UPDATE: As predicted, state tax revenue took sharp dip in March | Arkansas Blog

Tuesday, April 4, 2017

UPDATE: As predicted, state tax revenue took sharp dip in March

Posted By on Tue, Apr 4, 2017 at 10:16 AM

As Gov. Asa Hutchinson had warned several days ago, state tax collections in March were sharply below forecast.

Though some of the blame goes to accounting anomalies, it's also worth noting that the sales tax collections dipped in March both against last year and forecast despite this being the first month of collections from Amazon, the Internet retailer which began voluntarily collecting tax on purchases in Arkansas on March 1.

CORRECTION: Sen. Jonathan Dismang informs me that, though Amazon began collections March 1, it  isn't required to make its payment of March collections until April 20.

The summary on the important net collection figures for the month:

March Net Available General Revenues total $345.0 million, $68.7 million or -16.6
percent below last year and $50.2 million or -12.7 percent below forecast.

Results in March were impacted by a change in Corporate tax filing due dates compared to the monthly forecast. The timing shift involved Corporate Returns and Extension payments previously due in March and shifted to April in federal and adopted state law.

The two filing categories are down $33.9 million from a year ago and $34.5 million compared to forecast. Also Corporate Refunds exceeded forecast in March reducing net revenues by a further $5.3 million compared to forecast.

Individual Income tax collections were $0.6 million below forecast as lower payments from Tax Returns offset higher than expected Withholding Tax revenue.

Individual Income Tax Refunds were below forecast by $4.4 million, adding to Net Available fund results. This amount reflects continued differences in filings and processing compared to last year to allow for additional fraud checks of refund requests.

Among other major categories, Sales and Use Tax collections were $8.9 million below forecast.
For the first nine months of the year, gross revenues are $8.2 million below the same period last year and $101.7 million below forecast. The net figure, after certain off-the-top distributions, is $65.2 million below forecast. This raises the obvious question:  Will budget cuts be necessary? Gov. Asa Hutchinson has so far resisted saying so. I've asked his office again today.


Though the legislature passed no legislation to spur sales tax collection by Internet merchants with no facilities in the state, such as Amazon, it announced it would voluntarily begin collections  March 1 as it has done in some other states. By some estimates, it accounts for about half of all Internet business nationwide.

Individual corporate collections are secret by law. But if they are significant, they should be expected to make sales tax collections depart from what have generally been sluggish collections.

March sales and use collections were $193.7 million, a decrease of  $300,000 below last year. Collections were below monthly forecast levels by $8.9 million or -4.4 percent.  The sales tax is a pretty good measure of the economy, unaffected by calendar issues such as income tax receipts. Doesn't look robust.

UPDATE: A comment from the governor's office on the situation:

“This month’s revenue does not meet our monthly forecast largely because of a change in corporate filing deadlines. Even though the greatest portion of the shortfall will be corrected in the coming months, I am keeping a very watchful eye on our budget both in terms of revenue and expenses. It should be noted that individual income tax collections remain above last year’s level despite the $100 million tax cut that was in effect for the entirety of the last fiscal year.

“Keep in mind, we have three months left to go in this budget cycle, and a lot could change before July 1. April is typically the biggest month for state revenue, and next month’s results in particular will be important for any decisions as to whether the forecast should be adjusted or not.

“Given how much time is left before the end of the fiscal year, it would be premature at this time to make any changes to the budget or the forecast. I’ve previously advised our agencies to make contingency plans in the event the budget forecast will need to be adjusted. In the event adjustments are needed down the road, there should not be any impact to Category A spending. This type of budget variance is the reason we included over $100 million in Category B which means the agencies cannot spend line items in Category B until late in the fiscal year."

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