Arkansas' state general revenue in March slipped by $9.7 million from a year ago to $536.7 million, reflecting a sharp drop in individual income tax collections, state officials said Wednesday.
The month's collections fell $12.5 million below the state's forecast. Individual income tax collections fell by $17.2 million. Income tax cuts approved by the Arkansas Legislature and signed into law by then-Gov. Mike Beebe became effective Jan. 1.
Individual income taxes and sales-and-use taxes are state government's largest sources of general revenue and both declined last month, state Department of Finance and Administration officials reported during their monthly general revenue report.
"It was a tough month, but I think it's temporary in the case of sales tax. We did get a nice contribution from corporate income tax. That was almost 14 percent above forecast for the month. That helped," said John Shelnutt, the state's chief economic forecaster.
Sales-and-use tax collections last month dropped from a year ago as the state bore the brunt of February ice and snow storms.
"The sales tax decline is probably weather-related," Shelnutt said.
Taxes on February sales are submitted the following month, leading to the March dip.
During the first nine months of fiscal 2015, general revenue has increased by $115.4 million (2.6 percent) from the same period in fiscal 2014 to $4.57 billion. These collections exceed the state's forecast by $56.8 million (1.3 percent) during the period.
Tax refunds and some special government expenditures, such as court-mandated desegregation payments, come off the top of gross general revenue, leaving a net amount that state agencies are allowed to spend.
So far in fiscal 2015, the net increased by $105.9 million (2.9 percent) from the same period in fiscal 2014 to $3.7 billion. That's $81.4 million (2.2%) above the state's forecast.
Last year, the Arkansas Legislature approved a $5 billion general-revenue budget for fiscal 2015 that increased projected spending by $109 million over the previous year, with most of the increase targeted for public schools, prisons and human services.
That budget anticipates $85 million in general-revenue reductions from tax cuts enacted by the Legislature in 2013 and up to $89 million in savings from the use of federal funds to purchase private health insurance for some low-income Arkansans under the so-called private-option Medicaid expansion.
Legislation that the General Assembly sent to the governor Wednesday would allocate the first $50 million collected above the state's forecast in fiscal 2015 into rainy-day funds for the governor to use and the next $30 million collected above the forecast in the governor's Quick-Action Closing Fund for economic development incentives for private industry to locate in Arkansas.
But Larry Walther, director of the state Department of Finance and Administration, said he doesn't expect net available revenue to stay so far ahead of the forecast during the last three months of fiscal 2015, what with individual income tax collections slipping as a result of the income tax cuts.
In an e-mail, Richard Wilson, assistant director of research for the Bureau of Legislative Research, wrote that "short sales tax collections due to February weather was expected." Regarding the lower individual income tax collections, "we will see if that holds up in April, our only collection month that exceeds $700 million."
According to the finance department, March's general revenue includes:
• A $17.2 million (7 percent) decline in individual income taxes from a year ago to $229.4 million, trailing the state's forecast by $17.7 million (7.2 percent).
• A $3.3 million (1.8 percent) dip in sales-and-use tax collections from a year ago to $179.8 million, falling $5 million (2.7 percent) below the state's forecast.
• A $9.6 million increase in corporate income tax collections from a year ago to $75.4 million, exceeding the state's forecast by $9.2 million (13.9 percent).
Metro on 04/03/2015