Economic uncertainty combined with concerns about income growth have resulted in a lower Arkansas tax revenue estimate for fiscal year 2014 and a small projected increase for fiscal year 2015.
Gross general revenues are estimated at $6.203 billion for the current fiscal year (July 1, 2013-June 30, 2014), down about 0.2% from fiscal 2013 collections, according to a report issued Monday (Dec. 2) by Richard Weiss, director of the Arkansas Department of Finance and Administration.
The revenue forecast for fiscal year 2015 is $6.333 billion, up just 2.1% above the 2014 estimate. The 2015 estimate includes an anticipated reduction of $85.2 million from tax cuts approved in the 2013 Legislative Session.
Year-to-date gross revenue for the first four months of fiscal year 2014 (July 2013-Oct. 2013) totaled $1.958 billion, 4.1% above the same period last year and above forecast by 2.3%.
Weiss said part of the reason for the lowered revenue in FY 2014 is “the expectation that income tax strategy will unwind from the income shift effect for tax year 2012 that helped generate a $299.5 million surplus in FY 2013.”
Overall, there is too much risk in the state and national economy to project tax revenue growth.
“Risk factors for the forecast remain sizable. Although a host of economic indicators point to continued, gradual improvement in the state and national recovery, low income gains pose a threat to continued growth in consumption. Added risk is posed by uncertainty in business investment for new equipment spending and expansion plans,” Weiss noted.
Lower energy prices could help alleviate the negative risks.
“One upside factor for growth is the potential for lower energy prices from potential oversupply and its beneficial effects for consumer discretionary spending, transport costs, and industrial input costs,” according to Weiss’ report.
Other details of the report included:
• FY 2014 state non-farm personal income is estimated at $107.54 billion (current dollars), an increase of $3.53 billion or 3.4% over FY 2013.
• FY 2014 state total payroll employment is expected to reach a level of 1.193 million jobs, an increase of approximately 12,800 jobs or 1.1%. Private sector employment growth is expected to gain 1.3%.
• FY 2015 state non-farm personal income will reach $112.68 billion (current dollars), an increase of $5.13 billion or 4.8% over FY 2014. Non-farm income is expected to expand gradually in a low-inflation economic environment and with limited national growth acceleration.
• FY 2015 state total payroll employment is expected to reach a level of 1.214 million jobs, an increase of approximately 20,490 jobs or 1.7% in FY 2015. Private sector employment is expected to gain 1.9%.
Tax collections during fiscal year 2013 (July 2012-June 2013) totaled $6.214 billion, up 4.9% above the previous fiscal year and up 2.5% compared to budget estimates. One result of the gains was a budget surplus of $299.5 million.
Fiscal year 2013 marked the third consecutive year of year-over-year gains. Arkansas tax collections reversed a negative two-year slide in the 2011 fiscal year, with collections up 4.5% in the July 2010-June 2011 period.
State tax collections for fiscal year 2011 totaled $5.673 billion, up 4.5% above the $5.43 billion in the 2010 period.
The biggest declines in the 2009 and 2010 fiscal years were with individual income tax collections and sales and use tax collections.