DF&A Downgrades Forecast, Warns Of Tax Collection Slowdown (UPDATED)

Citing an expected decline in income tax collections, state forecasters revised the current fiscal year budget downward by 1.7% from the previous year.

Arkansas Department of Finance and Administration director Richard Weiss issued a memo to legislators on Monday (Dec. 2) in advance of hearings expected to begin for the state’s fiscal session in February.

“For FY 2014 net available revenues from collections are expected to reach $4,943.8 million, a decrease of $83.2 million, or -1.7 percent from FY 2013 net available,” Weiss reported.

Although state revenues are trending above forecast so far this fiscal year, Weiss warned that changing income tax policy would negatively impact future collections.

“The target rate of growth to meet the new forecast is negative at -1.7 percent for net available funds and -0.2 percent for gross general revenue as part of the expectation that income tax strategy will unwind from the income shift effect for tax year 2012 that helped generate a $299.5 million surplus in FY 2013,” he said.

The tax impact related to 2012 affecting the state stems from changes in federal law when the Bush tax cuts were last in effect. Arkansas benefited from individuals who accelerated income into the calendar year 2012, but the payment of that year’s taxes boosted state income tax collections in 2013.

DF&A is acknowledging that the one-time boost is expected to drop when 2013 income taxes are paid in early 2014.

For the following year, DF&A officials expect positive growth in the state’s tax collections even with more than $85 million in new tax cuts going into effect from changes made in the 2013 regular session.

“For FY 2015, net available general revenues are estimated at $5,040.7 million, an increase of $96.9 million or 2.0 percent over FY 2014. The results include the effects of $85.2 million in tax policy changes enacted and scheduled to effect FY2015 collected revenue,” Weiss told lawmakers.

You can access the full forecast memo here.

Talk Business will update this story later today.