State tax collections continue flat in November, yearly receipts nearly $27 million below forecast

State tax collections in November were mostly flat ahead of the all-important Christmas shopping season as Arkansas households appear reticent to hike spending during the holiday although consumer confidence across the U.S. is near 16-year highs.

Through November, the fifth month of the state’s 2018 fiscal year that began July 1, year-to-date available general revenues were $2.17 billion, up 1%, or $20.8 million above year ago levels. However, revenue collections were down 1.2%, or $26.8 million below forecast from July to November.

Despite the flat collections, Arkansas saw “good growth” in payroll withholding tax collections that reflect a solid job market, said John Shelnutt, director of economic analysis and tax research for the state Department of Finance and Administration (DFA). Shelnutt said sales tax collections in November were above year ago by 2.8%, but slightly below forecast due to large refunds processed this month.

In December, Shelnutt said certain timing factors that will give Arkansas consumers an extra day and four Saturday shopping days between Thanksgiving and Christmas Day should boost overall sales tax revenue in the first half of fiscal 2018. State budget officials also expect higher ecommerce collections compared to a year ago after Amazon decided in March to begin collecting sales taxes for online purchases from existing retailers with a nexus, or physical presence in Arkansas, he said.

“We expect good holiday shopping results to be reflected in December and January reports from very good economic indicators locally and nationally as well as timing factors favoring this shopping season,” Shelnutt forecasted. “At the economic level, total payroll income gains at 4.5% year-to-date  and 4.8% in November suggest retail growth of about 3.5% and in-line with national retail industry expectations.”

The Arkansas Revenue Stabilization Act mandates a balanced budget to provide appropriate funding levels for all the state’s major priorities under Gov. Asa Hutchinson’s $5.5 billion budget for fiscal 2018. The Arkansas General Assembly’s biennial fiscal session begins in February where lawmakers will consider budget requests for fiscal year 2019 and consider other financial matters concerning the state’s operations.

Arkansas voters approved a constitutional amendment in November 2008 that requires the legislature to convene in fiscal sessions in even-numbered years. The fiscal session will last 30 days, unless extended by a 75% vote of each chamber. The fiscal session cannot be extended any more than 15 days, so the longest fiscal session allowable is 45 days.

REVENUE DETAILS
So far, in fiscal 2018, most major categories were flat or below the yearly forecast set the state’s budget officials at the Department of Finance and Administration (DFA). For example, sales and use tax collections came in well below expectations by 3% or $30.1 million. On a year-to-date basis, however, sales were slightly up by 0.7%, or $7.2 million to $979.9 million.

Year to date gross tax receipts rose by $39.1 million, or 1.6% million to $2.53 billion. That tally is $21.1 million or 0.8% below forecast, state budget officials said. Yearly individual income tax collections were a robust $1.19 billion, or $35,4 million, or 3.1% above year ago levels, and $10.6 million, or 0.9% above forecast

Like the yearly totals, Arkansas tax collections across the board were mostly flat or below forecast in November. However, individual income taxes, the state’s single largest category for gross receipts, exceeded the monthly forecast at $201.4 million, up $8.2 million, or 4.1% compared to last year and 1.8 million or 0.4% above forecast.

November sales and use tax collections, however, continued to trend below expectations. Revenue tallies for the month were $189.6 million, an increase of $5.1 million or 2.8% above a year ago, but $2.7 million or 1.4% below budget forecast.

Monthly individual income tax refunds, which reduce net available state funds, totaled $16.3 million, $6.8 million and $4.4 million, respectively, above last year levels and the monthly forecast. Corporate income tax refunds were $8.3 million, $3.9 million above year ago levels and $10.6 million below forecast.

November corporate income collections were only $4.4 million, a decrease of $6 million, or 57.5% from a year ago, and $1.1 million or 20.3% below forecast.

OTHER TAX REVENUE SOURCES
Alcoholic beverage
July-November 2018: $23.6 million
July-November 2017: $22.9 million

Games of skill
July-November 2018: $25.7 million
July-November 2017: $23.4 million

Tobacco
July-November 2018: $94.3 million
July-November 2017: $92.6 million

Insurance
July-November 2018: $42.1 million
July-November 2017: $42.6 million