Combined FY 2026 and FY 2027 Arkansas revenue surplus could be just under $1 billion

Arkansas’ total tax revenue in fiscal year 2026, which ends in June, is expected to total $8.634 billion, up $278.7 million, or 3.3% from the previous fiscal year, according to an update posted Wednesday (May 20) by the Arkansas Department of Finance and Administration (DFA).

The projected surplus at the end of fiscal 2026 is $585.8 million, above the previous surplus projection of $560 million.

Total revenue in the first 10 months of the fiscal year (July 2025-April 2026) was $7.136 billion, up 4.1% compared with the same period in the previous fiscal year, according to a May 4 revenue report from the DFA. The revenue is $189.2 million above the budget estimate, and the state’s surplus is approximately $560 million.

The fiscal year 2027 (July 2026-June 2027) gross revenue is expected to total $8.723 billion, up just 1%, or $84.6 million, compared with fiscal year 2026. The projected surplus in fiscal 2027 is $389.6 million, according to the DFA update. The combined projected surplus for the two fiscal years is $975.4 million.

Greg Kaza, an economist and executive director of the Arkansas Policy Foundation, said it’s not a surprise that state revenues are projected to continue growing.

“The U.S. economy has been in an expansion since May 2020, with real GDP and three of four monthly coincident indicators recording growth,” Kaza noted. “These are nonfarm payroll employment, industrial production, and manufacturing and trade sales. There has been weakness in the fourth indicator, real personal income less transfer payments, with declines in four of the six most recent months due to inflation and other factors.”

The projections, according the DFA, are based on recent revenue, recent income and corporate tax cuts pushed by Gov. Sarah Sanders and approved by the Arkansas Legislature, and forecasted changes in global and national economic conditions.

“Economic forecasts employed by the Department of Finance and Administration indicate slower growth, resulting from the impact of energy prices, among other factors,” the DFA report noted.

Specifically, modeling used by the DFA indicated that Arkansas gross domestic product (GDP) is estimated at 2.6% in fiscal year 2026, and is projected to fall to 1.7% in fiscal year 2027.

“Arkansas payroll employment growth will enter a period of low to near-zero net job growth,” according to the DFA report. “Unemployment rates in the U.S. and Arkansas are expected to continue the recent trend of slowly rising over the next year. Arkansas wage and salary disbursements are expected to grow 5.1% in FY 2027 after growth of 5.8% in FY 2026.”

The Congressional Budget Office projects an average annual U.S. GDP of 1.8% between 2027 and 2036. The closely-watched The Conference Board GDP projection has fourth quarter 2026 GDP at 1.3% and rising through 2027 to reach 2.5% in the fourth quarter of 2027. The Conference Board reports that in the near term the U.S. war with Iran is “eroding purchasing power and compressing growth.”

“Even if diplomacy prevails, the negative shock to the economy is already set in motion,” The Conference Board noted. “Spillovers are likely to extend into the second half of the year — even if a peace agreement is reached in the coming weeks.”

DFA Secretary Jim Hudson said the department will “act expeditiously” to change the forecast if or when economic conditions change, adding that the DFA “utilizes more stable and conservative forecast sources and models among national forecast contractors to maintain a conservative input process.”

Arkansas ended the previous fiscal year (July 2024-June 2025) with tax revenue of $8.359 billion, down 4% compared with the previous fiscal year. Tax revenue in the previous fiscal year also resulted in a $367.9 million surplus. The fiscal year ending in June 2024 posted a $698.4 million surplus, and the fiscal year ending June 2023 had a $1.161 billion tax revenue surplus.

Link here for a 9-page PDF of the DFA updated forecast.