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State government's general-revenue collections in October increased by $9.4 million compared with the same month a year ago to $510 million and exceeded the state's forecast by $3 million.

Sales and use tax collections increased for October from the same month last year with the help of increased consumer spending, while individual income-tax collections dipped slightly because the month had one fewer Friday payday than in October 2017, state officials said Friday.

The record general revenue for any October is $516 million collected in 2016, said Whitney McLaughlin, a tax analyst for the state Department of Finance and Administration.

October is the fourth month of fiscal 2019, which started July 1.

The revenue report shows the economy is "robust" with average 5.6 percent-a-month growth in individual income-tax withholdings and average 5-plus-percent-a-month growth in retail sales-tax collections over the past two months, said John Shelnutt, the state's chief economic forecaster.

"Both of those growth rates are beyond forecast expectations, what you might call peak cycle kind of growth," he said.

Gov. Asa Hutchinson said the report "shows we have exceeded our revenue forecast for four consecutive months.

"This demonstrates the continued consumer confidence in the Arkansas economy," the Republican governor said in a written statement. "The fact that both sales tax and individual income tax collections exceed expectations for the year to date puts us in a strong position to boost teacher pay and meet our other priorities in 2019."


In the first four months of fiscal 2019, total general-revenue collections increased by $87 million, or 4.2 percent, from the same period in fiscal 2018 to $2.16 billion. The collection exceeded the forecast by $33.9 million or 1.6 percent, the finance department reported.

Tax refunds and some special government expenditures come off the top of total revenue, leaving a net amount that state agencies are allowed to spend.

Thus far in fiscal 2019, net general revenue available to state government increased by $114.6 million, or 6.4 percent, from the same four-month period in fiscal 2018 to $1.9 billion and exceeded forecast by $57.5 million or 3.1 percent.

"We're pretty happy about that," said Paul Louthian, a deputy director for the finance department.

For the current budget year, the 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 enacted the governor's plan to cut income-tax rates for people who make 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 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 totaling $65 million a year 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 from 6 percent.

On Nov. 14, eight days after Tuesday's election, state officials are scheduled to present the revenue forecasts and the governor's proposed budgets for the next two fiscal years to the Legislature's Joint Budget Committee and Legislative Council. The next two fiscal years are 2020 and 2021. Fiscal years start July 1.

Hutchinson, who is seeking a second two-year term, has proposed increasing the state's minimum teacher pay from the current $31,800 a year to $36,000 in the next four years with the aim of making the starting pay the highest in the region. The governor has estimated the eventual cost of this proposal at $60 million a year.

In addition, Hutchinson has signaled his support for a plan to reduce the number of state individual income-tax tables from three to one and gradually reduce the top rate from 6.9 percent to 5.9 percent.

The plan also would increase the standard deductions for both single and married taxpayers and increase the rates for some taxpayers, but their increased taxes would be offset by the increases in the standard deduction, according to state officials. They project the plan would reduce revenue by nearly $192 million a year.


According to the finance department, October's general revenue included:

• A $8.8 million, or 4.6 percent, increase in sales and use tax collections from a year ago to $199.7 million. This fell below the forecast by $2.4 million or 1.2 percent, partly because tax revenue from utilities was lower than expected.

• A $2 million, or 0.8 percent, decline in individual tax collections compared with the same month a year ago to $252.4 million. This exceeded the forecast by $3.7 million, or 1.5 percent.

Withholdings are the largest category of individual income taxes. They totaled $206.1 million, a dip of $5.6 million from a year ago, and exceeded the forecast by $900,000. The dip resulted from the month having one fewer Friday payday than the same month a year ago.

• A $100,000, increase in corporate income taxes from the same month a year ago to $21.4 million. This fell $1.5 million or 6.5 percent below forecast in what the department described as a low collection month for the category.

In October, the net general revenue available to state agencies increased by $20.9 million or 5 percent from the same month a year ago to $435.4 million and exceeded the forecast by $24.1 million or 5.9 percent.

"A big piece of that is the corporate refunds were much less than we anticipated," Louthian said. "Of course, that [corporate income taxes] has been our most volatile category for the last two and a half to three years."

Metro on 11/03/2018

Print Headline: October revenue reaches $510M

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