Ahead of the start of a fiscal session this month of the Arkansas General Assembly, the latest revenue report shows the state has a budget surplus of $240.8 million.
The Department of Finance and Administration on Wednesday released its revenue report for January. It showed net available general revenues for the month totaled $715.4 million, which is $188.7 million above forecast and $79.6 million more than the same month a year ago.
Gov. Asa Hutchinson had noted strong tax collections when he proposed his $6 billion budget for fiscal year 2023 last month to the Joint Budget Committee. It included a 3.3% increase in state spending for education, workforce development and services for people with disabilities. Lawmakers will consider the budget when the fiscal session begins Feb. 14.
Year-to-date net available revenue general revenues totaled $ 4.1 billion, which is 6.2% above the forecast and 7.1% higher than a year ago. The fiscal year runs through the end of June.
“The overall story is that revenue remains strong in January,” said John Shelnutt with the department’s office of Economic Analysis and Tax Research. In an interview with KUAR News, he noted the forecast had been revised in December after previous monthly reports also came in better than expected.
“This report, after two months, is tracking above that prediction, so it looks likely that we’ll go above that surplus amount for year-end. It’s difficult to say how much more because we still have the income tax filing season and the refund claims coming up over the next three months or so,” Shelnutt said.
Sales tax collection so far for the fiscal year totaled $268.7 million, which is 13.4% more than at this point last year. The year-to-date sales tax growth was 11.9%, which he says reflects an economic rebound and expansion in Arkansas.
“Sales tax growth was led by gains and the retail sector as part of the Christmas shopping season,” Shelnutt said. Other gains could be seen in services, manufacturing and transportation. Sectors with declines compared to a year ago included motor vehicles sales tax, accommodation and food services, and utilities.
The only category in which the state did not perform above forecast was individual income tax refunds. Refund claims were nearly $1 million dollars below what was forecasted in December. Shellnut said the forecast had accounted for a larger drop due to COVID-related tax policies.
The report reflects high growth that was seen at the beginning of the fiscal year, but Shelnutt said he expects that growth to slow down.
During a special session of the legislature in December, lawmakers approved the largest tax cut in state history. If certain economic conditions are met, it will reduce the state's top income tax rate to 4.9% in the next four years. When fully implemented, state revenue is expected to be reduced by $430 million.
