May 2023 Revenue Report
The Arkansas Department of Finance and Administration (DFA) reported today that May state general revenue came in above forecast, adding $18.5 million to the state surplus. DFA predicted a S1.03 billion year-end surplus when the forecast was revised on May 17, 2023. After May collections, the state has now collected enough general revenue to fully fund the 2023 Fiscal Year Budget, which leaves only June collections remaining. All June collections will now be budget surplus. Total June collections must equal $643 million to meet the $1.03 billion surplus forecast. The $643 million target for June is a historically conservative prediction for that month. For instance, June 2022 collections totaled $770 million.
The $18.5 million dollars that was above the May forecast was 4.9% above forecast. DFA attributed the surplus to Individual Income and Sales Tax while Corporate Income Tax was slightly below forecast. DFA reported that Individual Income Tax was above forecast in all components. DFA has factored in recent tax reductions and a payroll timing factor expecting a decrease in Individual Income Tax which did occur. Individual Income Tax decreased by $53.2 million; however, this was $11.8 million dollars or 4.9% more revenue than expected.
May Sales and Use Tax was $13.8 million or 5% above forecast. DFA stated that collections increased with broad based gains and that most major reporting sectors displayed high growth over last year. DFA stated that the sales tax reflected “continuing economic expansion in many sectors.” Motor vehicle sales tax was up 15.2% over last year. The sales tax economic statement from DFA points to overall improved economy that bodes well as the 2023 State Fiscal Year comes to a close.
After May revenue, the $1 billion dollar surplus appears to be a sure thing; only a mediocre last month of June will reach that mark. We can probably look forward to surpassing the $1.03 billion surplus goal. This surplus was achieved because of good economy with a record low unemployment rate and new business investments. But the surplus is also a product of conservative budgeting and forecasting of revenues. An important fact this fiscal year is that Individual Income Tax cuts have been implemented within the forecast tax amount. The State should continue to do well if leadership continues the trend of conservative economic planning for future fiscal years. Of course, there is always the dreaded “recession” word that creeps into every economic discussion. Let’s hope state leaders can plan and anticipate to minimize a recession when it occurs. Having a billion dollars in the bank to offset any downturn could make things easier.