Arkansas budget coffers in March percolated out of a two-month malaise as corporate and individual income tax collections exceeded the state’s own internal forecast and year-ago results, state Department of Finance & Administration (DF&A) officials said Tuesday (April 2).
March net available revenues were a robust $407.1 million, up 19% or $65 million from a year ago, and $51.9 million or 14.6% above forecast, according to the monthly revenue summary from DF&A. March gross collections, a broader economic indicator that includes collections from all available categories, came in at $599.3 million, a spike of $80.8 million, or 15.6% above last year, and $76 million, or 12.6% ahead of the state’s monthly outlook.
With three months left in the fiscal year that ends on June 30, 2019, Arkansas’ budget overflows now total net available general revenues of nearly $4.14 billion, which is $207.1 million, or 5.3% ahead of year-ago levels and $46.8 million or just 1.1% ahead of the state’s official forecast, reversing last month’s dip into negative territory.
Yearly gross general collections jumped by $194.2 million, or 4.2% to $494 billion compared with the same period of fiscal 2018. That left gross revenues above forecast by $59.8 million, or 1.2%. DF&A economist John Shelnutt said the major “headline” for this month’s revenue report was the large gain in corporate income tax collections.
“This is our most volatile category of collections of any size, a distant third place in terms of revenue collection sources,” Shelnutt told Talk Business & Politics. “We have been trying to make the forecast for corporate revenue more conservative after a number of negative surprises in recent years.”
Shelnutt continued, “In this case, the volatility was on the upside, but we will continue to pursue additional conservative adjustments going forward in this category and not suggest trends in future years from this experience in official forecasts for budget planners.”
Beyond the surprise uptick in corporate revenue, Shelnutt said otherwise state tax collections would have been below the forecast in March. “This was due to elevated refunds in both individual and corporate refunds and some loss against forecast in sales tax,” said Shelnutt.
In other areas, the state’s chief economic forecaster said the DF&A Revenue Division is running ahead of last year and against forecast on the rate of tax returns and refunds processed to date. Faster handling of refunds in the filing season now suggests a falloff, although April and May results are still not final, he said.
In another key area of the state’s economic health, Shelnutt said underlying data from the monthly report shows wage income growth in Arkansas is still trending upward with a 4.4% jump in payroll withholding on a yearly basis. “Sales tax collections growth in the main consumer staples categories remain good and in-line with income growth,” he said.
Among the other major categories, individual income tax collections in March increased by $15.7 million, or 6.3%, to $265.9 million compared to a year ago, which is $6.7 million, or 2.6% below forecast. Year-to-date individual income tax collections were up 1.5%, or $35.7 million, to $2.035 billion, which is $26.9 million, or 1.1%, below forecast.
As noted, sales and use tax collections in March were $201.6 million, an increase of $1.7 million, or 0.8%, from last year, and $4.8 million, or 2.3%, below the state’s forecast. Year-to-date, sales and use tax revenue is up 2.6% at nearly $1.84 billion, which is $47.5 million ahead of last year and $21 million, or 1.1%, below forecast.
The March revenue report comes as state lawmakers in Little Rock are looking this week to begin winding down the 92nd General Assembly as key appropriations bills and tax-related measures are being pushed out of the legislative pipeline.
All appropriations bills approved by the Joint Budget Committee include general revenue distributions for state agencies and programs. Senate and House members then must approve the Revenue Stabilization Act (RSA), the final balanced budget measure that allows lawmakers to transfer tax revenues into the state’s war chest to fund the $5.75 billion fiscal 2020 budget that begins July 1. House and Senate leaders have set April 12 as a tentative deadline for the 2019 session to adjourn.
OTHER TAX REVENUE SOURCES
July-March 2019: $42.1 million
July-March 2018: $41.1 million
Games of skill
July-March 2019: $49.8 million
July-March 2018: $46.4 million
July-March 2019: $158.9 million
July-March 2018: $164.7 million
July-March 2019: $63.2 million
July-March 2018: $61.5 million