Arkansas’ general revenue surplus set an official record, totaling $ 945.7 million in the fiscal year that ended Wednesday, state officials said on Friday.
The surplus for fiscal year 2021 is more than double the previous record of $ 409.3 million for fiscal 2007, according to records from the Ministry of Finance and State Administration.
The 2007 fiscal year began on July 1, 2006, when Republican Mike Huckabee was governor. Democrat Mike Beebe took office in January 2007.
Governor Asa Hutchinson said the state ended the year stronger than ever with a record surplus.
“This allows the state to increase our reserves to over $ 1.2 billion and also increase our Medicaid trust fund to ensure we can continue our health care coverage for low-income Arkansans.” the Republican governor said in a written statement on Friday.
“The most impressive part of the income report is that our personal income tax collections have increased year over year despite lowering the tax rate to 5.9% at the start of this year. the calendar year, âHutchinson said.
Law 182 0f 2019 reduced the state’s highest personal income tax rate from 6.9% to 6.6% on January 1, 2020, and then to 5.9% on January 1 of this year . State officials initially predicted that Bill 182 would reduce revenue by $ 25.6 million in fiscal 2020; $ 48.5 million more in fiscal 2021; and $ 22.9 million more in fiscal 2022, which began Thursday.
âThis shows that a growing economy coupled with careful management of our resources allows us to finance high-level education and other public services and reduce taxes at the same time,â the governor said.
Over the past few months, Hutchinson has said on several occasions that he plans to call a special session this fall to have lawmakers consider further income tax cuts and that his top priority is to further cut the rate most Student.
Senator Jonathan Dismang, R-Searcy, co-chair of the Legislative Assembly’s Joint Budget Committee, said on Friday that he and other lawmakers were working through the Bureau of Legislative Research to determine “what the economy is real “, what is the share of the state economy. growth is inflated by federal stimulus payments and by the amount of tax cuts the state can afford.
In FY2021, total general revenue collection increased $ 1.1 billion, or 16.6%, from FY2020 to $ 8.1 billion, and exceeded plan The state’s April 2, 2020, forecast of $ 1.2 billion, or 17.8 percent, the finance ministry said in its monthly revenue report on Friday.
The April 2, 2020 forecast predicted a recession triggered by covid-19 that would dampen tax revenue.
The two main sources of general revenue are personal income taxes and sales and use taxes.
Personal income tax collections during the year topped the April 2, 2020 forecast by $ 610.1 million, or 18.2%.
Sales and use tax collections were higher than forecast by $ 314.4 million, or 12.2%.
Corporate tax collections for the year were above forecast by $ 202.5 million, or 45.1%.
Individual collections have been strengthened by the postponement of the 2020 tax declaration and payment deadline from one fiscal year to another by the State. The original deadline of April 15, 2020 was in fiscal year 2020 and the new deadline of July 15, 2020 was in fiscal year 2021.
The deadline for the 2021 tax year has changed, but remained in the same fiscal year, from April 15 to May 17.
The deadline changes are what the federal government has done.
In addition to two filing deadlines in the same fiscal year, payroll deductions exceeded expectations during a faster rebound in the state’s economy.
Sales tax and use tax collections have exceeded expectations for the combined factors of the economic recovery, federal stimulus payments and basic sales growth in the online marketplace, the Department of Engineering said. finances.
Corporate tax collections are a volatile source of income, but they are also exceeding expectations.
Tax refunds and some special government expenses are deducted from total general revenue, leaving a net amount that state agencies are allowed to spend.
Fiscal 2021 net general revenue increased $ 1 billion, or 19%, from fiscal 2020 to $ 6.8 billion and was $ 1.1 billion above plan, or 20.4%.
On Wednesday, the last day of fiscal 2021, the Department of Finance increased the forecast for net general revenue by $ 212.3 million, to $ 5.89 billion.
This fully funded the $ 5.89 billion budget passed in the April 2020 tax legislative session.
The $ 212.3 million increase in forecast also allowed a transfer of $ 86.6 million to the Medicaid trust fund and various government agencies, including public colleges and universities and the Department of Education, to defer. a total of $ 101.6 million.
The remaining $ 24 million was transferred to a long-term reserve fund.
The increase in forecast net general revenue of $ 212.3 million left a surplus of $ 945.7 million.
The surplus results from two main factors at the start of the pandemic and during the year, said chief economic forecaster John Shelnutt.
“Initially, national and state economic forecasts overestimated the size and shape of the pandemic recession, primarily out of concern for aspects of business shutdowns during the pandemic and the blow to consumer confidence,” he said. he stated in a written statement. “The forecast was not fit for a pandemic with this mix of sector impacts and an unknown duration of impact on the job base.”
The second factor was the scale and gradual nature of federal stimulus programs over the year with uncertainty as to their adequacy against needs, Shelnutt said.
âArkansas benefited in both accounts from a smaller impact of the shutdown on sectors and a higher relative advantage of stimulus transfers over our wages and our going cost of living,â he said. he declared.
“If the pandemic recession could be classified as a natural disaster with a rapid rebound in the absence of underlying structural or valuation issues, then Arkansas has had a faster return to trend growth in more sectors.” , Shelnutt said. âConsumers in Arkansas have spent locally and online instead of travel, which has also changed consumption patterns. Staycation has become a new unofficial spending category during the pandemic.â
USE OF SURPLUS
The surplus of $ 945.7 million was combined with surplus funds already accumulated to bring the general revenue earmarked reserve fund to $ 1.1 billion, according to finance ministry records.
With the addition of $ 35.8 million from the restricted reserve fund and $ 6.5 million from a rainy day fund, this brought the state’s total reserve fund to $ 1.17 billion on Wednesday under Law 1058 of 2021.
Under Law 1058, $ 171.4 million of the total reserve funds was transferred to various reserve fund set-aside accounts earmarked for fiscal year 2022 and $ 16.5 million was transferred to the rainy day fund for fiscal 2022 Thursday, according to finance ministry records.
(On June 18, the Legislative Council approved the State Finance Council’s revised request for $ 35 million from the Fiscal Year 2022 Restricted Reserve Fund for the Public School Employees Health Insurance Plan and 13 requests from Hutchinson to transfer $ 62.5 million from the restricted reserve fund for fiscal year 2022 to various state programs and projects. The state has yet to transfer that money, the holder said. word of Finance Department, Scott Hardin.)
Under Law 1058, the remaining $ 991.7 million in excess funds was transferred to the long-term reserve fund on Thursday to add to its previous balance of $ 209.9 million, and the fund totals 1,201. billion dollars, according to finance ministry records.
Hutchinson described the long-term reserve fund as the state’s long-term savings account.
Total general revenue collected last month increased by $ 171.7 million, or 24.7%, from June 2020 to $ 867.7 million and exceeded the April 2020 forecast of 187, $ 2 million, or 27.5%.
Last month’s general revenue total represents a new high level of fundraising for the month of June, said Whitney McLaughlin, tax analyst for the finance department. The previous record was $ 743 million raised in June 2019.
Net general income in June was up $ 150.9 million, or 25.6%, from the same month a year ago to $ 740.6 million and was above plan by $ 178 million , or 31.6%.
According to the finance department, general revenue for June included:
â¢ An increase of $ 26.5 million, or 8.8%, in personal tax revenues from the same month a year ago to $ 328.8 million, which is higher than forecast by $ 71 million , or 27.5%.
â¢ An increase of $ 29.4 million, or 12.9%, in sales and use tax collections from June 2020 to $ 256.8 million, which is higher than forecast by 18.8 million. million dollars, or 7.9%.
â¢ An increase of $ 51.7 million, or 81.7%, in corporate tax collections from the same month a year ago to $ 115 million, which was higher than forecast by 44.9 million dollars, or 64.1%.