Gov. Asa Hutchinson's administration is projecting a $171.9 million -- or 2.7 percent -- growth in total general-revenue tax collections from the current fiscal year, to $6.58 billion in fiscal 2017, state officials said Tuesday.
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Also, seven months into the current fiscal year, the administration predicts a general-revenue surplus of $35.9 million when the fiscal 2016 ends June 30.
The state Department of Finance and Administration forecasts that the net general revenue available to state agencies will increase by $106.8 million, or 2 percent, in fiscal 2017 to $5.33 billion, department Director Larry Walther said in a letter to the Legislative Council's co-chairmen, Rep. David Branscum, R-Marshall, and Sen. Bill Sample, R-Hot Springs.
State 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.
The state's net general revenue increased by $228.1 million (4.5 percent) to $5.25 billion in fiscal 2015, the finance department said.
The department is projecting that the state will have $5.22 billion in net general revenue in fiscal 2016, and that's enough fully fund the state's general-revenue budget of $5.19 billion and leave a $35.9 million general-revenue surplus from fiscal 2016, finance department Director Larry Walther said in the letter to Branscum and Sample.
The projected surplus would be in addition to the state's currently unobligated surplus funds totaling $47.6 million, according to the finance department.
Next month, Hutchinson is expected to propose his general-revenue budget for fiscal 2017. The Legislature will convene for a fiscal session starting April 13 to approve a budget.
Hutchinson said the state's latest general-revenue forecast "will allow us to meet the needs of the state in terms of education, health care, prisons and other essential services.
"The forecast is an example of our faith in the strength of the state's economy, our positive outlook for the coming years, and our commitment to conservative, balanced budgets as a hallmark of good government," the Republican governor said in a written statement.
"Over the next two fiscal years, we anticipate that Arkansas' revenues will grow and that a budget surplus will result," Hutchinson said. "This in addition to major reductions in state income taxes which will save more than $100 [million] for middle-class Arkansans. State revenues continue to show solid, steady growth."
In fiscal 2017, the finance department is projecting an increase of $88.2 million (2.8 percent) in individual income tax collections, to $3.22 billion, and a $90.6 million (3.9 percent) increase in sales-and-use tax collections to $2.39 billion.
The House Revenue and Taxation Committee chairman, Rep. Joe Jett, D-Success, said in an interview that the projected increases in individual income tax and sales-and-use tax collections in fiscal 2017 are "pretty stout."
Senate Revenue and Taxation Committee Chairman Jake Files, R-Fort Smith, said, "It is promising that we continue to sustain strong growth and forecast continued growth, but with the volatility of the global market and uncertainties that exist, I would hope that as a state we would try to be more conservative in our spending moving forward.
"When I see neighboring states like Oklahoma dealing with huge shortfalls, I can appreciate where we are and would hope that we can continue to produce surpluses in the future," Files said in an email to this newspaper.
Jett said he's cautiously optimistic that the finance department's projected 2 percent increase in net available general revenue for state agencies in fiscal 2017 is a good projection.
"The 900-pound elephant in the room is the private option," Jett said, referring the state's program that taps federal Medicaid funds to purchase private health-insurance for some low-income Arkansans.
The private-option program -- authorized by the Republican-controlled Legislature in 2013 when Democrat Mike Beebe was governor -- has deeply divided Republicans in the Legislature in the past three years.
Hutchinson wants to overhaul the private option and rename it Arkansas Works. The state will have to start paying 5 percent of the program's cost in fiscal 2017 and its share will gradually increase to 10 percent by 2020.
Hutchinson has said he's preparing two proposed budgets for fiscal 2017 -- one including the overhauled Medicaid expansion program and one excluding it. About 180,000 Arkansans have health insurance through the program.
Reauthorizing funding for the private option or Arkansas Works requires a three-fourths vote of the 100-member House of Representatives and 35-member state Senate -- a threshold that required multiple votes to meet in 2013 and 2014.
House Speaker Jeremy Gillam, R-Judsonia, said many of the state's budget issues for fiscal 2017 "will depend on whether we implement Arkansas Works in some shape or fashion" and continue receiving the federal funds for the Medicaid expansion.
Hutchinson's highway funding plan counts on using surplus state funds and transferring some state general revenue to the state Highway and Transportation Department for the first time.
A Section on 02/03/2016