January 2024 Revenue Report
GROUNDHOG DAY STATE REVENUE REPORT, “SURPLUS AGAIN”
Today the Arkansas Department of Finance and Administration (DFA) issued another monthly revenue report with Net General Revenue above forecast. This is the 59th consecutive month that Net State General Revenue was above the amount that had been forecast to fund the state budget. It is appropriate that the January report was issued on Groundhog Day as the streak continues. Unlike the Groundhog Day movie, this repetitive story is most promising for the future.
DFA reported that from the three major categories tax collections were above forecast in Sales Tax and Corporate Income Tax but slightly below forecast in Individual Income Tax. The continued absorption of recent income tax cuts resulted in revenue being $61.8 million or 8..5% less than last year. However, this was $14.8 million or 2.3% above the amount that was forecasted.
Individual Income Tax decreased $61.9 million or 14% from last year due largely to income tax cuts. Collections were less than anticipated with collections $2.5 million or 0.7% below forecast. It should be noted that Individual Income Tax refunds were greater than expected in January and exceeded forecast by $2.5 million. Refunds of income tax reduce total Net General Revenue. January refunds reflect economic activity and tax laws as they existed in pervious periods. The Individual Income Tax filing period for 2023 tax year has just begun, and processing of refunds will impact revenue during the upcoming processing season. Refunds will be watched closely in the next few months as the State closes the fiscal year. Refunds will now reflect recent economic conditions and new tax reductions.
Sales and Use Tax collections increased over last year by $8.2 million or 2.8%. This is $5.2 million or 1.7% above forecast. DFA reported that major reporting sectors for Sales and Use Tax displayed mostly higher growth over last year. They stated that this reflected continuing economic expansion in many sectors.
Corporate Income Tax collections were $54.3 million which was $17.6 million above last year and $36.1 million above forecast. As, experts always note, too much should not be projected on Corporate Income Tax monthly reports as they are speculative and hard to forecast month by month. This is because corporations must comply with federal regulatory and tax filing requirements, and they also pay taxes on different fiscal year schedules.
As we awakened on Groundhog Day, the Arkansas Democrat Gazette reported that yesterday DFA issued a required revised forecast for the upcoming Fiscal Legislative Session that raised the projected surplus for FY 2024 which ends in June, from $174 million to $240.5 million. Today DFA released the January revenue report of a year-to-date surplus of $231.2 million. If this new surplus projection is accurate, only $9.3 million will be added to the surplus over the final five months of the fiscal year. Based on the Groundhog Day revenue pattern this seems like a pretty sure thing. It also sounds like a very conservative forecast unless someone knows something about a slowing economy that has not been disclosed.
DFA also reported recently that Dr. John Shelnutt has retired after 19 years as the DFA economic forecaster. Dr. Shelnutt guided the state through both good and bad economy always erring on the side of being conservative with taxpayer’s money. Job well done, Dr. Shelnutt. Let’s hope DFA finds another economist who can take on the responsibility of providing a forecast that keeps the state financially sound.
The January 2024 revenue report may be viewed and downloaded here.