It’s tricky to read what’s happening in the Arkansas economy from the March revenue summary released on Thursday (April 2).
The official state revenue forecast was revised on March 23, 2020, due to the COVID-19 pandemic finally reaching the state borders, and much of the tax collections in the March report are an indication of economic activity in February.
When Gov. Asa Hutchinson lowered the state forecast on March 23, he was projecting a $353.1 million budget shortfall in the current fiscal year, which ends June 30, 2020. Subsequently, the governor convened a short special session to plug gaps in the budget through the creation of a COVID-19 rainy day fund.
Hutchinson also extended the state tax deadline to July 15th to match a federal tax deadline extension. That move is expected to drain state tax collections in the final quarter of the fiscal year.
In March, net general revenues – the calculation of overall collections minus mandatory allocations – showed a 12.4% decline from year-ago levels but was 8.9% above the projected forecast. For the month, net available general revenues totaled $356.6 million, $50.5 million below last year and $29.3 million above forecast.
John Shelnutt, director of DFA’s Economic Analysis & Tax Research Division, said individual and corporate income tax collections were above forecast in March and that payroll withholding tax collections were “better than expected.”
“Sales tax collections were $7.0 million below forecast due to weakness in business-related sectors and no gain in the motor vehicle portion of sales tax,” he said.
Sales taxes are generally a harbinger of consumer spending, which accounts for nearly two-thirds of all overall economic activity.
Year-to-date, gross revenue collections stood at $5.102 billion, up 3.2% from last year. The number is about 0.5% above the revised forecast. Year-to-date general revenue collections were $4.261 billion at the end of March, 2.9% over last year and 0.7% above forecast.
The April revenue report will highlight economic activity in Arkansas during the month of March, and that is expected to provide insight on how hard the state’s economy has been hit by the coronavirus pandemic that has curtailed commercial and individual activity.
State lawmakers are slated to begin the biennial fiscal session on April 8th under strict social distancing rules.
On Thursday, a second legislator tested positive for COVID-19. State Rep. Vivian Flowers, D-Pine Bluff. Her diagnosis follows news from earlier this week that Rep. Reginald Murdock, D-Marianna, tested positive for the coronavirus.