August revenue numbers post gain
Posted on Wednesday, September 6, 2006
Arkansas raked in $ 395. 8 million in gross general revenue in August, $ 2. 1 million more than in August last year and $ 11. 6 million more than the state had predicted.
Gov. Mike Huckabee called it “a good report from the standpoint that it’s right on forecast.” “I’m encouraged to see strength in sales tax revenues,” Huckabee said. “There is nothing in the immediate future that would indicate anything other than confidence in our forecast.” Last month’s collections were 0. 5 percent more than in August a year ago and 3 percent above the state’s forecast for August 2006, which was issued May 3. It was a record for August, topping last year’s record $ 393. 6 million, the state Department of Finance and Administration reported.
Other officials said they see signs of a slowdown in general revenue growth, a prediction they have repeatedly made for a year without it materializing. Instead, the state’s monthly reports have bested the previous year ’s monthly totals by 5 percent or more, beating the state’s forecast by substantial margins.
During that run, the state has piled up a record surplus — $ 402. 7 million in the fiscal year ending June 30. It had $ 448. 9 million in unallocated surplus from fiscal 2005 and 2006 as of July 1. The surplus is projected to grow into a $ 721 million surplus by June 30, 2007.
The August 2006 revenue report “is pretty much on forecast for a change, not some huge overage,” said the department director, Richard Weiss. “It looks just like a good moderate [growth in general revenue ] going forward.” The state’s chief economic forecaster, John Shelnutt, said, “Let’s put it this way. We are not at double digit [increases ] on gross receipts anymore, so that’s coming back to normal.” Gross receipts are primarily the sales tax and the use tax. Signs of a slowdown include a slowing housing market and slower sales of vehicles in Arkansas, Shelnutt said. Richard Wilson, the Bureau of Legislative Research’s assistant director for research, agreed that the state won’t continue to see “the huge [revenue ] increases over forecasts that we have seen, because things are starting to down in all sectors, not just housing and consumption, but everywhere.” August’s general revenue included: $ 189. 2 million in gross receipts, a $ 9. 1 million (5. 1 percent ) increase over August 2005. That’s $ 4. 4 million (2. 4 percent ) above the forecast. $ 151. 1 million in individual income tax collections, down $ 1. 1 million (0. 7 percent ) from August 2005. That’s $ 4. 4 million (2. 8 percent ) below the forecast. August’s collections were partially offset by a 14. 5 percent gain in July’s collections and by a decline in refunds in August. $ 14. 6 million in corporate income tax collections, a $ 6. 9 percent (32. 2 percent ) decrease from August 2005. That’s $ 9. 8 million (203 percent ) above the forecast. August 2005 collections were boosted by unexpected one-time gains, the department said.
For the first two months of fiscal 2007, gross general revenue totaled $ 796. 9 million, up $ 46. 1 million or 6. 1 percent compared to the same period last fiscal year. That’s $ 14. 7 million or 1. 9 percent above the forecast.
After off-the-top distributions from the gross, the revenue is reduced to the “net,” which agencies are authorized to spend. The net in August totaled $ 344. 2 million, $ 3. 3 million or 1 percent above August last year. This year’s August net was $ 16. 6 million or 5 percent above the forecast.
Year-to-date net totaled $ 722. 6 million, a $ 77. 9 million or 12. 1 percent increase from the same time last year. That’s $ 20. 4 million or 2. 9 percent above the forecast.
The huge surplus has led lawmakers to talk about what to do with it during the 2007 regular legislative session that convenes Jan. 8.
Ideas include creating a rainy-day fund, granting tax cuts such as exempting energy used by manufacturers and getting rid of the sales tax on groceries, and increasing state support for the state’s public schools, Medicaid program and other programs.
Revenue surges have prompted other states to replenish rainy-day funds, bolster support for education and other programs, and reduce certain taxes, including personal income taxes by nearly $ 600 billion, according to the National Conference of State Legislatures.
Forecasters projected the states’ general revenue to grow by 2. 7 percent in fiscal 2006, but the actual increase was 7. 7 percent, the conference said in its latest survey of states’ financial conditions.
In their fiscal 2007 budgets, 25 states increased their reserve funds with 18 making deposits to rainy-day accounts, the conference said.
Weiss has floated the idea of creating a rainy-day fund of about $ 200 million in Arkansas. Legislators have said the idea has merit. Rainy-day funds generally are thought of as cash reserves to be used by the government for emergencies or in times of severe revenue shortfalls. Efforts to keep legislators from spending the money on lesser things can be an ongoing controversy.
The National Conference of State Legislatures said 24 states boosted K-12 education funding for fiscal 2007 and 20 put more money toward higher education. Fourteen states increased Medicaid funding, 11 increased funding for prisons, 10 states increased funding for transportation, and 14 used the new revenue to pay for one-time capital expenditures.
Last week, an Arkansas legislative subcommittee issued a report on how to achieve adequacy in education to meet a deadline in state law, but the report left undecided many issues relating to teacher salaries and administrative costs for district central offices.
Consultants Allan Odden of the University of Wisconsin and Larry Picus of the University of Southern California recommended in July adding about $ 340 million in fiscal 2008 to the $ 4 billion-a-year public school system.
But legislators and school administrators said adding $ 340 million isn’t realistic, especially because much of the money would be intended to help cover administrative costs, rather than for the classroom.
In addition, the state Department of Health and Human Services has asked for $ 316 million more in state funding over the next two fiscal years, part of a budget request that would see the agency’s spending grow to $ 5. 58 billion in fiscal 2009.
The bulk of the agency’s request would be for Medicaid, a program of health-care assistance that serves about 750, 000 people in the state.
Under the agency’s proposed budget, Medicaid would require roughly $ 360 million more for 2008 and 2009 combined, from either state general revenue or a state Medicaid trust fund. That amounts to a 20 percent increase in the state’s share of the Medicaid program.
Combined with federal funds, Arkansas Medicaid will consume $ 4 billion in 2008 and $ 4. 4 billion in 2009 under the department’s budget request.
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