Gov. Asa Hutchinson's administration on Friday trimmed by $22.1 million its projection for increased general-revenue tax collections in fiscal 2018 over the last fiscal year, but it didn't cut the state's projected budget of $5.45 billion.
The new projection is that the state will take in $183 million more in fiscal 2018 than it did last fiscal year. Fiscal 2018 began July 1.
Officials for the state Department of Finance and Administration said they changed the fiscal 2018 general-revenue forecast -- originally issued in May -- largely by cutting projections for state sales and use tax and corporate income tax collections. Both have been lagging.
They said they made up for the reduced projections largely by also cutting the too-high projection for individual income tax refunds.
"Last year, we saw month-to-month fluctuations in the budget, but at the conclusion of the fiscal year, the original forecast was right on target," Hutchinson said in a written statement regarding why the department didn't cut the projected budget for fiscal 2018.
"Based on that experience and the revenue numbers thus far this year, I am satisfied that maintaining the forecast without adjustment is the right approach," the Republican governor said.
"As an additional conservative tool to managing the budget, we will present to the General Assembly a [fiscal 2019] budget that will reduce spending," Hutchinson said in his written statement. "This will provide a sufficient cushion in the event there is any unanticipated economic news that changes the revenue picture next year."
The finance department will report the state's general-revenue tax collections for November -- the fifth month of fiscal 2018 -- on Monday. Department Director Larry Walther declined to reveal Friday whether collections rebounded in November after dipping in October.
In early May, Hutchinson announced a $43 million cut to the general-revenue budget for fiscal 2018.
That is the second consecutive fiscal year that saw a cut. In late April, Hutchinson announced a $70 million cut in the fiscal 2017 budget because of lagging sales and use tax and corporate income tax collections. But after tax collections rebounded, he later restored $60 million of that cut at the end of the fiscal year in June.
In fiscal 2018, the general revenue budget of $5.45 billion is $130.1 million more than last fiscal year's budget, with most of the increase going to the state Department of Human Services, according to the finance department.
The finance department cut its projection for fiscal 2018's total general revenue from $6.756 billion, which was a $205.1 million, or 3.1 percent, increase over fiscal 2017, to $6.734 billion, which is a $183 million, or 2.8 percent, increase over fiscal 2017.
Sen. Bryan King, R-Green Forest -- a critic of Hutchinson -- said the finance department should have forecast a 1.5 percent increase in general-revenue tax collections in fiscal 2018 and planned on reaping the benefits in the form of a larger surplus at the end of the fiscal year.
The state's two largest sources of state general revenue are individual income taxes and sales and use taxes.
The finance department's forecast released Friday projects $3.323 billion in individual income tax collections in fiscal 2018 -- up by $108.4 million over fiscal 2017. That's a $4 million increase over the May forecast.
The department now forecasts $2.418 billion in sales and use tax collections in fiscal 2018 -- an $81 million increase over fiscal 2017. That's a $26 million decline from the May forecast.
The department's newest forecast projects $465.7 million in corporate income collections in fiscal 2018 -- a $31.9 million increase over fiscal 2017. That's a $9.2 million decline from the May forecast.
For fiscal 2018, the department projects paying out individual income tax refunds totaling $485.1 million -- up by $38.1 million over fiscal 2017. That's a reduction of $37 million from the May forecast.
The department also forecasts paying out corporate income tax refunds totaling $78.9 million -- up by $11.5 million over the previous fiscal year. That's a $14 million increase from the May forecast.
The department now projects total general revenue of $6.942 billion in fiscal 2019 -- an increase of $207.2 million, or 3.1 percent, over fiscal 2018. Fiscal 2019 starts on July 1, 2018.
For net general revenue available for distribution, the department's latest forecast still projects $5.69 billion in fiscal 2019 -- an increase of $237 million, or 4.3 percent, over fiscal 2018.
King said the projected 4.3 percent increase in fiscal 2019's net revenue "is so unrealistic."
But the forecast for fiscal 2019 "assumes that as the desegregation payments end in [fiscal] 2018, the sales tax rate reduction on food will be triggered to become effective January 1, 2019," Whitney McLaughlin, a tax analyst at the finance department, said Friday in an email.
The state's sales tax on groceries will decline from 1.5 percent to 0.125 percent with the use of savings from the state no longer making desegregation payments to three Pulaski County school districts under a law enacted in 2013.
"Thus, the [fiscal] 2019 forecast includes the impact of a reduction of $25 million in sales tax collections and the benefit of not deducting $65.8 million for desegregation payments," McLaughlin said in her email.
Hutchinson provided no details about what he called a "conservative tool to managing the budget" that he plans to present to the Legislature for fiscal 2019.
Metro on 12/02/2017