Tax collections in Arkansas rise for month, but lag forecast

State’s $518.5M March haul marks rise of $8.2M from ’17

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

Arkansas' general revenue tax collections in March rose by $8.2 million over the same month a year ago, to $518.5 million, and lagged the state's forecast by $2.4 million.

The two largest sources of general revenue -- individual income taxes, and sales and use taxes -- both increased in March over the same month a year ago, the state Department of Finance and Administration reported Tuesday in its monthly report.

Both sources of tax revenue barely fell short of the forecast for March.

The state's record for general revenue collections for March continues to be the $547.8 million collected in March 2016, said Whitney McLaughlin, a tax analyst for the finance department.

Gov. Asa Hutchinson said Tuesday in a written statement that "the revenue report is consistent with a continued vibrant economy and with my goal of ending the year with a significant surplus."

March was the ninth month of fiscal 2018, which started July 1, 2017.

The state's chief economic forecaster, John Shelnutt, said individual income tax withholdings have increased by 4.8 percent so far in fiscal 2018 over the same period last fiscal year, and that's "the stable guide to what the economy is doing, and it is a very healthy growth rate."

During the first nine months of fiscal 2018, general revenue totaled $4.75 billion -- a $159.2 million, or 3.5 percent, increase over the same period a year ago, the finance department reported. That's $32.4 million, or 0.7 percent, above forecast.

So far in fiscal 2018, individual income tax collections have increased by $115.7 million, or 5.2 percent, over the same period in fiscal 2017. They exceeded the forecast by $42.9 million, or 1.9 percent.

And sales and use tax collections during the first nine months of fiscal 2018 have increased by $44.3 million, or 2.5 percent, over the same period last fiscal year to $1.79 billion, but lagged the forecast by $7.1 million, or 0.4 percent.

Tax refunds and some special government expenditures, such as court-mandated desegregation payments, come off the top of total general revenue, leaving a net amount that state agencies are allowed to spend.

Net revenue in March dipped by $2.9 million, or 0.8 percent, over the same month a year ago to $342.1 million and fell $10 million, or 2.8 percent, below forecast.

Individual income tax refunds in March increased by $16.7 million over March a year ago to $120.2 million, and they exceeded the forecast by $14.7 million, which reduced net revenue for the month.

The total net revenue for the first nine months of fiscal 2018 reached $3.93 billion -- a $155.6 million, or 4.1 percent, increase over the same period in fiscal 2017, the finance department reported. That's $69.6 million above the state's forecast.

For fiscal 2018, the state-funded general-revenue budget is $5.45 billion, up by $130.1 million over fiscal 2017, according to the finance department.

In May 2017, Hutchinson cut the fiscal 2018 general-revenue budget by $43 million. At the same time, he cut the fiscal 2017 budget by $70 million because of lagging sales and corporate income tax collections, but then restored $60 million of that cut at the end of the fiscal year, after tax collections rebounded.

But Hutchinson said Tuesday in his written statement, "I do not intend to restore last May's spending cut as the agencies effectively absorbed the reduction.

"It should also be noted that the May cuts in educational facility funding and pre K have been restored in next year's budget," the Republican governor said.

In fiscal 2019, which starts July 1, the general-revenue budget for public school buildings will be $41.8 million, including the restored cut of $3.274 million, and the budget for the Arkansas Better Chance pre-kindergarten program will be about $114 million, including the restored cut of $982,000, said Scott Hardin, a spokesman for the finance department.

During this spring's fiscal session, the Legislature enacted Hutchinson's proposed budget of nearly $5.63 billion for fiscal 2019 -- an increase of $172.8 million over the current fiscal year's budget -- and approved the governor's plan to set aside about $64 million of what he considers to be surplus funds. About $48 million of that surplus is earmarked for a new restricted reserve fund and the other $16 million to match federal highway funds. The restricted reserve fund could be used with the approval of the three-fifths of either the Legislative Council or Joint Budget Committee for extraordinary needs in an economic downturn or for future tax cuts.

According to the finance department, March's general revenue included:

• A $10 million, or 4.2 percent, increase in individual income tax collections over year-ago figures to $250.2 million; this fell $1 million below forecast.

The largest category of individual income taxes is withholdings. Withholdings in March increased by $6.5 million over the same month a year ago to $207.3 million, which was $2.8 million below forecast.

• A $6.3 million, or 3.3 percent, increase in sales and use tax collections over the same month a year ago to $200 million, which fell below forecast by $4.1 million, or 2 percent.

For the month, the state collected $29.6 million in sales taxes from motor vehicle sales, a decline of $1.9 million from a year ago. March's vehicle sales taxes also fell $3.1 million short of forecast, state officials said.

• A $10.2 million, or 36.8 percent, decline in corporate income tax collections compared with a year ago. The collection of $17.4 million was $500,000, or 2.6 percent, below forecast.

"We are in the middle of filing season, so, going forward, what refunds hit us in April will be a big part of the story for the rest of the [fiscal] year as we finish out the normal filing season for normal taxpayers," said Paul Louthian, deputy director and comptroller at the finance department.

Individual income tax returns are due April 17, Louthian added.

Metro on 04/04/2018

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