Revenue below forecast as state starts fiscal '15

The state's general revenue collections in the first month of fiscal 2015 were lower than expected, according to a revenue report released Monday by the state Department of Finance and Administration.

Arkansas collected $470.8 million in gross general revenue in July, which was $9.3 million (1.9 percent) below forecast. State officials attributed it to a decline in sales tax and corporate income tax collections.

The collections were $3.1 million (0.7 percent) above last year's July totals.

Department Director Richard Weiss, who is the state's chief fiscal officer, said the drooping revenue was not yet a cause for concern. Weiss said the department was pleased with collections from individual income tax withholding, which totaled $213.2 million, or 0.1 percent above forecast and $7.3 million more than last year.

"The good news is that withholding is right on forecast, holding up well, and that's the best of all economic signs. We can feel very comfortable about the forecast and just move on," Weiss said.

Weiss said sales tax collections were weak. The department reported those collections totaled $185.5 million, which was $7.6 million (3.9 percent) below forecast and $500,000 (0.3 percent) less than last year.

Weiss said online retail sales and a possible slowdown in car sales and utility bills could have attributed to the lagging collections.

"People aren't running their air conditioners as much, surprisingly enough, in this cool summer," Weiss said.

Tim Leathers, deputy director for the department, said that the decline in corporate income tax collections was largely because of timing, with some corporations paying less in the past month of their fiscal year to "settle up" accounts after paying more throughout the year. The department reported $18.4 million in collections, which was $9.7 million (34.6 percent) below forecast and $8.5 million less than last year.

"You'll have those things from time to time where the corporations are even more varying in that than individual [income tax collections]," Leathers said.

Richard Wilson, assistant director of research for the Bureau of Legislative Research, said the only thing worth noting in the revenue report was the low corporate income tax collections. He said the drop "doesn't look like any big deal" and that it was difficult to estimate when corporations would make their payments.

"You can't forecast what goes on in the boardroom. Corporate [income tax] is probably the hardest component of all the general revenue elements to forecast," Wilson said.

Wilson said he was not surprised by the sales tax collections.

Since the recession, people have been more cautious and less willing to take on debt, he said.

"Sales and use is still sluggish because people are afraid to spend money," Wilson said.

July's gross general revenue is a record for the month, said Whitney McLaughlin, a tax analyst for the department. The previous record was $467.7 million in 2013.

The state ended fiscal 2014 with a $78.7 million general revenue surplus, which officials attributed to stable general revenue collection and individual income tax refunds and other deductions that fell below expected levels.

The state's general revenue increased by $28.4 million (0.5 percent) over fiscal 2013 to $6.242 billion. That was $14.2 million (0.2 percent) above the state's forecast.

Fiscal 2015 began July 1.

This spring, the Legislature approved a $5 billion budget for fiscal 2015 that increased spending by $109 million over the previous year. Most of the additional spending will go to public schools, prisons and human services programs.

That budget also includes $85 million in general revenue reductions from tax cuts enacted by the Legislature in 2013 and up to $89 million in savings from the use of federal funds to purchase private health insurance for low-income Arkansans.

According to the department's report, July's general revenue also included:

A $7.1 million (1.7 percent) dip in net general revenue from 2013 to $403.1 million. That is $9.8 million below forecast.

Tax refunds and certain specific expenditures, such as desegregation payments, come off the top of "gross" revenue and leave the "net" amount for agencies to spend.

A $1.8 million (9.5 percent) increase in tobacco tax collections from July 2013 to $21 million. That amount is $2.8 million above forecast and "can be attributed to uneven patterns of [cigarette] stamp sales to wholesale purchasers," according to the report.

Metro on 08/05/2014

Upcoming Events