May revenue tops forecast with $ 2.2M gain

Aided by rising sales tax revenue, state general revenue in May increased by $ 2.2 million over a year ago to $ 427.5 million and exceeded the state’s forecast by $ 14.8 million.

Last month’s sales and use tax revenue increased by $ 7.9 million over year- ago figures, while the state’s individual income tax collections slipped by $ 4.7 million from May 2014, the state Department of Finance and Administration reported Tuesday in its monthly revenue report.

Net available general revenue reached $ 335.9 million in May — a $ 20.5 million increase over a year ago and $ 40.3 million higher than forecast. The net was $ 40.3 million higher than forecast

largely because individual income tax collections exceeded expectations and individual income tax refunds were lower than expected, the finance department said.

Tax refunds and several other government expenditures come off the top of total general revenue, leaving “net” general revenue that agencies are allowed to spend.

“We have some increased consumption in the economy of Arkansas, which is a good sign,” said department Director Larry Walther.

“It looks like we have a good month and a good [ fiscal] year. Hopefully, this will be sustained in June as we complete the fiscal year.”

The state’s tax collections in May fell short of the record for the month.

The record collections for the month is the $ 443.2 million collected in 2013, said Whitney McLaughlin, a tax analyst for the department.

Gov. Asa Hutchinson said that while he’s “pleased with the numbers, there’s always some uncertainty when the unemployment numbers are still too high.

“We will continue to budget in a cautious and conservative fashion as we head into the new fiscal year,” the Republican governor said in a written statement.

The U. S. Bureau of Labor Statistics reported last week that Arkansas’ unemployment rate rose to 5.7 percent in April from 5.6 percent in March. It was the first jump in the Arkansas unemployment rate since January 2011.

The national unemployment rate was 5.4 percent in April.

During the first 11 months of fiscal 2015, state general revenue increased by $ 174.2 million ( 3.1 percent) over the same period in fiscal 2014 to $ 5.80 billion. That exceeded the state’s latest forecast from May 6 by $ 14.8 million ( 0.3 percent.)

So far in fiscal 2015, the net has increased by $ 180.2 million ( 4 percent) over the same 11- month period in fiscal 2014 to $ 4.66 billion. That’s exceeded the state’s May 6 forecast by $ 40.3 million ( 0.9 percent).

The department projected a $ 92.4 million surplus for the year on May 6 when it increased its fiscal 2015 forecast for net general revenue to $ 5.18 billion.

Walther said Tuesday that he’s not sure what the state’s surplus will be on June 30, fiscal 2015’ s final day.

“I feel confident we’ll have a surplus,” he said.

If the state’s net general revenue in June reaches the forecast amount, then that $ 40.3 million from May would be add to the state’s projected surplus of $ 92.4 million on June 30.

Richard Wilson, assistant director of research for the Bureau of Legislative Research, said the state’s revised forecast for June projects an $ 11 million decrease in net revenue from a year ago and “our numbers do not agree.”

“In addition, we are expecting a one- time injection of $ 19 million from the [ attorney general’s] office from the S& P settlement with the states,” he said.

Standard & Poor’s is settling government allegations that it knowingly inflated its ratings of risky mortgage investments that helped trigger the financial crisis. The settlement is with the U. S. government, 19 states and the District of Columbia and covers ratings issued from 2004 through 2007.

Wilson said the “expectation is that the surplus should total at least $ 175 million, perhaps up into the $ 200 million neighborhood.”

Such a surplus would provide $ 50 million in rainy day funds for Hutchinson to use and an additional $ 30 million for the governor’s Quick Action Closing Fund to recruit and retain businesses in Arkansas or other economic development projects, said Kevin Anderson, the bureau’s assistant director of fiscal services.

Last year, the Arkansas Legislature approved a $ 5 billion- plus general- revenue budget for fiscal 2015 that increased projected spending by about $ 114 million over the previous year, with most of the increase targeted for public schools, prisons and human services, Anderson said.

That budget anticipated $ 85 million in general- revenue reductions from tax cuts enacted by the Legislature in 2013 and up to $ 89 million in savings from the use of federal funds to purchase private health insurance for some low- income Arkansans under the so- called private option Medicaid expansion.

According to the finance

department, May’s general revenue included:

A $ 7.9 million ( 4.4 percent) increase in sales and use tax revenue over a year ago to $ 188.6 million, which exceeded the state’s forecast by $ 6.9 million ( 3.8 percent).

John Shelnutt, the state’s chief economic forecaster, said May is the second consecutive month that sales and use tax collections have increased by more than 4 percent. Winter weather in February led to a drop in sales taxes paid by businesses in March.

A $ 4.7 million ( 2.3 percent) decline in individual income tax collections from a year ago to $ 198.9 million that exceeded the state’s forecast by $ 25.2 million ( 14.5 percent).

These collections included a $ 5.6 million decline in individual income tax withholdings over a year ago to $ 182.7 million, exceeding the state’s forecast by $ 0.8 million.

Shelnutt said the decline stems from the updating of payroll withholding formulas by payroll service companies and large employers.

The individual income tax collections from returns and extensions increased by $ 0.2 million over a year ago to $ 11.7 million, which exceeded the state’s forecast by $ 23 million.

A $ 1.5 million ( 20.8 percent ) increase in corporate income taxes over a year ago to $ 8.7 million, exceeding the state’s forecast by $ 2 million ( 29.5 percent).

State officials have said corporate income taxes are volatile and often fluctuate with corporations’ federal tax strategies.