Arkansas ends fiscal budget year with historic $1.628 billion surplus; special session called (Updated)

The previously estimated Arkansas budget surplus of $1.473 billion grew to a record $1.628 billion, which resulted in Gov. Asa Hutchinson on Tuesday (July 5) calling for an Aug. 8 special session to discuss possible tax cuts.

“Today, I am announcing I will call a special session of the General Assembly to reduce the rate of our tax collection. The special session will be the week of August 8. The specific items on the call in addition to tax relief will be announced at a later time as further discussions are held with the General Assembly,” the governor said in a Tuesday afternoon statement.

A record fiscal year 2022 surplus was thanks in large part to a more than 5% annual growth in income tax revenue and a more than 9% growth in sales tax revenue. Total tax revenue in fiscal year 2022 (July 2021-June 2022) was $8.773 billion, up 8% – or $651.2 million – compared with a robust fiscal year 2021 in which the tax surplus hit the previous record of $945.7 million. The Arkansas Department of Finance and Administration (DFA) reported the fiscal year numbers on Tuesday (July 5).

“June revenue results were notably above forecast because of continued strength in the state economy with tax receipts from Income Tax Estimated Payments still running above expectations,” DFA Secretary Larry Walther said in a statement. “A surplus of $1.628 billion is now in the books at fiscal year-end.”

Individual income tax revenue in the fiscal year was $4.171 billion, up 5.1% – or $202.3 million – from the previous fiscal year, and 0.9% above the revised budget estimate. Sales and use tax revenue, an indicator of consumer spending, was $3.154 billion in the fiscal year, up 9.4% compared with the previous fiscal year and 1.3% above the revised budget forecast.

Fiscal year corporate income tax revenue totaled $837.2 million, up $185.2 million compared with the previous fiscal year and 7% above the revised budget forecast.

“The fiscal year ended above forecast in all major categories of collections and above year ago levels. This broad-based gain resulted from high growth in Income Tax categories and Sales and Use Tax. Income tax collection growth from individuals and corporate accounts represented increased income tax liabilities in 2021 and continued growth in Payroll Withholding Tax. Sales tax collections recorded a second high-growth year of 9.4 percent in FY 2022, following a gain of 13.4 percent in FY 2021,” John Shelnutt, DFA administrator of economic and tax research, noted in Tuesday’s report.

Arkansas ended fiscal year 2021 (July 2020 – June 2021) with a revenue surplus of $945.7 million thanks in part to the COVID-19 induced shift in a tax filing deadline from June to June that pushed some of fiscal 2020 income tax payments into 2021.

JUNE REVENUE
Gross revenue in June was $903.2 million, up 4.1% compared with June 2021 and 19.8% above the forecast. Individual income tax revenue was $338.7 million, up 3% over June 2021 and 10.8% above the forecast.

Sales and use tax revenue in June was $285.9 million, up 11.3% compared with June 2021 and 16.7% above the forecast. Corporate income tax revenue was $133.5 million, up 16.1% compared with June 2021 and 66.4% above the forecast.

OTHER REVENUE SOURCES
Tobacco
July 2021-June 2022: $215.5 million
July 2020-June 2021: $224.5 million

Alcoholic beverages
July 2021-June 2022: $75.1 million
July 2020-June 2021: $68.8 million

Games of skill
July 2021-June 2022: $46 million
July 2020-June 2021: $38.8 million

Insurance
July 2021-June 2022: $175.3 million
July 2020-June 2021: $191.8 million