Revenue collections eclipse state's forecast for November

Graphs showing Arkansas sources of general revenue.
Graphs showing Arkansas sources of general revenue.

Arkansas' state general revenue collections in November decreased slightly from year-ago figures but still exceeded the state's forecast.

Net revenue was below the forecast for the month but is above the forecast in the fiscal year to date.

Last month's tax collections dipped by $1.7 million (0.4 percent) from November 2014 to $462.9 million and were above the state's forecast by $7.4 million, (1.6 percent), the state Department of Finance and Administration said Wednesday in its monthly revenue report.

The state's sales and use tax collection in November increased over year-ago figures, while individual income taxes dropped largely as expected because of cuts enacted by the Arkansas Legislature in the past few years, state officials said.

Sales and use taxes and individual income taxes are state government's two largest sources of general revenue.

The record collection for any November remains $480.7 million in 2009, said Whitney McLaughlin, a tax analyst for the finance department.

Gov. Asa Hutchinson said November's revenue report "shows a continued trend in the right direction for Arkansas' economy."

"In fact, it was the eighth consecutive month we saw an increase in our state's sales tax, which ... is a reliable marker for consumer confidence and economic growth in our state," the Republican governor said in a written statement. "However, the fact that our net revenues [for state agencies to spend] are down this month is a cautionary note to remind us to be conservative in our budgeting."

State tax refunds and several other government expenditures come off the top of total general revenue, leaving "net" general revenue that agencies are allowed to spend.

Net general revenue in November declined by $16.5 million (4.2 percent) from year-ago figures to $374.6 million and was $4.3 million (1.1 percent) below the forecast.

However, during the first five months of fiscal 2016, the net available general revenue increased by $900,000 over the same period in fiscal 2015 to $2.12 billion and exceeded the state's forecast by $59.1 million (2.9 percent).

John Shelnutt, the state's chief economic forecaster, said the sales and use tax collections "would indicate something of a boom over the past seven or eight months. Anything above 4 percent is enough for me [to call it a boom]."

Shelnutt said November's tax collections "don't reflect Black Friday sales" for which sales taxes will be paid by retailers to the state in December.

Arkansas' unemployment rate dropped for the fifth-straight month in October, mirroring a decline in the national rate, the federal government reported two weeks ago.

The unemployment rate fell to 5.1 percent, down from 5.8 percent in October 2014. The national rate was 5 percent in October.

During the first five months of fiscal 2016, total general revenue increased by $18.9 million (0.8 percent) over the same period in fiscal 2015 to $2.48 billion and exceeded the state's forecast by $74 million (3.1 percent), the finance department said.

So far in fiscal 2016, sales and use tax collections have increased by $52.8 million (5.7 percent) over the same period in fiscal 2015 to $974.6 million and exceeded the state's forecast by $34.6 million (3.7 percent).

In fiscal 2016, individual income tax collections have decreased by $42.3 million (3.6 percent) over the same five-month period in fiscal 2015 to $1.13 billion and exceeded the state's forecast by $25.6 million (2.3 percent).

Larger-than-expected corporate income tax refunds are largely responsible for the $16.5 million decline in net available general revenue in November from a year ago, the finance department said.

November's corporate income refunds were three times higher than a year ago and $12.5 million more than forecast and "most of the refunds represented reconciliation of overpayments by corporations with their final returns for tax year 2014," the finance department said in its written report.

Across the nation, the growth in total state tax collections has fluctuated significantly during the past two years, according to the Nelson A. Rockefeller Institute of Government in New York.

"Total state tax collections were rather weak in the first half of calender year 2014, but resumed growth since then," the institute said in a report released last month.

But, the institute added, "recent fluctuations in the stock market [will] likely lead to further fluctuations in personal income tax collections."

According to the state Department of Finance and Administration, November's general revenue included:

• A $13.7 million (6 percent) decline in individual income tax collections over a year ago to $213.4 million; that's $1 million (0.4 percent) below the state's forecast.

Reduced income tax collections from the withholding tax accounted for the decline from year-ago figures, the department said.

• A $4.5 million (2.5 percent) increase in sales and use tax collections from November 2014 to $184.9 million, which exceeded the state's forecast by $900,000 (0.5 percent). "It's lower growth than in recent months, but we'd like to see it averaged with December to get a better picture" on the sales and use tax collections, Shelnutt said.

• A $1.2 million (18.8 percent) increase in corporate income tax collections over year-ago figures to $7.6 million, which exceeded the state's forecast by $1.3 million (20.4 percent). State officials have said corporate income tax collections often fluctuate with corporations' federal tax strategies.

Richard Wilson, assistant director of research for the Bureau of Legislative Research, said there were "no surprises except for the corporate income tax refunds" in the November revenue report.

"Corporate income tax revenues [and the associated refund amounts] possess the greatest relative statistical variance of the general revenue sources, so the surprise should not be a surprise," Wilson said in a written statement.

Metro on 12/03/2015

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