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State racks up $191.6M surplus

As fiscal year closes, one-time inflows beef up total revenue by Spencer Willems | July 3, 2015 at 4:13 a.m.
Arkansas Department of Finance and Administration Director Larry Walther.

The state coffers ended the fiscal year with a $191.6 million surplus bolstered by some one-time cash influxes.

Photo by Rick McFarland
Gov. Asa Hutchinson is shown in this file photo.
Photo by Sources: Economic Analysis and Tax Research, Department of Finance and Administration / Arkansas Democrat-Gazette
Graphs showing Arkansas sources of general revenue.

The end-of-year nest egg, more than double fiscal 2014's surplus of $78.7 million, came in part from a $14.4 million transfer from a settlement won by the Arkansas attorney general's office, as well as a $51 million transfer to general revenue from funds in the state Insurance Department.

Though bigger than last year, it is well below the $299.5 million from fiscal 2013, as well as the $409.3 million seen in fiscal 2007, the biggest the state has achieved in more than two decades.

The surplus -- combined with increases nearly across the board in different revenue streams including income to corporate taxes -- bodes well for the near future, according to state Department of Finance and Administration Director Larry Walther.

"Obviously we've had a good year," Walther said. "Those [one-time influxes] are anomalies that you would not expect on an ongoing basis to occur ... but we've had a good year."

As to what will happen with the surplus, department officials said that all but about $38 million will be divvied up for previous general improvement commitments and other obligations.

On Thursday, Gov. Asa Hutchinson released a statement saying the figures showed that Arkansas is working in the right direction.

"I am pleased with these numbers, because they indicate a growing confidence in Arkansas's economy," Hutchinson stated. "Our conservative budgeting philosophy will not change as we continue to look for ways to grow our economy and meet the needs of our state."

In total, the state collected $6.47 billion in gross revenue, $72.3 million more than expected and a 3.7 percent increase from the $6.242 billion collected last year.

That marks the third-straight year that such revenue has set a record, starting with a $6.214 billion haul in fiscal 2013.

Tax refunds, bond obligations and other state financial commitments come off the top of gross revenue, leaving the remainder, or net revenue, for state agencies and services.

Net revenue for fiscal 2015 was $5.25 billion, roughly $100 million more than projected, and $228.1 million more than in fiscal 2014, roughly a 4.5 percent increase.

A settlement between Standard & Poor's Financial Services LLC and the state generated the extra, one-time $14.4 million.

Overall, Walther said, increases in revenue streams were robust, including a growth in income-tax revenue, the state's largest stream of money.

The state saw a 2.5 percent increase in the amount collected from individuals' income taxes, growing $77.3 million from $3.111 billion in fiscal 2014 to $3.188 billion this year.

Tax refunds fell just below forecast, reaching $524.3 million, a $15.3 million increase over the previous year.

Two years ago, the state implemented a $50 million tax cut for individual taxpayers, and again this year, lawmakers approved another tax cut, this time $100 million over the next two years aimed at the middle class, or those making $21,000 to $75,000 a year.

"We're in a pretty good position to deal with those sorts of changes in our revenue streams," Walther said. "We want to be conservative in our forecast so that we're available to finance state government and also be able to address ongoing issues."

Corporate income tax revenue saw a sizable jump, growing 12 percent from $440 million collected in fiscal 2014 to $493 million.

Tobacco taxes dropped slightly, from $219.2 million collected in fiscal 2014 to $218.5 million in 2015.

Sales tax revenue climbed 1.1 percent, from $2.173 billion in fiscal 2014 to $2.197 million.

That's $15 million below the Department of Finance and Administration forecast.

Sales tax revenue was ahead of forecasts most of the year. But an Arkansas Supreme Court ruling in early June forced the state to pay more than $24 million to fracking companies that had improperly been charged taxes on "proppants"-- granular substances, such as sand, that are injected into wells to keep fractures open so oil or gas can be removed.

But on Thursday, Walther said that amount was $28.7 million.

Otherwise, sales tax revenue is climbing and that "bodes well for the economy in Arkansas," Walther said. "I don't know what happens next month ... but if you look at what's going on, it tells me things are doing well in Arkansas."

The most recent figures from the U.S. Bureau of Labor Statistics show that the state's unemployment rate in May was at 5.7 percent, up from 5.6 percent in April.

Overall, the total labor force is 1.336 million.

General revenue increased in June, the last month of the fiscal year, reaching $670.3 million, nearly $54 million more than June 2014 and $57.5 million more than expected.

Metro on 07/03/2015

Print Headline: State racks up $191.6M surplus

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