Arkansas Projects Significant Budget Surplus
Arkansas is expecting a substantial budget surplus for the 2024 fiscal year. The Arkansas Department of Finance and Administration significantly boosted its projection from 0.5 million to 8.1 million. Income tax collections have driven this surge, including gains in individual income tax and sales and use tax collections. Corporate income tax collections, though down from the previous year, remain above forecasts. This upward revision follows a rosier-than-expected revenue picture across several major sectors.
Context and Criticisms
Critics argue that the state has systematically underestimated its revenue projections, artificially creating large surpluses. This pattern extends several years, with the state surpassing forecasts for each monthly general revenue report. Historically, this underestimation allows for fiscal room for future tax cuts, while key state agencies and services struggle to keep pace with inflation.
Legislative Actions and Future
The state legislature will decide how to allocate the surplus. This development occurs amidst a proposed austerity budget for the next fiscal year, which increases spending by only 1.76%, largely for school vouchers. Outside of this funding, the budget increase is limited to 0.7% compared to recent years. Arkansas Advocates for Children and Families questions whether the focus should be on serving citizens by adequately funding essential programs rather than claiming a surplus.
Economic Resilience
The Arkansas economy has demonstrated resilience, particularly in the labor market. Unemployment rates are at or below the national average. Despite a decrease in corporate income tax collections compared to last year, they still contribute to revenue above forecasts. Additionally, the general revenue forecast shows the state’s individual income tax collections have been better than expected, further supporting the surplus.
