JUNE 2024 REVENUE REPORT
REVENUE ANALYSIS
STATE ENDS FISCAL YEAR WITH $698.4 MILLION SURPLUS
BUT MISSES JUNE FORECAST
The Arkansas Department of Finance and Administration (DFA) reported today that the state ended its fiscal year with a surplus of $698.4 million, which was $9.7 million less than had been forecast when the forecast was updated in May. Collections fully funded the state budget, including the primary A category and secondary B category, and then produced the surplus.
The state’s 2024 fiscal year certainly ended in great shape. However, DFA reported that June Revenue did not meet forecast. This was primarily due to Sales and Use Tax being under forecast by $16.9 million, or 5.4%. This is the second month in a row that the Sales and Use Tax has not met forecast. DFA’s explanation was the same as last month, stating that “Major reporting sectors of Sales and Use Tax displayed mixed results over last year.” A specific review by sectors is needed to provide some indication of which sectors are determining impacts on future forecasts.
For the entire fiscal year, Sales and Use Tax collections were $3,480.4 million, an increase of $62 million, or 1.8%. This growth seems extremely weak when compared with last year’s inflation rates. The Bureau of Labor Statistics reports the Consumer Price Index inflation rate for the most recently reported twelve months to be 3.3%. If Sales and Use Tax had just kept up with the Consumer Price Index, inflation growth should have been almost double the $62 million. The Consumer Price Index market basket does not exactly match the Sales Tax base. For example, food and gasoline, which are high inflation categories in the Consumer Price Index, are not subject to the State Sales and Use Tax. It still appears evident that Sales and Use Tax did not grow above inflation last fiscal year. This could become worrisome for the new forecast if Sales and Use Tax does not pick up in the next couple of months.
Individual Income Tax increased above last June, even with lower tax rates due to tax cuts. Individual Income Tax was $22.8 million, or 7.3%, above last June. This was $12.9 million, or 4%, above forecast. The Withholding from the payroll category of Individual Income Tax was $22.6 million dollars more than last year. DFA attributed this performance to the fact that there were more payrolls this June because of calendar aberrations. In this case, the overage should be reflected in lower Individual Income Tax collections in July.
June Corporate Income Tax collections totaled $102.7 million, which was down $19.6 million from last June and $20.9 million less than forecast. As historically noted, Corporate Income Tax collection is highly variable on a monthly comparison basis due to the reporting and compliance issues of corporations.
The State has ended the 2024 fiscal year on a great note with another tremendous surplus. This is due to economic growth, as well as conservative budgeting and forecasting by the executive and legislative branches. The State has followed an established process of not cutting taxes or spending in the budget more than can be afforded. Let’s hope that trend continues in this 2025 fiscal year. Let’s also hope that the Sales and Use Tax returns to growth above the rate of inflation.
The June 2024 revenue report may be viewed and downloaded here.
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Arkansas Democrat-Gazette
7/2/24