State revenue jumps in April

LITTLE ROCK -- Fueled by rising individual income tax collection, Arkansas' general revenue in April surged by $56.5 million from a year ago to $801.2 million.

The month's tax collection exceeded the state's forecast by $73.4 million, the state Department of Finance and Administration said Monday in its monthly revenue report.

April's tax collection was fueled by a $43.5 million increase in individual collection, a $7.3 million increase in sales and use tax collection, and a $5.3 million increase in corporate income tax collection.

But April's collection fell short of the record for the month.

Historically, the state's best month for tax collection is the one in which tax returns are due. That month has been April in recent years, although it was May in earlier years.

The state's record for general revenue collection for a month is $817.4 million in April 2013, said Whitney McLaughlin, a tax analyst for the finance department.

John Shelnutt, the state's chief economic forecaster, said April's revenue report shows Arkansas' economy is still on "a moderate [growth] track."

Gov. Asa Hutchinson said he's "pleased that April revenues are well above forecast and that our economic numbers remain solid, but it is imperative that we continue to take a conservative approach as we wind down this fiscal year and look toward the next.

"I appreciate the work of the [Arkansas] Legislature during the session for passing a balanced budget that both funds the essential needs of the state and keeps spending growth at a low level," the Republican governor said.

Earlier this year, the Legislature authorized increased general revenue spending of $133 million to $5.18 billion in fiscal 2016.

Larry Walther, director of the finance department, said the state's tax collection was higher than expected in April largely because individual income tax collection from tax return filings and extensions exceeded the forecast by $47.1 million, and corporate income tax collection exceeded the forecast by $23.1 million.

He said state officials expected the surge in corporate income taxes in May -- not April -- "so that will reverse itself" with lower-than-forecast corporate income tax collection in May.

Tim Leathers, deputy director of the Finance Department, said state officials are still analyzing April's larger-than-forecast individual tax collection from the tax return filings and extensions.

"We do know that it is significantly weighted with higher-income taxpayers," he said. "There are about 48 [individual] taxpayers that paid about $23 million more than they paid last year."

Shelnutt added "it seems to be happening in other states," as well.

Leathers noted the state "had the big surprise [with a large increase in individual income tax collections in April 2013], and it turned out to be money we gave back the next year, so we are going through that analysis now to determine exactly what's going on."

During the first 10 months of fiscal 2015 , state general revenue increased by $172 million (3.3 percent) over the same period in fiscal 2014 to $5.37 billion. That's $130.2 million (2.5 percent) above the state's forecast.

Tax refunds and several other government expenditures come off the top of total general revenue, leaving "net" general revenue that agencies are allowed to spend.

During the first 10 months of fiscal 2015, the net increased $159.7 million (3.8 percent) over the same period in fiscal 2014 to $4.32 billion. That's $163.8 million (3.9 percent) above the state's forecast.

Walther said the entire $163.8 million probably won't end up as a surplus at the end of the fiscal year.

"I wouldn't make a large wager on that," he said.

Richard Wilson, assistant director of research for the Bureau of Legislative Research, said his best forecast model in February suggested a $125 million surplus in fiscal 2015 and that "April was even bigger than we expected."

The Legislature's Committee on Economic and Tax Policy is scheduled to meet Wednesday, "at which we expect to discuss revenue forecasts and possible revision," Wilson said.

Walther declined Monday to offer any updated projection.

If the state collects more than forecast in the current fiscal year, measures enacted this year by the Legislature would distribute up to $50 million to rainy-day money and up to $30 million to the Quick-Action Closing Fund.

Any surplus above $80 million would be money the Legislature could decide to allocate in the future, said Brandon Sharp, the state's budget administrator.

Last year, the Arkansas Legislature approved a $5 billion general revenue budget for fiscal 2015 that increased projected spending $109 million over the previous year, with most of the increase targeted for public schools, prisons and human services.

That budget anticipates $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 money to buy private health insurance for some low-income Arkansans under the so-called private option Medicaid expansion.

NW News on 05/05/2015

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