Revenue collections reach $697.2 million
Posted on Saturday, May 3, 2008
Bolstered by income taxes on individuals, state general revenue in April hit a record $ 697. 2 million, up $ 5. 9 million compared with April of last year.
Collections in the month in which most income tax returns are due exceeded the state’s forecast by $ 17. 9 million.
Individual income-tax collections exceeded those of April 2007 by $ 36. 5 million, the state Department of Finance and Administration said Friday in its monthly revenue report.
Other figures hinted at an economic downturn: Corporate income taxes fell $ 19. 6 million compared with the same month last year, and gross receipts, which are largely sales taxes, were $ 14. 8 million below those of April 2007.
Tim Leathers, deputy director of the Finance Department, said the dips reflect a weakening state economy.
“We think this is the first sign of what we expect to see [in Arkansas ],” he said. Many other states have experienced it already, he said.
In April, state finance officials trimmed the $ 4. 5 billion budget for fiscal 2009 by $ 106. 7 million. That fiscal year begins July 1.
The state’s revised forecast will be officially released Wednesday to the Legislature’s Joint Committee on Economic and Tax Policy, said Leathers. Some lawmakers have questioned whether the revised forecast is too pessimistic for next fiscal year. Gov. Mike Beebe has said that if revenue comes in better than expected, spending authority can be expanded as easily as it was reined in.
With few exceptions, states ’ finances are deteriorating, considerably in some instances, according to a report last week by the National Conference of State Legislatures.
“Whether or not the national economy is in recession is almost besides the point for some states,” said William Pound, the conference’s executive director. “The fiscal situation has declined so much in some states that they appear to be in a recession.”
But Arkansas’ gross general revenue in April increased 0. 9 percent to reach the $ 697. 2 million. The previous record for a month was $ 691. 2 million in April 2007, said Whitney McLaughlin, technical assistance manager for the department.
April 2008 is the fifth consecutive April in which the state collected a record monthly amount of general revenue. The Legislature in 2003 moved the due date for state individual income tax returns from May 15 to April 15, starting in 2004, to match the federal returns’ due date.
The state doesn’t send the gross amount in full to state agencies for spending. First it makes off-the-top subtractions, including those for refunds to taxpayers, resulting in a “net” figure that state agencies may spend.
April’s net totaled $ 552. 1 million, a $ 1 million (0. 2 percent ) increase over April 2007 and $ 12. 9 million (2. 4 percent ) above the forecast.
During the first 10 months of this fiscal year, general revenue increased $ 136. 1 million (3 percent ) to $ 4. 64 billion over the same period last fiscal year. That exceeded the forecast by $ 162. 6 million (3. 6 percent ).
About $ 65 million of the increase resulted from one-time business transactions, the Finance Department said.
So far this fiscal year, net revenue has increased $ 49. 9 million (1. 4 percent ) to $ 3. 74 billion. That’s $ 158 million (4. 4 percent ) above the forecast.
Richard Wilson, assistant director of the Bureau of Legislative Research, noted that he has predicted a budget surplus of at least $ 155 million in this fiscal year.
Leathers said the Finance Department will release its projection for the surplus Wednesday.
According to the Finance Department, April’s general revenue included: Individual income taxes of $ 461. 9 million, a $ 36. 5 million (8. 6 percent ) increase over the same month last year. That’s $ 42. 5 million (10. 1 percent ) above the forecast.
Leathers said “a catch-up payment” in income tax withholdings by one large employer contributed $ 7 million to the increase in individual income taxes.
The majority of the rest of the increase in individual income taxes is in estimated tax payments, which are mostly final payments for taxpayers who have an extension for filing yearend tax returns, he said.
“Obviously people are working a lot of hours and two jobs, and both spouses are working,” said Wilson. “More and more of those [Fayetteville ] Shale... jobs are going to Arkansans,” and the development is “counter-recessionary,” he said.
John Shelnutt, the state’s chief economic forecaster, said employment in the state is “pretty flat” compared with a year ago. Gross receipts totaled $ 170. 4 million, a decrease of $ 14. 8 million (8 percent ) below the same month last year. That’s $ 9. 6 million (5. 3 percent ) below the forecast.
The decline largely results from sales tax reductions enacted in the 2007 legislative session and implemented on July 1, the Finance Department said. The biggest reduction slashed the state sales tax on groceries from 6 percent to 3 percent.
“Added weakness in collections is associated with economic conditions in the state,” the department said in its report.
Leathers said sales of building products, home improvements and appliances are lagging behind those of April 2007. Department-store sales are lagging, too, he said.
The sales tax prepayments by retailers in the building-supply and home-improvement business declined by about $ 5 million, he said. Payments from department stores also dropped by $ 5 million, he said. Corporate income taxes totaled $ 43. 4 million, a decrease of $ 19. 6 million (31. 1 percent ) below April of 2007. That’s $ 14. 2 million (24. 7 percent ) below the forecast.
Leathers said the lower corporate income tax collections largely reflect corporations ’ lower estimates of their yearly tax liabilities.
He said individual tax collections usually fall off after sales and corporate income taxes dip. When people buy less, that leads employers to lay off some employees, and this results in less individual income and thus less individual income tax paid to the state, he said.
April’s special revenue declined $ 4. 4 million to $ 132 million compared with April 2007, McLaughlin said.
Special revenue is earmarked for specific purposes such as highways. General revenue is used more broadly.
Within the special revenue taxes, the revenue derived from sales and real estate taxes declined by $ 6 million last month from April 2007, McLaughlin said.
In general, sales taxes have declined because of tax cuts and slowing sales, McLaughlin said. Real state transfer taxes have declined because of the slowdown in the real estate market, he said.
Special revenue has declined in three of the past four months.
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