Revenue for state up, tops forecast

— Fueled by unexpectedly strong collection of individual income taxes, state general revenue in December increased by $36.4 million over the same month a year earlier to $517.6 million.

Last month’s overall collections exceeded the state’s forecast by $10.8 million, the state Department of Finance and Administration reported Thursday in its monthly revenue report. And the total collected represented a record for the month of December. The old record of $481.3 million was set the previous year, in 2011.

Most of a $36.1 million increase in individual-income-tax collections last month resulted from having two more paydays than in December 2011, Department Director Richard Weiss said.

“We underestimated [December’s collections], and it will come at the expense of [lower collections in January],” he told reporters.

The state’s tax collections for December show “an economy that is continuing to improve, but very slowly,” Weiss said.

Three and a half years after the official end of the 2007-08 recession, the description of slow and steady growth may be the “new normal” for many other states, not just Arkansas, according to the National Conference of State Legislatures.

“With the unpredictability of recent fiscal years, stable is not necessarily a bad position for states, but enough uncertainty lingers on the horizon to create a fragile situation for state budgets,” the conference said in a report released two weeks ago.

State revenue officials project a surplus of about $300 million, with $99.5 million of new surplus funds expected as a result of a Nov. 15 increase in the state general-revenue forecast for fiscal 2013.

That expected surplus will become important as Arkansas lawmakers convene Jan. 14 and grapple with a projected shortfall in the state’s Medicaid program for fiscal 2014 and whether to expand the healthcare program for the poor under the federal Patient Protection and Affordable Care Act. Medicaid officials say 250,000 more Arkansans would be covered under an expansion.

Medicaid’s shortfall is projected to be $298 million in fiscal 2014. If the Legislature follows the governor’s recommendation to provide $90 million in general revenue and $70 million in one-time funds to the program, that would still leave the state Department of Human Services with $138 million that it still needs to cut from the budget, said Amy Webb, a spokesman for the department.

According to the finance department, December’s general revenue included:

The $36.1 million (17.4 percent) increase in the collection of individual income taxes from a year earlier to $243 million, which was $20.1 million (9 percent) over the forecast.

The additional paydays last month helped boost individual-income-tax withholdings by $35.7 million (19.6 percent) over a year earlier to $217.6 million.

The state’s chief economic forecaster, John Shelnutt, said he couldn’t determine from this report whether the increased income-tax withholdings indicate that many more people are working or that they are working more hours or both.

“We still have about 1 percent net job growth in the state, and it hasn’t changed that much,” he said.

Arkansas’ unemployment rate fell to 7.0 percent in November from 7.2 percent in October, the U.S. Bureau of Labor Statistics reported last month. The rate bounced up and down late in the year but has remained below 8 percent since November 2011.

A $4.4 million (2.5 percent) increase in sales- and use-tax collections over a year earlier to $180.9 million, which was $2.9 million (1.6 percent) below the state’s forecast.

“We are continuing the general trend of having not very strong sales-tax collections,” Weiss explained.

“A lot of that I think is due to the general economy, but a lot of that is due to a lot of people buying [over the Internet] and companies that don’t collect the sales tax,” he said.

Most businesses will pay sales taxes to the state this month based on their sales in December, according to Shelnutt.

A $4.0 million decrease (5.9 percent) in corporate income taxes over a year earlier to $62.8 million, which was $6.3 million (9.2 percent) below the state’s forecast.

Corporate income taxes are a volatile source of taxes that often fluctuate on a monthly basis, Shelnutt said.

During the first six months of fiscal 2013, the state’s general revenue increased by $90.3 million (3.3 percent) over the same period in fiscal 2012 to $2.826 billion, according to the finance department. That’s $14.8 million (0.5 percent) above the state’s Nov. 15 forecast.

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

During the first six months of fiscal 2013, the net increased by $90.8 million (3.9 percent) over the same period in fiscal 2012 to $2.430 billion, the department reported. That’s $22.1 million (0.9 percent) above the Nov. 15 forecast.

For his part, Democratic Gov. Mike Beebe advised not getting excited about December’s $36.4 million increase in general revenue over the previous December’s figure

“We don’t get excited when we’re way over. We don’t get excited when we’re way under. We look at a trend, not a month to month,” he said.

But Beebe added that individual-income-tax withholdings have increased because more people are working.

Front Section, Pages 1 on 01/04/2013

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