August Revenue Report
STATE REVENUE CONTINUES ON SURPLUS ROLL
After two months of the new state fiscal year, the state continues on a surplus roll after completing a fiscal year with all-time record revenue surplus. The Arkansas Department of Finance and Administration (DFA) released the August Revenue Report today with net general revenue exceeding forecast by $19.5 million or 3.7%. After the first two months of the fiscal year, net general revenue surplus is now $46 million, exceeding the forecast by 4.4%. This is after the latest revenue forecast was raised in May. However, the report does not include the full impacts that will occur from accelerating the income tax cuts during the recent special legislative session.
DFA reported that sales and use tax was $24.2 million or 9.2% above forecast. Revenue growth was above forecast in most of the major sectors which DFA attributed to “continuing economic expansion in many sectors.” Motor vehicle sales were up 8% compared to last year.
Individual income tax was above forecast by $3.7 million or 1.4%. DFA reported that withholding income tax from paychecks was actually down 1.8% from last year but attributed this to payroll timing issues and lower withholding rates from the recent accelerated tax cuts rather than economic factors. Next month’s revenue report should prove if timing was a substantial factor.
Corporate income tax was below forecast by $2.2 million. However, August is a low corporate tax collections month seasonally and corporate income tax collections were only predicted to be $11.2 million. In low reporting months this amount of variance is not considered to be an economic indicator.
The State continues well positioned fiscally with revenue collections running above forecast. This can be expected to continue as the national economy remains on track. The true test will come later in this fiscal year as more economic data is clear about the future of the national economy. Arkansas has done well recently even as compared to other states. Hopefully if the national economy declines, Arkansas is positioned to weather any downturn and absorb fax cuts and spending increases that may impact the state budget.