April state tax revenue plummets more than 28% from ’19

LITTLE ROCK — Arkansas’ general revenue tax collection in April plummeted $270.9 million — or 28.3% — from the same month a year ago to $687.8 million, but exceeded the state’s forecast, which was revised because of the economic impact of the coronavirus pandemic, according to a report released Monday.

April typically is the month in which the state collects the largest amount of general revenue because the deadline for filing and paying individual income taxes is April 15.

But Gov. Asa Hutchinson extended these state deadlines this year to July 15 to coincide with the federal government’s extension of its income tax deadlines, because of the pandemic.

Individual income and sales and use taxes are state government’s two largest sources of general revenue.

Just a year ago, the April collection set a record — $958.8 million — according to Whitney McLaughlin, a tax analyst for the state Department of Finance and Administration.

This year, the state collected more in individual and corporate income taxes than projected in April under its forecast revised March 23. The state income tax deadline change didn’t apply to corporate income taxes.

That’s why total general revenue collection exceeded the forecast for April, by $103.8 million, or 17.8% finance department officials said Monday.

“It was difficult trying to determine what behaviors is going to be in this new environment and so we believe it has taken a little longer for it all to start being seen,” said Larry Walther, secretary of the finance department.

“A lot of what we collect in April was actually from March activity, so we will expect [the May report’s] numbers that will be more indicative of what the economy has turned into from covid-19 virus,” he said.

Extending the state’s income tax deadlines — coupled with an expected economic slowdown from covid-19 — led the finance department on March 23 to cut the projection for general revenue in fiscal 2020 from $7.05 billion to $6.69 billion and the net general revenue budget by $353.1 million to $5.38 billion. Fiscal 2020 ends June 30; the new income tax deadline falls in 2021.

In a March 26-28 special session, the Legislature authorized creationing a covid-19 rainy-day fund with $173 million in surplus to fill state budget holes and cover unexpected needs tied to the coronavirus.

NET REVENUE FIGURES

Tax refunds and some special government expenditures come off the top of the total general revenue, leaving a net amount that state agencies are allowed to spend.

Net revenue in April fell $213.8 million, or 28.5%, from a year ago to $537.3 million, but exceeded forecast by $177.7 million, or 49.4%.

Walther noted tax refunds were lower than projected last month, which added to net general revenue. Individual income tax refunds dropped $51 million, or 37.1%, from a year ago to $86.6 million and fell $75.7 million, or 46.7%, below forecast.

April is the 10th month of fiscal 2020. In the 10-month period, total general revenue dropped $114.8 million, or 1.9%, to $5.78 billion compared to 2019, but exceeded forecast by $130.2 million, or 2.3%.

So far in 2020, net revenue has decreased $92.9 million, or 1.9%, to $4.79 billion from 2019 but exceeded the forecast by $206.9, or 4.5%.

APRIL’S NUMBERS

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

• A $235.2 million, or 39.1%, fall in individual income tax collection from a year ago to $366.4 million, but the collection exceeded the revised forecast by $80.4 million, or 28.1%.

Withholdings is the largest category of individual income tax collection.

Withholdings dropped $33.3 million from a year ago to $274.7 million, but exceeded forecast by $37.9 million.

There was one fewer Friday payday in April compared to a year ago, “so that was just another factor thrown in there,” said John Shelnutt, the state’s chief economic forecaster.

Collection from tax returns and extensions fell $192.5 million from a year ago to $45.2 million, but that exceeded the forecast by $45.2 million.

Since the state moved its deadline for income taxes, “we assumed nobody would file,” Walther said. “Forty-five million dollars came in from that, so that was unexpected.”

Collection from income taxes dropped $9.4 million from a year ago to $46.4 million and fell $2.8 million short of the forecast.

• A $5.5 million, or 2.8%, drop in sales and use tax collection from a year ago to $194.5 million that fell $3.6 million, or 1.8%, below forecast.

The retail sales collection increased 4.5% in April over a year ago because “we got the benefits of stocking up [by] retailers,” Shelnutt said.

But “accommodation and food services, which is restaurants, [was] down 28%,” he said. “Motor vehicle portion of sales tax [was] down 18.6%, so there was offsetting.”

• A $23.2 million, or 19.1%, drop in corporate income tax collection from a year ago to $98.6 million, but the collection exceeded forecast by $23.9 million, or 32%.

“We had a very good collection last year and we thought it would come down off of that,” said Shelnutt.

But he said the corporate income tax collection exceeded the forecast in April “because of past activities being reported now in corporate payments, so it is a look at the past helping us out now.” • A $5.2 million, or 69.6%, drop in casino gaming revenue from a year ago to $2.3 million, exceeding the forecast by about $200,000, or 7.2%.

The drop is largely because Oaklawn Racing Casino Resort in Hot Springs and Southland Casino Racing in West Memphis are paying a lower tax rate under constitutional Amendment 100 approved by voters in November 2018.

Oaklawn, Southland and the Saracen Casino Annex in Pine Bluff have been closed since mid-March and the casino taxes remitted to the state in April are based on gambling in March.

No casino has been authorized yet in Pope County by the Arkansas Racing Commission.

During the first 10 months of fiscal 2020, casino and gaming revenue totaled $31.2 million, a $26.1 million, or 45.6%, decline from a year ago, but about $300,000, or 0.8%, above forecast.