Fueled by increased individual income and sales and use tax collections, state general revenue increased in November by $34.4 million over the same month a year ago to $492.2 million.
State government's total general-revenue tax collections exceeded the newly revised forecast by $14.8 million, the state Department of Finance and Administration reported Tuesday in its monthly revenue report. The forecast was reduced Nov. 14 to alter expectations in different categories.
November's general-revenue collections are a record for the month, exceeding the previous record of $480.7 million in 2009, said Whitney McLaughlin, a tax analyst at the finance department.
Individual income taxes and sales and use taxes are the two largest sources of general revenue.
"The growth in sales tax collection, along with an increase in payroll withholding, are encouraging signs as we head into December," Gov. Asa Hutchinson said in a written statement.
"The growth has resulted in $11.5 million in [net] revenue over projections last month. The state is in a good pattern as the General Assembly considers my balanced budget proposal," the Republican governor said.
The 92nd General Assembly will convene in regular session, starting Jan. 14, to consider enacting a fiscal 2020 budget and many other matters.
For fiscal 2020, which starts July 1, Hutchinson last month proposed a general revenue budget totaling $5.75 billion -- a $125.2 million increase over fiscal 2019's budget, with most of the increase going to human services and education programs, including a boost in starting teacher pay.
His proposal factors in a $47.4 million reduction in general revenue in fiscal 2020 as part of his plan to gradually cut the top individual income tax rate from 6.9 percent to 5.9 percent and simplify the tax code by reducing the number of tax tables from three to one. State officials projected his plan ultimately will cut revenue by nearly $192 million a year.
On Nov. 14, the department reduced its projection for total gross general revenue in fiscal 2019 by $24.2 million, or 0.4 percent, to $6.91 billion -- which would be a $191.3 million increase over fiscal 2018, which ended June 30 -- according to department records.
But the department didn't change its fiscal 2019 projection for net available general revenue -- money available to state agencies -- from $5.62 billion, a $131.1 million increase over fiscal 2018.
For fiscal 2019, the department reduced its forecast for corporate tax collections by $74.5 million to $407.8 million -- a $1.1 million increase over fiscal 2018.
The department increased its forecast for individual tax collections by $16.3 million to $3.44 billion -- an $85.5 million increase over fiscal 2018.
It also increased its forecast for sales and use tax collections by $9.4 million to $2.49 billion -- a $79.6 million increase over fiscal 2018 -- department records show.
The projection for corporate tax collections was lowered "for the risk that we see in that category for the rest of the year and it was also necessary to pull it down, so it didn't affect the new biennial [fiscal 2020 and 2021] values for corporate" tax collections, said John Shelnutt, the state's chief economic forecaster.
"We have essentially pulled corporate risk down for the next 2½ years to be cautious" and conservative, he said.
"We know of certain things that are going to happen and that may happen and it's a volatile category [of tax collections] to begin with," he said.
According to the finance department, November's total general revenue collections increased by 7.5 percent over the same month a year ago and included:
• A $14.7 million or 7 percent, increase in individual tax collections over year-ago figures to $225.2 million, which exceeded the revised forecast by $7.1 million or 3.2 percent.
The largest category of individual tax collections is withholdings.
Withholdings totaled $211.4 million last month -- a $13.3 million or 6.7 percent increase over the same month a year ago that exceeded the latest forecast by $4.8 million.
The increased withholdings last month are "a combination of all the labor market factors, hours and jobs and quality of jobs," said Shelnutt.
• A $15.2 million, or 8 percent, increase in sales and use tax collections from the same month a year ago to $204.9 million, which is $6 million or 3 percent above the revised forecast.
Last month's sales-tax collections increase "was across the board," including increased business and consumer spending, but with the exception of motor vehicle sales-tax collections that were essentially flat from a year ago, Shelnutt said.
• A $5 million, or 114.3 percent, increase in corporate tax collections to $9.4 million, which exceeded the revised forecast by $1.2 million, or 14.1 percent. Corporate taxes are volatile and often reflect corporations' federal tax strategies, state officials have said.
Tax refunds and some special government expenditures come off the top of total general-revenue collections, leaving a net amount that state agencies are allowed to spend.
The net in November increased by $28.1 million or 7.4 percent over year-ago figures to $407.1 million, which exceeded the forecast by $11.5 million or 2.9 percent.
YEAR TO DATE
In the first five months of fiscal 2019, general-revenue collections increased by $121.3 million, or 4.8 percent, from the same period in fiscal 2018 to $2.66 billion. The collections exceeded the latest forecast by $14.8 million or 0.6 percent, the finance department reported.
Thus far in fiscal 2019, net general revenue available to state agencies has increased by $142.7 million, or 6.6 percent, from the same five-month period in fiscal 2018 to $2.32 billion. That exceeded the revised forecast by $11.5 million or 0.5 percent.
For the current fiscal year, the general-revenue budget is projected to be $5.63 billion, which is $172.8 million more than the budget for fiscal 2018.
The Revenue Stabilization Act that distributes general revenue to state-supported programs also would set aside $48 million of what the governor considers surplus money for a restricted reserve fund that would be used to fund future tax cuts and another $16 million to help match federal highway funds.
On Jan. 1, cuts in income-tax rates for people who make up to $21,000 a year will go into effect. The cuts are projected to reduce revenue by $25 million in fiscal 2019 and then $50 million a year thereafter. In 2015, the Legislature also enacted the governor's plan to cut tax rates for people with income between $21,000 and $75,000 a year. This cut is projected to reduce revenue by $100 million a year.
Also on Jan. 1, the state sales tax on groceries will go from 1.5 percent to 0.125 percent under a 2013 law. The cut will be funded by savings from the end of desegregation payments to three Pulaski County school districts. The reduction is the final part of former Gov. Mike Beebe's plan to gradually cut the grocery tax.
Metro on 12/05/2018
Print Headline: State revenue hits $492.2M in November