State ’08 surplus: $176 million
Posted on Thursday, July 3, 2008
The state ended fiscal 2008 with a surprisingly large surplus: $ 176. 5 million, which was $ 81. 7 million above what the state predicted less than two months ago.
The Department of Finance and Administration, which issued the May 7 forecast, gave the numbers Wednesday in its general revenue report for June, the last month of fiscal 2008, which ended Monday.
Fiscal 2009 began Tuesday. State agencies are under an order from the Finance Department to trim previous spending plans for fiscal 2009 by nearly $ 107 million because of concerns that the state economy may be cooling and that state tax collections may as a result be less than predicted.
But at the moment, a surplus abounds. Besides the $ 176. 5 million from fiscal 2008, the state has another $ 83 million, said Mike Stormes, the state’s budget administrator. That $ 83 million consists of funds left from fiscal 2007 plus interest collected on the investment of idle state money.
So the state now has an accumulated surplus totaling $ 259. 5 million.
Gov. Mike Beebe has encouraged the conservative approach. He greeted the news Wednesday with words suggesting that he wants to stay conservative but that continued good numbers could lead to a loosening of the state’s purse strings.
“Even though Arkansans are struggling with skyrocketing fuel prices and other increasing expenses, our state’s economy continues to show signs of strength in spite of the national downward trend,” Beebe said.
The conservative approach and careful planning have put Arkansas “in an advantageous economic position” compared with that of many other states, Beebe said.
“Because our national economy still faces daunting challenges, I remain alert to the potential for additional downturns in the coming months,” he said.
“If we continue to hold steady in the next two to three months, we will consider revising our economic forecast upward and restoring at least some of the funding that our state agencies have been asked to do without in the new fiscal year,” Beebe said.
For weeks, the National Conference of State Legislatures has been reporting that the finances in many states are deteriorating, considerably in some instances.
State government in Arkansas isn’t experiencing financial problems to the extent of some other states because conservative revenue forecasts have led to conservative budgeting, said Richard Weiss, director of the Department of Finance and Administration.
In addition, highway and public school construction programs and the development of the Fayetteville Shale have helped stabilize the economy in Arkansas, Weiss said.
Another state budget expert, Richard Wilson of the Bureau of Legislative Research, said the state has benefited from having fewer subprime mortgages and more homeowners without mortgages than in other states.
The state’s unemployment rate also is below the national average, and the state has been helped by the development of the Fayetteville Shale, he said.
“We have some counterrecessionary things that I think help us out a little bit,” said Wilson, assistant director of research for the bureau.
Individual income tax collections supplied the big bump in June. June’s total general revenue was $ 544. 4 million, up $ 22. 1 million (4. 2 percent ) compared with June last year. The month’s total exceeded the state’s forecast by $ 42. 8 million (8. 5 percent ). Individual income tax collections increased $ 29. 6 million or 12. 7 percent over June last year. They totaled $ 262. 4 million this June, outdistancing the department’s forecast by $ 43 million, a whopping 19. 6 percent.
“Individual income taxes is what is carrying us right now and employment is flat and unemployment is up a little bit, so it’s got to be more hours and more dollars per hour [for workers ],” Wilson said.
Rep. Chris Thyer, co-chairman of the Legislature’s Joint Budget Committee, wondered in May whether the department’s fiscal 2008 surplus projection was too pessimistic. He said he’s not surprised by the $ 176. 5 million fiscal 2008 surplus.
“I am not going to gloat or say ‘ I told you so, ’” said Thyer, a Jonesboro Democrat.
Beebe is right to take “a conservative approach to make sure we are on the uphill side of this,” Thyer said.
“Obviously, I am very happy the numbers are what they are. It could be a heck of a lot worse than they were,” Thyer said.
In May, the department revised its forecast for fiscal 2009, trimming it by $ 106. 8 million, lowering the general revenue budget to $ 4. 411 billion. That’s still an increase over general revenue spending in fiscal 2008, during which the state distributed $ 4. 353 billion to be spent by state agencies.
Weiss said he’s not embarrassed that the surplus projection was off by $ 81. 7 million.
“In what we do you’ve got to err on the side of being conservative, because there is just too many problems on the other side of it,” Weiss said.
“There is certainly not anybody on the national level saying things are going to get rosy within the next couple of months by any stretch of the imagination,” he said.
The department said higherthan-expected individual income tax collections were responsible for $ 54. 6 million of the amount of surplus that exceeded the prediction. Lower-than-expected corporate income tax refunds were responsible for $ 9 million, the department said.
Other parts of the surplus came from a mix: $ 10 million that had been set aside for claims from federal lawsuits, $ 9. 1 million in lower-than-expected payments from the economic development incentive fund, and $ 7. 3 million in lower-than-expected desegregation payments, state officials said.
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