There’s a good chance Arkansas’ budget surplus at the end of its fiscal year will top $1 billion. State officials released the May 2021 revenue report Wednesday (June 2) that shows a $980 million surplus, 19.1% above forecast. The state’s fiscal year ends June 30.
On an annual basis:
- Individual income taxes topped $3.640 billion, up $539.2 million (17.4%) above forecast.
- Corporate income taxes totaled $536.9 million, up $157.6 million (41.6%) above forecast.
- Sales and use taxes cleared $2.627 billion, up $295.6 million (12.7%) above forecast.
John Shelnutt, DFA’s director of Economic Analysis and Tax Research, said the revenue streams were robust across a broad range of areas.
“Net available revenue results were above forecast in all major categories in May. Sales growth was broad based. Individual Income Tax gains partly reflect the recent filing date change and continued economic growth. Payroll Withholding Tax collections also exceeded forecast reflecting underlying economic growth. Corporate Income Tax collections also exceeded forecast with gains in returns with payments and estimated tax payments,” he said.
The last time the state of Arkansas had a nearly $1 billion budget surplus was around 2006-2007. Former Gov. Mike Huckabee was leaving office and then Gov. Mike Beebe was entering his first term.
With one month to go in the state’s fiscal year, it’s all but certain the economic recovery in the wake of the COVID-19 pandemic will push surplus projections over the billion dollar threshold.
Lawmakers will return later this year in a special session to consider tax cuts ranging from reshaping tax brackets to extending a used car tax to lowering the state’s top tax bracket.
Gov. Asa Hutchinson said fiscal discipline led to the large surplus.
“The $980 million current surplus is the largest surplus in the history of Arkansas,” he said. “This fact underscores the importance of the belt-tightening decisions we made during the pandemic and the strength of our economic recovery. The record surplus also tells us that this fall will be the right time to cut our individual income tax rate again. This surplus has been created despite reducing our tax rate this year to 5.9%. This shows we can fund education, raise teacher pay and protect public safety at the same time we are lowering our tax rate. It is all because our private sector continues to grow.”