$83 million April gain tops revenue forecast

State finance chief sees perkier economy

— Fueled by a $72 million jump in individual income tax, state general revenue in April soared by $83.1 million compared with April 2010. The month’s total was $684.3 million, the third-highest in one month in Arkansas’ history.

The collections exceeded the state’s brand-new forecast, issued April 21, by $12.1 million.

The state’s chief fiscal officer, Richard Weiss, said it “looks to me like this is a further sign that we are climbing out of the recession.”

The report issued Tuesday by the state Department of Finance and Administration comes after its announcement nearly two weeks ago that it was cutting its forecast for gross general revenue for the current fiscal year by $79.1 million to $5.582 billion.

At that time it did not, however, change its forecast for “net” general revenue of $4.478 billion. Tax refunds and several government ex-penditures come off the top of “gross,” leaving a “net” that agencies are allowed to spend.

State officials said they cut the forecast for gross revenue to reflect lower-than-projected estimated income tax payments.

April’s total exceeded the forecast, Weiss said, because “we unexpectedly got a little more in the last day. That’s the reason that there is an overage there.”

Gov. Mike Beebe, as usual, reacted with measured caution.

“It is nice to be about $10 million over forecast,” he said. “But don’t get too excited. We might have a bad May.”

He said he’s concerned that the state’s economy could slow because of recent floods.

“It is a concern when commerce in any area slows down. It has an effect. The question is how much does it slow down and how many areas are affected?” Beebe said.

General revenue in Arkansas comes mostly from the sales and income taxes, and historically the state’s best month for revenue is the one in which state tax returns are due. In recent years that month has been April, while it was May in earlier years.

Although April’s collections increased by 13.8 percent over the same month last year, they fell short of the record for Aprils. April’s total this year trailed two months when the economy was stronger - the $697.2 million in April 2008 and the $691.2 million in April 2007 - said department tax analyst Whitney McLaughlin.

General revenue produces about $4.5 billion of what the state spends annually. Its total budget is about $25 billion a year when including federal funds, cash funds (such as student tuition and fees in higher education), special revenue (such as motor fuel taxes and some of the sales taxes), and other money sources.

YEAR TO DATE

May and June are the remaining months in Arkansas’ current fiscal 2011.

With 10 months of the fiscal year completed, Arkansas’ general revenue totaled $4.707 billion, an increase of $184.1 million (4.1 percent) over the same period last fiscal year. That’s $12.1 million (0.3 percent) above the April 21 forecast.

The net for the fiscal year to-date totaled $3.783 billion, an increase of $190.3 million (5.3 percent) above the same period last fiscal year. That’s $10.3 million (0.3 percent) above the April 21 forecast.

OTHER STATES

According to the National Conference of State Legislatures, states’ finances are showing encouraging signs of “revenue stability” nearly two years into the economic recovery after the end of what some have called the Great Recession.

“State officials expressed more confidence about the current fiscal situation than in recent years, possibly indicating that the most difficult times are behind them,” the conference said.

APRIL DETAILS

According to the finance department, April’s general revenue included:

$436.7 million in individual income tax, exceeding the state’s forecast by $12.9 million (3.1 percent) and besting April 2010 by $72 million (19.7 percent). Individual income taxes are made up of withholding collections, estimated payments and payments from income tax returns and extensions. Withholding collections increased by $20.2 million (10.4 percent) over the same month last year to $214.9 million. Payments from income tax return filings and extensions increased by $43.3 million (32.4 percent) over the same month last year to $176.9 million. Estimated payments increased by $8.5 million (23.2 percent) over the same month last year to $45 million.

John Shelnutt, the state’s chief economic forecaster, said the income tax collections reflected more people working and more working longer hours. Private-sector employment is growing by more than 2 percent in Arkansas, he said.

A $6.3 million (3.8 percent) increase in gross receipts (sales and use taxes) over the same month last year to $173.2 million, narrowly exceeding the state’s forecast by $500,000 (0.3 percent).

“We have moved past that easy comparison to the recession levels of activity and now we’ve leveled out some to more modest growth,” Shelnutt said regarding gross receipts.

A $5 million (13.2 percent) increase in corporate income taxes over the same month last year to $42.6 million, lagging the state’s forecast by $1.6 million (3.6 percent). State officials said corporate income taxes are often a volatile source of taxes.

Front Section, Pages 1 on 05/04/2011

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