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State tax officials said Monday that Arkansas’ April net available general revenue was $537.3 million, down 28.5% from the same month last year and 49.4% above forecast.
Year-to-date net available general revenue was $4.7 billion, down 1.9% year-over-year and 4.5% above forecast.
The forecast was revised on March 23, and state tax collections recorded in April mostly reflect taxable transactions in March — before and after the COVID-19 pandemic affected economic activity and tax collections. The state’s first coronavirus case was reported on March 11.
“Generally, when you look at a negative 1.9% or 2%, that would be consistent with a slowdown in the economy or the start of a recession,” John Shelnutt, the state’s economic forecaster, told Arkansas Business about the year-over-year decline in the year-to-date numbers. “… This is just a glimpse of what is to come. And we think we’ve built that into the forecast, so I think we’re going to be OK for now.
“Looking at the fiscal year that runs through June 30, with this forecast, we expect a recession in the economy to continue in May and June, and even into the new fiscal year starting July 1, probably going to the end of the calendar year of 2020,” he continued. “And we’ve built that into the forecast for the current year and the next fiscal year with that assumption.”
Still, Shelnutt added that “the forecast was more pessimistic than the outcome” in April.
While all major categories of revenue collections in April were down significantly compared to year ago, they were above forecast in several categories.
But sales and use tax collections in April ($194.5 million) were down by 2.8% year-over-year and 1.8% below forecast. Restaurant and car sales led the decline in sales tax collections, but a “stocking up” effect — consumers buying more non-food products — partially offset those losses.
Shelnutt said the restaurant sales tax collections were down 28%, while vehicle sales tax collections were down 18%.
Corporate income tax collections in April were $98.6 million, down by $23.2 million from last year but $23.9 million above forecast. Individual income tax collections were $366.4 million, down by $235.2 million from last year but $80.4 million above forecast.
“There’s a lot of stories within those categories to explain how that turned out. In the case of corporate income, it’s down compared to a year ago, but we know that a year ago was an unusual high point,” Shelnutt said. “So we expected it to drop anyway. That would have exceeded the forecast under either the old or new forecast.”
On individual income tax collections, “We assumed there would be no collections from payments with returns and we did pick up $45 million in payments that were made anyway even though the due date shifted” to July 15 from April 15, Shelnutt said. “Also, individual refunds appeared to pause in about mid-April, and fell below forecast, which is a benefit to net results when they do that. … We’re not sure if those refunds are going to be claimed in the next month, in May or June or wait until July. This would be cases of individuals that probably owe money on their federal return but get a small refund on their Arkansas return filed at the same time. So they may be holding off on the Arkansas return till later.”
Shelnutt said Arkansas releases state revenue figures earlier than most states, but that Texas had released its revenue figures and their collections are also down.
He expects other states to also report declines and said being conservative in the budgeting process is a tradition in Arkansas that makes the state “somewhat prepared” for unusual shocks to the economy.