Arkansas Economy Trends Upward With Rest of U.S. (Opinion)

Following the blockbuster first quarter on Wall Street, it’s time to assess the post-recession progress of the Arkansas economy.

Total tax collections are growing, and at a pace faster than expected. This represents more income and spending by consumer­­s, and that’s critical to economic gains.

The number that remains far too sluggish is the increase in gross receipts or sales taxes. We’re up just 1.7 percent this fiscal year compared with the same time a year ago, but in recent months we’ve seen increases in the 5 percent range. If we maintain the first-quarter trend, then retailers should be much happier in 2012.

Individuals and corporations are making more money, with individual income tax collections up 5.4 percent so far in the fiscal year, and corporate taxes up nearly 15 percent. Arkansas has 21,000 more people who are employed this year, and that fact alone helps to account for the surge in individual taxes.

Those additional jobs have resulted in the Arkansas unemployment rate falling from 8 percent in February 2011 to 7.6 percent this year. We topped out at 8.3 percent, and significant reductions will be difficult to achieve until manufacturing job losses level out.

Fort Smith, which has been hardest hit in the loss of manufacturing jobs, took another blow with news that plans for 300 jobs to be created by Mitsubishi for a wind turbine facility that has already been built would be put on hold indefinitely. And Jonesboro, which endured the recession perhaps better than any metro area in the state, took a blow with the announced closing of the Quad/Graphics printing plant that employs 600 people.

Overall, the metro areas will enjoy the fastest job growth the rest of the year, and the challenge will become finding educated, qualified applicants. Rural Arkansans who have lost manufacturing jobs must pursue new career paths because replacement jobs won’t develop anytime soon.

Home sales in Arkansas during the first quarter are up 8.6 percent over a year ago, and home prices on average have begun to appreciate again, albeit at just 1 percent.

The growth number that continues to amaze me is the 108 percent increase in “games of skill” taxes, which are generated by the non-racing businesses of Oaklawn Park in Hot Springs and Southland Park in West Memphis. Through nine months, the state has collected $19.3 million compared with $9.3 million the previous year. With a tax rate of 18 percent, that translates to net gaming revenue of $107 million in nine months. Perhaps that extra $50 million-plus in casino action helps explain slower lottery ticket sales growth.

The biggest development on the horizon that could accelerate the state’s recovery momentum is the Smackover Brown Dense formation in southern Arkansas. The significant slowdown in natural gas production in the Fayetteville Shale Play, which I still contend propped up Arkansas in a big way through the recession, would be a big blow if not for prospects in the Brown Dense play. Billions of barrels of oil are believed to be accessible using new fracking techniques, and that could result in a revival of south Arkansas’ oil boom days. Southwestern Energy Co. and others are testing as quickly as they can to assess the possibilities and, if successful, capitalize on high oil prices.

Finally, it’s difficult to gauge the impact of the impending U.S. Supreme Court decision on health care reform. The health care industry has plowed along with the assumption it would be implemented in 2014. If the law is ruled unconstitutional — and that seems likely in light of analysis since the deliberations — then the industry will return to wait-and-see mode and the November elections will loom even larger. This, coupled with proposed Medicare spending cuts, would have multiple negative effects on the Arkansas health care system in terms of investment and hiring.

Overall, it’s easy to see Arkansas is slowly bouncing back and trending in the right direction.

Jeff Hankins can be reached via e-mail at [email protected], followed on Twitter @JeffHankins and connected with at Facebook.com/Jeff.Hankins and Linkedin.com/in/JeffHankins.