Thursday, January 5, 2017

Week In Review

State Capitol Week in Review
            LITTLE ROCK – The Arkansas legislature opens the 2017 regular session with an encouraging revenue report to use as a guidepost for setting state fiscal policy.
            The report from the Finance and Administration Department shows that for the month of December net tax revenues for the state were up 0.7 percent over December of last year. The increase is notable because the first five months of the fiscal year had been relatively disappointing.
            The end of December marked the sixth month of the current fiscal year, which began on July 1.          For the fiscal year up to this point, the state has collected 1.5 percent more in net revenue than it collected during the same period last fiscal year.
            Elected officials and economists keep a close watch on monthly revenue reports because they are an accurate barometer of private sector economic activity in Arkansas. For example, the state sales tax rate has not changed over the past year, so the increase in sales tax revenue from last year to this year is an indicator of increased sales by Arkansas retailers.
            December sales tax collections were almost $203 million. That is an increase of 8.9 percent over December of 2015, and one of the reasons that state budget officials expect total collections to meet forecasts when the fiscal year ends on June 30.
Setting budgets for state agencies is dependent on revenue meeting forecasts, and exercising its “power of the purse strings” is the most time-consuming duty of the legislature. For example, throughout the regular session the Joint Budget Committee will meet more often any other legislative committee.
Joint Budget meets almost every day the legislature is in session, and it is usually the first meeting of the day for its members. The various subcommittees of Joint Budget hold frequent meetings, therefore it is routine practice for Joint Budget members to attend two meetings a day.
Other committees such as Education, Judiciary and Public Health will meet once or twice a week.
Individual income tax collections for December were up 1.4 percent over last year. Although that was not as strong as the increase in sales tax revenue, it is still encouraging because this fiscal year is the first in which the state’s tax code reflects the full effect of income tax cuts approved by the legislature in 2015.
The governor and Senate leaders said they are still comfortable with proposals to reduce personal income taxes by an additional $50 million a year for low-income families, and to repeal income taxes on military retirement benefits. That would save retired military families in Arkansas about $13 million a year.
Some legislators are advocating broader tax cuts, while others have said it may be best to wait until revenue is stronger so that state services are not in jeopardy of cutbacks due to the reduction in state tax collections.
Legislative leaders plan to consider tax cuts at the beginning of the session, so lawmakers will have a clear idea of how much to budget for state agency spending.
For the first six months of the current fiscal year, net general revenue from all sources is about $2.6 billion.

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