September 2023 Revenue Report
The Arkansas Department of Finance and Administration (DFA) reported today that net general revenue in September was $60.2 million or 7.9% less than last year. However, the month total was $74.9 million more than expected. The month puts the State in good financial shape after the first fiscal quarter, coming in at $108.2 million or 6.5% above forecast year-to-date. If this overage continues, soon it will begin being called a new surplus.
Individual Income Tax was $39 million or 12.5% above forecast while coming in $48.3 million or 5.7 percent below last year. Individual Income Tax was expected to fall because of recent tax cuts but actually fell less than expected. DFA reported that Individual Income Tax was above forecast in non-withholding categories. They cited a slight advantage for the month based on the timing of some employer payrolls.
Sales and Use Tax collections were strong in September, coming in at $17.6 million or 6.3% above forecast; this was $8.2 million or 2.8% more than last year. DFA reported that, “Major reporting of Sales Tax displayed mostly higher growth over the prior year, reflecting continuinng economic expansion in many sectors.” They also reported that motor vehicle collections were down 19.7%, which partially resulted from a payment timing shift due to a recent law change that allows vehicle owners more time to pay the sales tax.
Corporate Income Tax was $20.4 million above forecast but $44.7 million below last year’s collections. Corporate income tax collection timing is volatile and hard to predict because of corporate accounting and fiscal reporting responsibilities and tax planning. This variance is likely more of a timing issue than an economic result.
The question arises after three months in the new fiscal year, “What does it mean for the future when revenue is down but we are creating a surplus?” This situation tells us that conservative forecasting and budgeting have kept the State in a good financial situation. The State has not cut taxes more than can be afforded at this point, and it has not over spent and increased the forecast to cover the budget. September Sales Tax collections also tell us that the economy continues to do well in those tax areas.
The September 2023 revenue report may be viewed and downloaded here.