State budget holds $44.2 million surplus as fiscal 2018 nears end

As Arkansas budget officials wind down the end of fiscal 2018, Gov. Asa Hutchinson gave a “solid” rating to the state’s economy Monday (June 4) as revenue collections came in just above forecast through the end of May.

In the state’s monthly revenue report from the Department of Finance and Administration (DFA), fiscal officials reported that state budget coffers eked out a tidy $44.2 million surplus, which is 0.9% above forecast. That tally, which is slightly below the $54 million leftover tax collections in April, still puts Arkansas “in a solid position entering the final month of fiscal year 2018” that ends on June 30, Gov. Hutchinson said.

“From a significant increase in motor vehicle sales to a retail sector up more than 6.5%, this report includes several indicators that reflect the strength of Arkansas’s economy.  In addition, income tax withholding was 5.1% higher in May, signifying job growth.”

At the end of the recent 2018 biennial fiscal session in March, Hutchinson signed off on a $5.44 billion budget for fiscal 2019, which begins on July 1. The popular Republican chief executive who easily defeated GOP rival Jan Morgan in the recent May primary for governor, said he and DFA staff would monitor each category of the state budget during June “as we plan to successfully close out this fiscal year.”

According to DFA economist John Shelnutt, despite some year-end volatility in corporate tax filings the state has experienced in recent fiscal cycles, the $44.2 million bounty with only one month remaining in fiscal 2018 “is a nice cushion going into the final month …”

Among the major categories, Shelnutt said the downturn in gross corporate collections of estimated payments and extensions was partially offset by lower than expected refunds in corporate and individual income tax payouts. He said the two largest categories of collections were essentially on target in May with high growth in consumer sectors of sales tax and “continued good growth” in payroll withholding tax, which reflects the state’s near-full job market with a 3.8% unemployment rate.

“Individual income tax return processing is running ahead of last year so we do not expect refunds to be an issue in June,” Shelnutt said. “Quarterly estimated payments for both Individual income tax and portions of corporate Income filers will be watched in June. But we are well provisioned for any unexpected issues there.”

Through 11 months of fiscal 2018, gross tax revenue was $6.067 billion, up $181.8 million compared with the same period in the previous fiscal year and 3.1% above forecast. As noted, year-to-date net available revenue, the total amount of money collected, rose by $159.9 million to $4.937 billion, which is 3.3% above year ago levels.

Individual income tax revenue for the fiscal year-to-date was $3.065 billion, up $125.6 million or 4.3% compared with the previous period, and $40.7 million or 1.5% above forecast. Income tax refunds year-to-date, which subtract for net available revenue, totaled $467.7 million, up 10.1% compared to the same period a year ago and 1.1% above forecast.

Year-to-date sales and use tax revenue was $2.206 billion, up $71.4 million or 3.3% compared with the previous year and fractionally below forecast. Corporate income taxes for the year fell 6% to $343.2 million, which is $219 million below year ago levels and $50.2 million or 12.8% below forecast.

Gross general revenue collected in May totaled $473 million, up $4.1 million or 0.9% compared to the same period a year ago and 4.8% below the forecast. Monthly net available revenues rose 2.4% or by $8.1 million to $347.4 million, which is $9.6 million or 2.7% below forecast. Individual income tax revenue in May rose slightly to $218.8 million, up $9.4 million or 4.5% compared to a year ago and $300,000 or 0.1% below forecast. Individual withholding tax revenue – an indicator of job and wage growth – was up 5.1% from the previous yearly reporting cycle.

Sales and use tax revenue during the month was $201.5 million, a key bellwether of consumer sentiment, rose by $9.1 million or 4.7% from a year ago, and $600,000 below forecast. Up-and-down corporate income tax collections totaled $17.2 million, down $16.2 million or 48.5% from a year ago, and $26 million or 60.2% below forecast.

OTHER REVENUE SOURCES
Alcoholic beverages
July-May 2018: $52.1 million
July-May 2017: $50.4 million

Games of skill
July-May 2018: $58.9 million
July-May 2017: $44.9 million

Tobacco
July-May 2018: $200.9 million
July-May 2017: $199.8 million

Insurance
July-May 2018: $63 million
July-May 2017: $62.9 million