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story.lead_photo.caption Gov. Asa Hutchinson is shown in this file photo.

Bolstered by robust individual and corporate income tax collections, state general revenue in April surged to a record $958.8 million, a state report shows.

The general revenue collections increased by $116 million, or 13.8%, over the same month a year ago and exceeded the state's forecast by $125.1 million, or 15%, the state Department of Finance and Administration said in its monthly revenue report released Thursday.

April's total collections of $958.8 million exceeded the previous record for any month. The previous record was $842.8 million set in April 2018, said Whitney McLaughlin, a tax analyst for the finance department. April is typically state government's biggest revenue month because April 15 is the deadline for filing individual income tax returns.

Individual income, and sales and use taxes are state government's two largest sources of general revenue.

While individual and corporate income tax collections outdistanced the forecast in April, sales and use tax collections fell short of the prediction, according to the finance department.

Gov. Asa Hutchinson said the state has accumulated a net general revenue surplus of about $148 million in the first 10 months of fiscal 2019, which ends June 30.

This year's regular legislative session, which adjourned last week, saw the Legislature devote more money to increase teachers' minimum salaries and enact tax cuts.

Graphs showing Arkansas sources of general revenue.
Graphs showing Arkansas sources of general revenue.

"This is really a good sign for a robust economy, and we'll continue to be able to invest in education [and] we'll be able to continue to expand our economy," the Republican governor said at a news conference in the governor's conference room at the state Capitol.

John Shelnutt, the state's chief economic forecaster, said in an earlier interview that April's general revenue exceeded the forecast because of the combination of continued growth in the economy and "one-time payment issues and possibly continuing effects from the federal tax cut taxpayer strategy."

Paul Louthian, a deputy director at the finance department, said in an interview that state officials have seen some early reports from other states "where they are having really good months also, so we don't think we'll be alone in that.

"At the end of the day, we are going to be very cautious about these numbers as far as what it means going forward," he said. "We had some one-time events that we don't see happening again. In fact, some of this may wind up being where we have some refunds going into next year, especially in the corporate arena."

FORECAST BEATEN

During the first 10 months of the current fiscal year, general revenue collections increased by $310.2 million, or 5.5%, over the same period in fiscal 2018 to $5.9 billion and exceeded the forecast by $183.9 million, or 3.2%, the finance department reported.

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

So far in fiscal 2019, the net increased by $301.1 million, or 6.6%, over the same period in fiscal 2018, to $4.89 billion, which is $148.9 million above forecast, according to the finance department.

In April alone, the net increased by $94 million or 14.3% over the same month a year ago to $751.1 million, which exceeded the forecast by $102.2 million or 15.7%.

The projected general revenue budget for fiscal 2019 is $5.63 billion -- $172.8 million more than the budget for fiscal 2018. Also, the Revenue Stabilization Act for fiscal 2019 -- the act that distributes general revenue to state-supported programs -- would set aside $48 million of what the governor considers surplus money for a restricted reserve account and another $16 million to help match federal highway funds.

Under a 2017 state law, Hutchinson's plan to cut individual income taxes for people with incomes below $21,000 a year took effect Jan. 1. State officials project that the cuts will reduce revenue by about $25 million in fiscal 2019 and $50 million in all of fiscal 2020.

The sales tax on groceries also was cut, from 1.5% to 0.125%, on Jan. 1. Under a 2013 law, the tax cut of about $61 million a year is financed using savings from the end of desegregation payments to three Pulaski County school districts.

APRIL'S DETAILS

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

• A $79.1 million, or 15.1%, increase in individual income tax collections over the same month a year ago to $601.6 million. That exceeded the state's forecast by $87.4 million or 17%.

Withholdings is the largest category of individual income tax collections. They increased by $19.7 million, or 6.8%, over the same month a year ago to $308 million and exceeded forecast by $31.3 million.

The increased withholdings in April reflect more people working and people working longer hours, said Shelnutt. He said that some one-time events may have increased withholdings as well, but he can't discuss those factors because that involves confidential taxpayer information.

Individual income tax collections and extensions increased by $61.2 million over the same month a year ago to $237.8 million and exceeded the forecast by $57.7 million.

But collections from estimated individual income tax payments dipped by $1.8 million from April a year ago to $55.8 million and fell short of forecast by $1.6 million.

• A decrease of $8.2 million, or 3.9%, in sales and use tax collections from April 2018 to $200 million. That fell short of the forecast by $10.5 million, or 5%. That reduction was a reflection of the grocery sales tax cut that became effective Jan. 1.

Sales and use tax collections in April "were down in most sectors, consumer and business, except for motor vehicle and restaurants," Shelnutt said.

"We think there may be some influence from the differences in the Easter holiday period between last year and this year and any sales associated with Easter," he said.

Louthian said Easter "was earlier last year so we had more sales in March, which come in then as collections in April. This year, it was late enough that we didn't have that effect in April."

• A $43 million or 54.6% increase in corporate income tax collections compared with April 2018 to $121.9 million. That exceeded forecast by $46.5 million or 61.6%. Higher estimated payments and extension payments accounted for the gain in what's a volatile source of tax revenue.

"We found out that corporate tax filers when they make their extensions [for filing their corporate income tax returns], a lot of them now are making a very large extension payment because it protects them from having any penalties due on the tax due amount on their return," Louthian said.

"If they have a net overage, instead of asking for a refund they simply apply that to one or two quarters of their estimated payments for next tax year," he said.

"We could actually wind up having a good [corporate income tax] extension collection in this fiscal year and then have no payment received in the next year as they work out that overpayment for estimates, so that adds to that volatility that we are seeing in the corporate taxes," Louthian said.

For fiscal 2020, which starts July 1, the general revenue budget totals $5.75 billion -- an increase of $124.1 million over the current fiscal year, with most of the increase targeted for human services and education programs.

The Legislature and Hutchinson enacted laws in the recently ended session to phase in reductions in the top individual and corporate income tax rates and begin requiring out-of-state sellers without a physical presence in Arkansas to collect sales and use taxes on their sales to in-state purchasers.

A finance department report projects that laws tracked by the finance department are collectively projected to reduce general revenue by $8.5 million in fiscal 2020 and then by $67.4 million in fiscal 2021.

Act 182 will phase in Hutchinson's plan to reduce the state's top individual income tax rate from 6.9% to 5.9% over a two-year period. State officials project that it will reduce revenue by $25.6 million in fiscal 2020 and then $74.1 million in fiscal 2021.

FUTURE SURPLUS

Hutchinson said in an interview that he's optimistic that the current general revenue surplus of about $148 million collected so far this fiscal year will remain by the end of the year on June 30.

"The economy is solid. Even though this was a big jump this one month, I think overall the trend has been positive and so I have an expectation that we'll be able to end the year with a strong surplus," he said.

"We have budgeted for restricted reserves and have very conservative budgeting, so that we don't get ourselves in a bind," Hutchinson said.

"With our commitment to the new transportation funding bill, if casino revenues don't meet its goal or meet its expectation, then we've got to utilize general revenues to make that up, so these surpluses will help us in our highway program, meet the contributions there," he said.

"But also it allows us to set aside savings continually for what will ultimately happen in the future, which is some type of a downturn, so even though I feel good about the surplus we have now, we'll continue to manage it conservatively," said Hutchinson.

In March, Hutchinson signed the highway funding bill into law as Act 416.

Act 416 will impose a wholesale sales taxes on gas and diesel fuel and raise electric and hybrid registration fees, effective Oct. 1, and transfer at least $35 million a year in casino revenue and/or other funds to the state Department of Transportation.

State officials project Act 416 will raise about $95 million for the department to spend on highways and about $13 million more a year each for cities and counties.

A Section on 05/03/2019

Print Headline: Revenue in April a record for state; tax collections push it to $958M

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Comments

  • mozarky2
    May 3, 2019 at 6:34 a.m.

    "A $79.1 million, or 15.1%, increase in individual income tax collections over the same month a year ago to $601.6 million. That exceeded the state's forecast by $87.4 million or 17%".
    RobertBear's head explodes in three...two...one...

  • SeanJohn
    May 3, 2019 at 9:38 a.m.

    A lot of this is Greek to me while trying to follow along in this story. I understand charts and graphs better. Probably from looking at so many blue prints and schematics. But, it all sounds positive to me. Good job... whoever.

  • mozarky2
    May 3, 2019 at 9:51 a.m.

    The U.S. jobs machine kept humming along in April, adding a robust 263,000 new hires while the unemployment rate fell to 3.6%, the lowest in a generation, according to a Labor Department report Friday.
    Nonfarm payroll growth easily beat Wall Street expectations of 190,000 and a 3.8% jobless rate.
    Average hourly earnings growth held at 3.2% over the past year, a notch below Dow Jones estimates of 3.3%. The monthly gain was 0.2%, below the expected 0.3% increase, bringing the average to $27.77. The average work week also dropped 0.1 hours to 34.4 hours.
    Unemployment was last this low in December 1969 when it hit 3.5%. At a time when many economists see a tight labor market, big job growth continues as the economic expansion is just a few months away from being the longest in history.
    The unemployment rate for Asians fell sharply, plunging from 3.1% to 2.2%.
    While last month’s slump in the jobless rate came with strong increase in hiring, it also was helped along by a sharp decline in the labor force of 490,000. That brought the labor force participation rate down to 62.8%, exactly where it was a year ago.
    A broader unemployment gauge that includes those who have quit looking for jobs as well as the underemployed held at 7.3%, where it has been since February.
    Those counted as not in the labor force surged by 646,000 to a fresh high of 96.2 million.
    “Leaving aside month-to-month fluctuations, the labor market is still very strong, adding almost double the number of workers needed to keep pace with new entrants to the labor force in any given month,” said Eric Winograd, AllianceBernsetein’s senior economist. “Wages may have been slightly tepid this month relative to expectations but are still growing at just about the highest rate this cycle, and the unemployment rate is at multi-generational lows.”
    The level of unemployed people plunged by 387,000 in April, bringing the total level to 5.8 million. However, the ranks of the employed also declined by 103,000, according to the Labor Department’s household survey.
    Professional and business services led job creation with 76,000 new postions. Construction added 33,000, bringing to 256,000 the total new jobs created in the field over the past year.
    Health care rose by 27,000, bringing its 12-month total to 404,000, while financial positions increased by 12,000, rounding out an increase of 111,000 in the 12-month period thanks largely to growth in real estate and rental and leasing.

  • UoABarefootPhdFICYMCA
    May 3, 2019 at 10:39 a.m.

    this is nothing new to Arkansas.
    all i want to know is how much of it is headed to syria or mexico

  • mozarky2
    May 3, 2019 at 12:46 p.m.

    The national seasonally-adjusted unemployment rate for Hispanics and Latinos in the U.S. labor force fell to a record low of 4.2% in April, U.S. Bureau of Labor Statistics (BLS) data released Friday show.

    In April, the unemployment rate for Hispanics and Latinos, aged 16 and up, was 4.2%, down from 4.7% in March – breaking the record low of 4.3% set two months earlier in February. BLS began tracking Hispanic-Latino employment data in 1973.

    The number of unemployed Hispanics fell to 1,198,000 - the fewest unemployed since August of 2007 (1,190,000) and a decline of 165,000 from 1,363,000 in March of 2019.

    The number of Hispanics employed fell to 27,348,000 from 27,566,000 in March and off from its record high of 27,701,000 in December 2018. The number of Hispanics participating in the workplace increased as Hispanics' labor force participation rate fell to 65.9% from 67.0% in March.

  • mozarky2
    May 3, 2019 at 1:59 p.m.

    Lindsey Graham throws down the gauntlet! You progs are really going to hate the next several weeks!
    Senate Judiciary Committee Chairman Lindsey Graham invited special counsel Robert Mueller to “provide testimony” to the panel if Mueller wanted to discuss any discrepancies with Attorney General William Barr’s responses to questions from lawmakers this week about a phone call between the two men.
    “Please inform the Committee if you would like to provide testimony regarding any misrepresentation by the Attorney General of the substance of that phone call,” Graham wrote to Mueller.
    Graham said Wednesday he will not ask Mueller to testify before the panel about the 448-page report he completed that cleared the Trump campaign of collaborating with the Russians in 2016 but left open whether Trump tried to obstruct the probe.
    Graham, R-S.C., said he would seek from Mueller testimony limited to the phone call if Mueller disputed Barr’s accounting of the exchange.

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