State revenues fell below projections in the March report, a dip caused by sales tax and individual income tax collections that did not meet expectations due to wintry weather that shut down Arkansas for several days in February, the state’s fiscal office reported Tuesday.
The state’s net available general revenue last month totaled $365.2 million, $21.3 million or -5.5 % below last year and $13.2 million or -3.5 % below forecast. However, year-to-date net available general revenues total $3.7 billion, $105.9 million or 2.9 % above year ago levels. After nine months into the fiscal year, net available revenue is above forecast by $81.4 million or 2.2 %.
“The one thing that I have been watching over the last several months is the sales and use tax collections came in below forecast and are growing slower than expected,” said Michael Pakko, chief economist at the University of Arkansas at Little Rock’s Institute for Economic Advancement.
However, Pakko said the significant thing about the March report is it is a snapshot of February, the shortest month of the year where Arkansas businesses and state government were also shut down for several days because of icy weather. March’s report reflects sales tax revenues collected in February.
“It is pretty clear that the weather put a damper on sales during the month, so it is likely a one-time occurrence,” said the UALR economist. “But, overall, I don’t see any underlying weakness in the Arkansas (economy).”
MARCH INCOME TAX COLLECTIONS DOWN, REFUNDS UP
Overall for March, individual income tax collections totaled $229.4 million, down 7% or $17.2 million compared to last year. That is also 7.2% or $17.7 million below forecast. State officials said individual withholdings fell 5% compared to the same period a year ago, reflecting shifts in payroll withholding rates.
However, individual income tax refunds for Arkansas taxpayers jumped 8.6% to $115.5 million, $8.6 million above year ago levels and $2.2 million above forecast. March sales and use tax collections, however, fell by $3.3 million or 1.8% to $179.8 million, and $5 million or 2.7% below forecast.
Corporate income tax collections in March rose to $75.4 million, an increase of $9.6 million from year ago, and $9.2 million or 13.9%. Tax refunds for Arkansas businesses totaled $3 million, up $1.6 million above year ago levels.
March tobacco tax collections, a smaller component of general revenue in annual terms, topped $17 million.
Year-to-date, Arkansas’ gross collections came in just below $4.6 billion, up by 2.6% or $115.4 million. Gross general revenues are above forecast by $56.8 million or 1.3 %.
Individual income tax collections for the year were up 2.1% to nearly $2.2 billion, or $45.8 million above last year’s collections, and $4.9 million or 0.2 % above forecast.
Collections for individual withholding are up 2.5 % from year ago levels.
CORPORATE TAX COLLECTIONS UP 10% FOR THE YEAR
For the year, Arkansas taxpayers have received nearly $350.1 million in tax refunds, up $9.2 million or 2.7% compared to last year and $7.8 million or -2.2% below forecast. Refund amounts below forecast add additional dollars to the state’s bottom line and net available fund for other budget matters.
At the same time, sales and use tax collections rose by 1.9 % or $30.3 million to nearly $1.65 billion year over year. That total is $13 million or 0.8% above forecast.
The bellwether corporate income tax collections totaled $337.6 million, an increase of $31.8 million or 10.4% for the year. Corporate income is above forecast by $35 million or 11.6%. Year-to-date corporate income tax refunds total $35.4 million, a decrease of $14.0 million compared to the same year-to-date period last year.
Pakko noted that the decline in individual income tax revenue versus forecast and year ago levels was partly due to the state’s first income tax rate change in decades, which also caused the shift in the payroll withholding rate from updates to the state withholding tax tables.
“We are still doing pretty good year over year, and I think once the tax season is done, we will be able to look back and get a better picture of what is taking place now,” Pakko said, noting that the still has a $81.4 million “buffer” of net available revenue above forecast.