State tax collections begin fiscal 2017 below forecast

After ending fiscal 2016 with a $177 million surplus, state tax collections in the first month of the new budget year came in well below forecast as a number of economic indicators point to slowing business activity in the second half of 2016.

According to the Arkansas Department of Finance and Administration’s monthly financial report, net available general revenues for the first month of fiscal 2017 totaled $400.6 million, $1.4 million or 0.4% above last year and $7 million or 1.7% below forecast.

State budget officials said results in July for major categories consisted of sales and corporate income tax collections below forecast, and better-than-expected individual income tax revenue. The July revenue tallies also included an annual deposit to general revenue from the Arkansas State Auditor’s Office of $20.6 million, which was considerably above the year ago levels of $13 million and $10 million above forecast.

Overall, July collections totaled $467.8 million, an increase of $900,000 or 0.2% from last year and $8.2 million or 1.7% below forecast.

July Individual Income Tax collections totaled a strong $210.6 million. Collections increased by $9.8 million, or 4.9% compared to last year, boosted by growth in payroll withholding tax. With respect to the forecast, collections were $5.8 million or 2.8% above forecast.

Individual income tax refunds were only $5.9 million, $3.7 million below last year and $2.1 million or 26.6% below forecast. Refund amounts below forecast add to net available fund results. Corporate income tax collections for the month were $6.9 million, a decrease of $13.5 million from year ago, and $14.4 million below forecast.

July sales and use tax collections of $193.1 million were flat compared to a year ago. Collections were below monthly forecast levels by $8.9 million or 4.4%. July 2016 was a shorter collection month compared to year ago July. Collections from motor vehicle sales tax were also down from a year ago, state budget officials said.

Arkansas corporate income tax refunds totaled $2.8 million in July. This amount is $1.5 million above year ago levels and $1.6 million above forecast.

July Tobacco Tax collections, a smaller component of general revenue in annual terms, totaled $17.1 million. Collections decreased by $3.8 million or 18.2% from year earlier levels and were below forecast by $2.4 million. Monthly changes in tobacco tax collections can be attributed to uneven patterns of stamp sales to wholesale purchasers.

OTHER REVENUE SOURCES (Fiscal year)
Alcoholic beverage
July 2017 $5.6 million
July 2016 $5.4 million

Games of skill
July 2017: $4.6 million
July 2016: $4.1 million

Tobacco
July 2017: $17.1 million
July 2016: $20.9 million

Insurance
July 2017: $1.1 million
July 2016: $700,000