Week In Review

State Capitol Week in Review

            LITTLE ROCK – State government’s revenue report for May had more encouraging news about economic growth in Arkansas.

            More people are working, as indicated by increases in the amounts of individual income taxes that employers withheld from workers’ paychecks.  Also, the amount that the state collected in sales taxes exceeded expectations, which means people were spending money and generating economic activity.

            After releasing the May revenue report, budget officials said that the state was on track to accumulate a surplus of almost $200 million.  June is the final month of state Fiscal Year 2013, which ends on June 30. 

The May report reflects year-to-date revenue collections for the first 11 months of this fiscal year, and the actual amount of surplus collected at the end of May was $172.4 million. In the revenue report the surplus is referred to as the amount of net available revenue above forecast.  Another solid month of economic activity in June could push the total surplus for the fiscal year past the $200 million mark.

State economic officials are always cautious when they present encouraging news, but they did say that the better than expected amount of withholding was a good measure of growth. One reason for caution is sales tax revenue is still 1.4 percent below forecast for the first 11 months of the fiscal year.  This indicates that people are still being careful about spending money. 

A major factor in May’s growth in sales tax revenue was a 10 percent increase in the sale of motor vehicles. The boost in car sales helped increase total sales tax revenue in May to $183.9 million, which is $12 million or 7 percent above sales tax revenue in May of 2012.

Revenue from the state’s soft drink tax, which helps pay for Medicaid health services, is down 4.4 percent from the same period last year.  That represents $1.9 million.

A portion of the state sales tax and revenue and revenue from a sales tax on certain services go into the Educational Excellence Trust Fund. The money is spent to provide Arkansas children with an adequate school system, as required by the state Constitution.

So far this year the Educational Excellence Trust Fund is up 1.4 percent over last year. The total amount is $404 million.

Highway Construction

            The state Highway and Transportation Department opened bids for 63 bridge and highway projects that combined will cost an estimated $109.4 million.  Most of the department’s revenue comes from motor fuels taxes and from fees on heavy trucks.  The money generated by gas taxes and truck taxes is not general revenue but special revenue, so called because it is designated for a specific purpose. In the case of motor fuels taxes the purpose is highway maintenance.

            Sales and income taxes produce general revenue, the main fund of state government discretionary spending from which the legislature appropriates money for education, prisons, health care and other services.

            The Highway Department has about 3,500 employees who maintain more than 16,000 miles of highways and more than 7,200 bridges in Arkansas. Last year the department’s budget was more than $1.5 billion, which came from state and federal tax revenue.