Two months before the end of fiscal year 2018, state budget coffers are nearly $54 million ahead of forecast despite lukewarm tax collections in April after more Arkansans received bigger income tax refunds.
In the state’s monthly revenue report released Wednesday (May 2), the Department of Finance and Administration (DFA) reported that net available general revenue came in at $657.1 million, $3.8 million or 0.6% below last year and $15.7 million or 2.3% below forecast.
The chief reason behind the April shortfall was that Arkansas taxpayers cashed in $19.1 million over the state’s forecast in income tax refunds at the close of last month’s state and federal tax deadline. However, among the major categories, sales tax collections were above forecast and year ago levels, while individual and corporate income tax collections were flat or below expectations, said state budget officials.
“It does look favorable with two months remaining in fiscal 2018,” said John Shelnutt, administrator for DFA’s Office of Economy Analysis and Tax Research. “The remaining concerns have to do with the seasonal pattern of collections and the remaining income tax returns and refunds to be processed.”
Shelnutt also said the state usually has “rather large collection events” in May because of seasonal corporate income tax filings and possible anomalies in June due to quarterly Individual estimated payment filings.
“We also have a largely seasonal pattern forecast for another $64.8 million in Individual refunds in May and $22.6 million in June. Faster processing in April and therefore more rapid decline in refunds compared to prior years and forecast with stable averages in the refunds would suggest a benefit to forecast in May and June,” said Shelnutt. “However, we have had enough differences in fraudulent claims/return handling and other processing differences in recent years that we are not prepared to feel confident about that prospect until later in May.”
Beyond those minor issues, Shelnutt said the state has seen enough volatility in sales tax collections over the past two annual reporting cycles to remain cautious until the fiscal year ends on June 30.
“We need to wait and see,” said the state’s chief economist.
State budget hawks in the legislature will likely cheer the April revenue report with less than two months before fiscal year 2018 begins. The bicameral Arkansas Legislative Tax Reform and Relief Task Force will meet again May 10 in Little Rock to take recommendations on possible changes to individual and corporate income tax exemptions.
Last week, the legislative tax reform panel began the difficult task of reviewing and whittling down a list of 43 sales tax exemptions that the General Assembly may consider modifying, changing or even removing from the state’s bulky tax code in the 2019 legislation session.
Ten months into fiscal 2017, gross tax revenue for the first nine months (July 2017-April 2018) of the state’s fiscal year was $5.594 billion, up $177.7 million compared with the same period in the previous fiscal year and 3.3% above forecast, DFA reports. Year-to-date net available revenue, which is the total amount of money earned, rose by $151.8 million to $4.589 billion, which is 3.4% above year ago levels and $53.8 million, or 1.2%, above forecast.
Individual income tax revenue for the fiscal year-to-date was $2.845 billion, up 4.3% compared with the previous period and 1.5% above forecast. Income tax refunds year-to-date, which subtract for net available revenue, totaled $408.5 million, up 13.1% compared to the same period a year ago and 2.7% above forecast.
Year-to-date sales and use tax revenue was $2 billion, up 3.2% compared with the previous year but 0.1% below forecast. Corporate income taxes for the year were $326 million, down $5.7 million from the last year and 6.9% below forecast.
APRIL REVENUE TALLY
For the month, gross general revenue collected in April totaled $842.8 million, up $18.5 million or 2.2% compared to the same period a year ago but 0.4% below the forecast.
Individual income tax revenue in April rose slightly to $522.6 million, up $600,000 compared to a year ago and 0.4% below forecast. Individual withholding tax revenue – an indicator of job and wage growth – was up 1.1% from the previous yearly reporting cycle.
Sales and use tax revenue during the month was $200 million, a key bellwether of consumer sentiment, rose by $18 million or 9.5% from a year ago, and 4.1% above forecast. Corporate income tax revenue was mostly flat at $78.8 million, up 1% from a year ago but 12.1% below forecast.
OTHER REVENUE SOURCES
July-April 2018: $45.9 million
July-April 2017: $44.5 million
Games of skill
July-April 2018: $53.3 million
July-April 2017: $49.5 million
July-April 2018: $181.2 million
July-April 2017: $181.2 million
July-April 2018: $62.2 million
July-April 2017: $62.1 million