NOVEMBER 2024 STATE REVENUE REPORT
LOWER TAX REFUNDS INCREASE NOVEMBER STATE REVENUE
Net General Revenue grew this November, marking a rebound after several months of declines compared to the same period last year. Previous decreases were attributed to the implementation of Individual and Corporate Income Tax cuts. The Arkansas Department of Finance and Administration (DFA) announced today that November's Net General Revenue increased by $39.2 million, or 8.3%, compared to November of last year. This growth was primarily driven by a $36.1 million reduction in Individual Income Tax Refunds.
November's Net General Revenue exceeded the revised forecast by $10.9 million, or 2.2%. This marks the first reporting month under the updated forecast, which was revised on November 14, 2024. The $10.9 million surplus represents a year-to-date surplus of 0.4%. The revised forecast anticipates a total surplus of $278.6 million by the end of the fiscal year. To achieve this goal, revenue will need to exceed the forecast by an additional $267.7 million over the remaining seven months of the fiscal year.
Individual Income Tax Collections fell by $2.5 million, or 1%, compared to last November. DFA attributed this decrease to recent tax cuts. However, collections still exceeded the forecast by $3.4 million, or 1.4%, indicating that the DFA had anticipated an even larger reduction. The Payroll Withholding portion of the tax decreased by $6.2 million, which the DFA also attributed to the impact of the tax cuts.
Corporate Income Tax Collections totaled $17.3 million, an increase of $5.1 million compared to last year and $3.2 million above the forecast.
Sales and Use Tax collections totaled $294.9 million, which was $7.8 million higher than last year and a growth rate of 2.7%. This monthly growth surpasses the year-to-date growth of $24.6 million, or 1.7%. Assuming that sales were flat year-to-date, price inflation would mathematically have increased the tax more than 1.7%. In a growing economy, Sales and Use Tax revenue typically outpaces inflation. If this slower growth trend persists, it could pose a budgetary concern, especially as Income Tax revenues decline due to tax cuts. Sales and Use Tax collections were also $5.4 million, or 0.4%, above the forecast.
November's Net General Revenue growth was primarily driven by a decrease in Individual Income Tax Refunds compared to last year. The DFA closely monitors this trend, and the reduction aligned with their forecast. If refunds had remained at last year’s level, and all other factors the same, there would have been no revenue increase for the month. This factor considered along with Sales and Use Tax performance compared to price inflation should give cause for future review of those factors.
With seven months remaining in the fiscal year, revenue must surpass the forecast by an additional $267.7 million to meet the projected surplus. Hopefully, the Legislature and the Executive Branch will continue conservative forecasts and budgeting. Let’s also hope that revenue collections exceed last year in the remaining months of fiscal year 2025. The next two months in the fiscal year are especially important because they are major collections months for holiday spending. The planners should certainly be closely anticipating revenue results for December and January.
The November 2024 revenue report may be viewed and downloaded here.