Arkansas saw double-digit growth in revenue collections in February as fewer taxpayers received income tax refunds and the state’s predicted surplus from the recently revised fiscal 2016 forecast continued to grow, the state’s fiscal office reported Wednesday (March 2).
According to the state Department of Finance and Administration’s monthly revenue report, February net available general revenue totaled $279.9 million, $61.6 million or a whopping 28.2% above last year and $31.8 million or 12.8% above forecast.
Eight months into the fiscal year that began in July, Arkansas’ year-to-date net available general revenues totaled $3.41 billion, which is $74.4 million or 2.2% above year ago levels and well above last month’s revised forecast by the same margin.
John Shelnutt, DFA director of economic analysis and tax research, said the strong revenue gains in February were due to declines in income tax refunds for Arkansas taxpayers in the middle of the January to April tax season.
“The decline in tax (refunds) was the main driver,” Shelnutt said of the robust monthly gains. “We don’t know the main reason for the fewer refunds but they are running beyond what we predicted. Some of it may be due to the slow processing of federal refunds by the IRS at the beginning of the year, which affects the states as well.”
A month ago, DFA officials issued a revised official forecast, saying that net available revenues are expected to reach $5.33 billion in fiscal year 2017, an increase of $106.8 million or 2% above the current year. That forecast raised the guidance for fiscal 2016 to include a fully funded budget under the state’s revenue stabilization law and predicted a surplus of $35.9 million.
For the remainder of fiscal 2016, which began in July, net available revenues are expected to reach $5.22 billion, a decrease of $24.2 million, or 0.5% below the previous year. Year-to-date, the first six months of fiscal 2016 through December came in slightly below year-ago levels, but $66.9 million above forecast at that point.
The revenue forecast for fiscal 2016 and 2017 was laid out by DFA Director Larry Walther as Arkansas lawmakers prepare for the upcoming budget session. Gov. Asa Hutchinson said on Feb. 1 following the revised budget forecast that the rosier revenue projections would allow the state to cover all budget items and produce a budget surplus.
“The forecast released today will allow us to meet the needs of the state in terms of education, health care, prisons and other essential services. The forecast is an example of our faith in the strength of the state’s economy, our positive outlook for the coming years, and our commitment to conservative, balanced budgets as a hallmark of good government. Over the next two fiscal years, we anticipate that Arkansas’ revenues will grow and that a budget surplus will result,” the governor said. “This in addition to major reductions in state income taxes which will save more than $100 million for middle-class Arkansans. State revenues continue to show solid, steady growth. The revenue report from January, which was also released today, is a good example of that.”
Shelnutt said Tuesday the robust results from February will add to the surplus forecast made by state finance officials on Feb. 1.
“This month’s results will add on top of that surplus prediction,” said the DFA economist. “That surplus can go above that new target.”
Overall, Arkansas’ year-to-date gross collections continued on a steady path at $4.05 billion, representing an increase of $18 million or 0.4% above last year. Gross general revenues, however, are slightly below forecast by $6.7 million, or down 0.2%.
February collections totaled a tidy $420.4 million, a decline of $4.7 million, or 2.2% compared to last year. As noted by Shelnutt, February income refunds totaled $88.1 million, $60.3 million below a year ago and $33 million below forecast. Sales and use tax collections for the month rose slightly to $178.3 million, an increase of $1.8 million or one percent above last year. Collections, however, were below monthly forecast levels by $3.7 million or -2%. The results largely reflect taxable sales activity in January, DFA officials said.
February corporate income collections totaled $6 million, an increase of $1.7 million from year ago, and $1.3 million or 26.7% above forecast. The gain occurred mainly in estimated payments. The gain was primarily reflected in estimated payments, state tax officials said. Monthly corporate income tax refunds totaled $4 million, which is about $900,000 below year ago levels and $1.5 million below forecast.
February tobacco tax collections, a smaller component of general revenue in annual terms, totaled $16.5 million. Collections increased by $1 million or 6.6% from year earlier levels and were below forecast by 0.2%. Monthly changes in tobacco tax collections can be attributed to uneven patterns of stamp sales to wholesale purchasers, according to DFA.
For the year, individual income tax collections totaled $1.91 billion, $51.3 million, down 2.6% from a year ago and $4.6 million or 0.2% below forecast. Arkansas taxpayers have collected nearly $160 million in income tax refunds this year, which is down $74.6 million or -31.8% compared to last year, and $33 million or -17.1% below forecast. Amounts below forecast in refund categories add to net available revenue results.
OTHER TAX REVENUE SOURCES
July-Feb. 2016: $35.2 million
July-Feb. 2015: $34.8 million
Games of skill
July-Feb. 2016: $35 million
July-Feb. 2015: $28.6 million
July-Feb. 2016: $146.8 million
July-Feb. 2015: $145.4 million
July-Feb. 2016: $45.6 million
July-Feb. 2015: $46.3 million