June Revenue Report
JUNE TAX COLLECTIONS PILE ON STATE REVENUE SURPLUS TO CLOSE FISCAL YEAR
The Arkansas Department of Finance and Administration (DFA) released the final monthly revenue report today showing that the state continued to pile on the unprecedented surplus. As Governor Hutchinson announced last week, with his inside information, the state ended the fiscal year with $1.628 billion more in the bank than is needed to fully fund the state budget. The month of June piled on $150.1 million to the surplus as the fiscal year closed. Revenue for June was 23.9% above the forecast for the month.
DFA reported that June revenues were above forecast and last year collections in all major categories. Individual Income Tax and Corporate Income Tax were reported to both have exceeded forecast in estimated payments, which is an indicator of continued economic growth. However, as inflation increases, income and wages (both estimate and withholding payments) will grow.
June Individual Income Tax was above forecast by $32.9 million or 10.8%. Withholding Tax from Payrolls was only up 1.6%. DFA attributed the Withholding results to a mixture of growth in payroll earnings and new income tax reductions that lowered Individual Income Taxes after withholding tables were adjusted to account for the reduction.
Corporate Income Tax collections were above forecast by $53.3 million or 66.4%. This was a significant contribution to June revenues. The history of corporate payments with various company fiscal years and corporate financial planning always lead to caution in defining the cause for aberrations. This result could be economic or it could be short term to be offset by future reduced payments.
June Sales and Use Tax collections were $40.8 million or 16.7% above forecast. Tax collections from car sales were down 8.2% from last year, which DFA attributed to ”adverse comparison with stimulus spending and pent-up demand last June.”
Governor Hutchinson has announced a possible special legislative session for fiscal issues, possibly in August, as a result of the unprecedented $1.6 billion surplus. This will be the Governor’s last chance to impact the state fiscal process. The money is in the bank for some tax decreases and priority spending that may be addressed. Also, the Governor and DFA have increased revenue forecast for future years building on this year’s economic growth. All seems to be well in the world of Arkansas state finance. All will stay well if there is no significant national economic downturn in future years, which has already been forecast. Expect lots of discussion about future forecast risks and the impact of spending and tax decreases as preparations proceed for a special legislative session.