Revenue falls $20.2 million for December
Posted on Tuesday, January 6, 2009
Weiss
State general revenue declined in December by $20.2 million compared with December 2007, the first dip since May of 2008. It reflected a fall in individual income tax collections with not much sales tax increase.
Individual income tax collections dipped $31.6 million compared to December 2007 and sales tax collections increased less than $1 million.
But the month's general revenue total of $457.7 million outstripped the state's forecast by $19.7 million because corporate income tax payments surged, beating the state's forecast by $20.2 million, the state Department of Finance and Administration said in its monthly revenue report.
General revenue is derived mostly from the taxes on sales and income.
The individual income tax drop is due in part to the state collecting $28 million from a one-time transaction in December 2007, said Tim Leathers, deputy director for the department.
Richard Weiss, department director, said December's individual income tax collections also show "just the fact that job growth is stopped essentially. It's flat. We will probably be gaining in terms of unemployment."
The figures show "just a general slowing of the economy consistent with what we expected it to be and consistent with what is going on with the national [economy] right now," he said.
John Shelnutt, the state's chief economic forecaster, said he thinks it "will get a little worse."
The state "factored some additional weakness beyond this" into the state's last revenue forecast, released in November, he said.
Sales taxes collected in December were paid by consumers on sales in November and it was "very weak as we expected," he said.
The spike in corporate income tax "may disappear as soon as it shows up" when the state completes the payment of corporate tax refunds, Weiss said.
Corporate income tax collections fluctuate widely from month to month and often are driven by corporations' federal tax strategies, state officials have repeatedly said.
Richard Wilson, an assistant director of research for the Bureau of Legislative Research, said he was surprised by the stronger than expected corporate income tax collections in December because "you would think it would be lower rather than higher."
Gov. Mike Beebe said December's revenue report contained both bad news, declining general revenue collections, and good news, the collections were above forecast.
"If we can continue tracking above forecast, we'll continue to be all right," he said.
Beebe has proposed a state tax cut for consideration by the Legislature, which convenes Monday that would trim about $30 million a year out of state general revenue. He has asked that the state sales tax on groceries be trimmed from 3 percentage points to 2 percentage points, continuing his pledge try to remove the tax from groceries entirely. The 2006 Legislature enacted his request to lower the tax, which was 6 percent, to 3 percent.
President-elect Barack Obama has repeatedly warned that the nation's economy is likely to get worse before it gets better.
Beebe said "you never know" if that's going to happen in Arkansas.
"We have had our ups and downs," he said. "We lose jobs and we gain jobs. We continue to do far better than the rest of the country. In my discussions with other governors across the country, they can't believe the position we are in compared to the position they are in. Most of them are either having to make drastic cuts in their services or huge tax increases or both and fortunately we haven't had to do that."
In May, the Beebe administration cut state agencies' spending plans for the current fiscal year by nearly $107 million, citing the expectation of "a mild recession."
December's general revenue of $457.7 million reflected a 4.2 percent decline from December of 2007, but it exceeded the state's forecast by 4.5 percent.
The month's individual income taxes totaled $190.6 million, a decline of $31.6 million or 14.2 percent from December 2007. They fell short of the forecast by $1.4 million or 0.7 percent.
December's gross receipts, which include sales and use taxes, inched up by $0.7 million or 0.4 percent over December 2007, falling short of the forecast by $0.6 million or 0.3 percent.
The month's corporate income taxes totaled $66.8 million, an increase of $10.5 million or 18.2 percent from December of 2007. They exceeded the forecast by $20.2 million or 41.8 percent.
In the first six months of this fiscal year, general revenue totaled $2.657 billion, an increase of $80.1 million or 3.1 percent over the same period last year and $32.7 million or 1.2 percent above the forecast.
Net revenue is what's left for state agencies to spend after offthe-top transfers and refunds to taxpayers from gross revenue.
In the first six months of this fiscal year, the net totaled $2.282 billion, an increase of $74.6 million or 3.4 percent from December of 2007. That's $34.8 million or 1.5 percent above the forecast.
Wilson said the state has not been a beneficiary of the housing boom or a victim of the housing bust.
"But, for the first time we are seeing not only housing sales go stagnant, now we are starting to see housing prices go down and with that unemployment rising a little doesn't look real good," he said.
Arkansas "is not an island," Wilson said, and the national economic downturn "has to creep in at some point."
When general revenue declined in May 2008, it was down $23.1 million from May 2007, said Whitney McLaughlin of the finance department. The previous month in which general revenue dipped was August 2007 when it declined by $9.7 million from August 2006, she said.
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