State’s revenue collections slip $7.4M in April

$1.1B intake beats forecast

state government’s general revenue collections in April slipped slightly by $7.4 million or 0.7% from a year ago to $1.11 billion, but still beat the state’s latest forecast by $223.7 million or 25.1%, the state Department of Finance and Administration reported Thursday.

State government’s individual income tax and sales and use tax collections are the two largest sources of general revenue.

Both individual income tax and sales and use tax collections increased in April over a year ago, and both sources of taxes outdistanced the finance department’s latest forecast from Feb. 1, the finance department reported.

The state’s largest total general revenue collection for the month of April is the $1.32 billion collected in April 2022, said Whitney McLaughlin, a tax analyst for the finance department.

Tax refunds and some special government expenditures are taken off the top of total general revenue collections, leaving a net amount that state agencies are allowed to spend up to the maximum authorized by the state’s Revenue Stabilization Act. That act distributes general revenue to state-supported programs such as public schools, the state’s universities and colleges, human service programs, and prisons and other corrections programs.

The state’s net general revenue in April dipped by $43.6 million, or 5.1%, from a year ago to $818.8 million, but exceeded the state’s forecast by $173 million, or 26.8%.

“Revenue collection significantly surpassed the forecast despite the effects of reduced corporate and individual tax rates and the $150 one-time income tax credit (enacted in the Sept. 11-14 special session),” state Department of Finance and Administration Secretary Jim Hudson said in a written statement.

“Additionally, April was a good month for our citizens as more than 305,000 refunds were issued to individual taxpayers,” he said.” That brings total refunds so far in 2024 to 850,579, an increase of 47,300 over last year. We remain optimistic as we enter the last two months of Fiscal Year 2024.”

Arkansas taxpayers were required to file their state individual income tax returns and pay the state’s individual income taxes by April 15.

April is the 10th month of fiscal 2024.

During the first 10 months of fiscal 2024, the state’s total general revenue collections

have declined by $99.1 million, or 1.4%, from the same period in fiscal 2023, to $7.21 billion, but have exceeded the state’s latest forecast by $309.1 million, or 4.5% The state’s general revenue collections have slipped slightly because of individual and corporate income tax cuts and slowing general revenue collections in fiscal 2024, according to state officials.

During the first 10 months of fiscal 2024, the state’s net general revenue has dropped by $332.4 million, or 5.5%, from the same period in fiscal 2023 to $5.69 billion, but has exceeded the latest forecast by $250.8 million, or 4.6%.

During the 2023 regular session, the Republican-controlled General Assembly and Gov. Sarah Huckabee Sanders authorized a $177.7 million increase in the state’s general revenue budget to $6.2 billion in fiscal 2024, with most of the increase allocated to education and corrections programs.

The finance department’s latest general revenue forecast projects a general revenue surplus of $240.5 million at the end of fiscal 2024.

“With two months remaining in Fiscal Year 2024, Secretary Hudson is confident the state revenue surplus will surpass $400 million,” finance department spokesman Scott Hardin said Thursday.

Legislative leaders have said they want to wait until the end of the current fiscal year to determine whether they should pursue cutting income taxes further during a special session later this year.

Act 6 of the special session cut the state’s top individual income tax rate from 4.7% to 4.4% and the state’s top corporate income tax rate from 5.1% to 4.8%, starting in tax year 2024, according to the finance department.

Cutting the state’s top individual income tax rate from 4.7% to 4.4%, effective Jan. 1, 2024, is projected by the finance department to reduce state general revenue by $75 million in fiscal 2024 and by $150 million in fiscal 2025. Trimming the state’s top corporate income tax rate from 5.1% to 4.8% is projected to reduce state general revenue by $17.2 million in fiscal 2024 and by $34.5 million in fiscal 2025.

The finance department has projected the temporary income tax credit will reduce state general revenue by $156.3 million in fiscal 2024.

In this year’s fiscal session, the Legislature enacted identical Revenue Stabilization Act measures that would increase the state’s general revenue budget by $109.3 million, or 1.76%, to $6.31 billion in fiscal 2025, with most of the increase devoted to educational initiatives. Fiscal 2025 begins July 1 and ends June 30, 2025.

In fiscal 2025, the finance department has projected a general revenue surplus of $376.6 million if the state’s general revenue meets the department’s latest forecast of $6.68 billion for net general revenue with a general revenue budget of $6.31 billion.

APRIL’S DETAILS

According to the finance department, April’s general revenues included:

▪ A $3.4 million, or 0.6%, increase in individual income tax collections over a year ago to $606.7 million, beating the state’s forecast by $145.2 million, or 31.5%.

The withholding tax is the largest category of individual income tax collections.

Withholding collections declined by $11.3 million from a year ago to $304.7 million, but exceeded the state’s forecast by $4.7 million.

The collections from returns and extensions increased by $10.6 million over a year ago to $246.4 million, and exceeded the state’s forecast by $108.6 million.

The collections from estimated payments increased by $4 million over a year ago to $55.6 million, which beat the state’s forecast by $31.9 million.

McLaughlin said in a written statement that “Withholding was down 3.6% in April as a result of the income tax rate reduction that was reflected in withholding tables starting in January.

“This decline was offset by small gains in other income tax collection categories,” she said.

▪ A $12.9 million, or 4.5%, increase in sales and use tax collections over a year ago to $300.7 million, which exceeded the state’s forecast by $22.4 million, or 8%.

McLaughlin said, “Overall sales [tax collections] continue to perform better than anticipated in the forecast.”

Motor vehicle general revenue sales tax collections increased in April by $9.8 million, or 33.3%, over last year after motor vehicle sales tax collections fell $7.6 million in March, she said. A better indication of motor vehicle sales tax collections would be to combine the two months and they increased by an average of 3.2% a month, she said.

▪ A $24.8 million, or 12.5%, decrease in corporate income tax collections from a year ago to $173.4 million, which outdistanced the state’s forecast by $56 million, or 47.7%.

Corporate income tax collections decreased last month due at least in part to the reduction in the top marginal tax rate from 5.9% to 5.1% for tax year 2023, McLaughlin said.