State’s tax collection increases, lags forecast by $2.4 million

Arkansas’ general revenue tax collection in March rose $8.2 million over the same month a year ago, to $518.5 million, and lagged the state’s forecast by $2.4 million.

The two largest sources of general revenue — individual income taxes, and sales and use taxes — both increased in March over the same month a year ago, the state Department of Finance and Administration reported Tuesday in its monthly report.

Both sources of tax revenue fell short of the forecast for March.

The state’s record for general revenue collection for March continues to be the $547.8 million collected in March 2016, said Whitney McLaughlin, a tax analyst for the finance department.

Gov. Asa Hutchinson said Tuesday “the revenue report is consistent with a continued vibrant economy and with my goal of ending the year with a significant surplus.”

March is the ninth month of fiscal 2018, which started July 1, 2017.

The state’s chief economic forecaster, John Shelnutt, said individual income tax withholdings have increased by 4.8 percent in 2018 over the same period last year, and that’s “the stable guide to what the economy is doing, and it is a very

healthy growth rate.”

During the first nine months of fiscal 2018, general revenue totaled $4.75 billion — a $159.2 million, or 3.5 percent, increase over a year ago, the finance department reported. That’s $32.4 million, or 0.7 percent, above forecast.

So far in fiscal 2018, individual income tax collection has increased by $115.7 million, or 5.2 percent, over the same period inm2017. They exceeded forecast by $42.9 million, or 1.9 percent.

And sales and use tax collection during fiscal 2018 have increased $44.3 million, or 2.5 percent, over last year to $1.79 billion, but lagged the forecast by $7.1 million, or 0.4 percent.

Tax refunds and some special government expenditures, such as court-mandated desegregation payments, come off the top of total general revenue, leaving a net amount state agencies can spend.

Net revenue in March dipped by $2.9 million, or 0.8 percent, over a year ago to $342.1 million and fell $10 million, or 2.8 percent, below forecast.

Individual income tax refunds in March increased by $16.7 million over March a year ago to $120.2 million, and they exceeded the forecast by $14.7 million, which reduced net revenue for the month.

The total net revenue for fiscal 2018 reached $3.93 billion — a $155.6 million, or 4.1 percent, increase over fiscal 2017, the finance department reported. That’s $69.6 million above the state’s forecast.

For fiscal 2018, the state-funded general-revenue budget is $5.45 billion, up by $130.1 million over 2017, according to the finance department.

In May 2017, Hutchinson cut the fiscal 2018 general-revenue budget by $43 million. At the same time, he cut the fiscal 2017 budget by $70 million because of lagging sales and corporate income tax collection, but then restored $60 million at the end of the year, after tax collection rebounded.

But Hutchinson said Tuesday, “I do not intend to restore last May’s spending cut as the agencies effectively absorbed the reduction.

“It should also be noted that the May cuts in educational facility funding and pre K have been restored in next year’s budget,” the Republican governor said.

In fiscal 2019, which starts July 1, the general-revenue budget for public school buildings will be $41.8 million, including the restored cut of $3.274 million, and the budget for the Arkansas Better Chance pre-kindergarten program will be about $114 million, including the restored cut of $982,000, said Scott Hardin, a spokesman for the finance department.

During the spring’s fiscal session, the Legislature enacted Hutchinson’s proposed budget of nearly $5.63 billion for fiscal 2019 — an increase of $172.8 million over the current fiscal year’s budget — and approved the governor’s plan to set aside about $64 million of what he considers to be surplus. About $48 million of the surplus is earmarked for a new restricted reserve fund and the other $16 million to match federal highway money. The restricted reserve fund could be used with the approval of the three-fifths of either the Legislative Council or Joint Budget Committee for extraordinary needs in an economic downturn or for future tax cuts.