in fiscal 2012, according to the finance department. These collections are $4 million (0.2 percent) above the state’s forecast on Nov. 15.

The gross general revenue collections are reduced by refunds and about a dozen other deductions, leaving a “net” revenue that agencies spend.

During the f irst f ive months of fiscal 2013, the net totaled $1.973 billion, and that’s a $53 million (2.8 percent) increase over the same period in fiscal 2012. That’s $4.6 million (0.2 percent) above the Nov. 15 forecast.

On Nov. 15, the finance department increased its forecast for fiscal 2013 by $99.5 million (2.1 percent) because growth in general revenue in the first four months of the fiscal year was better than expected, according to Weiss. The projection for $99.5 million in new surplus funds brings the expected surplus to nearly $300 million, according to state officials.

That’s money some government officials want to spend.

With the 2013 session starting Jan. 14, Weiss said the state’s revenue forecast for fiscal 2014 “still anticipates having to make some big reductions in Medicaid or find some other way to finance it,” and that “would seem to forgo any room for tax cuts from our perspective.”

Sen. Michael Lamoureux, R-Russellville, who will be the Senate president pro tempore in 2013 and 2014, said Weiss has been clear in his perspective and he appreciates that.

“Now, the Legislature is going to have to decide what our perspective is as a group,” he said, and it’s still too early to do that.

Northwest Arkansas, Pages 7 on 12/05/2012

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