Release the Rainy-Day Fund

Arkansas Gov. Mike Beebe last week authorized the release of rainy-day funds and other financial transfers to avoid significant cuts in agency budgets due to an unanticipated shortfall in April revenue.

The moves include use of $17.4 million from the budget stabilization fund authorized by the General Assembly in 2009, a shift of $17.3 million in general revenue from the education facilities partnership fund to the public school fund, and a reallocation of $6.3 million in federal funds to avoid cuts in the state’s Medicaid program.

The Department of Finance and Administration said April’s revenues were $41.2 million less than expected and $49 million less than was collected in April 2009. It was the 13th time in the past 17 months that revenues were below year-before totals.

Beebe said the shortfall is the type of situation for which the rainy-day fund was designed.

“Our overall economic trend remains positive, and if this anomaly had hit a few months ago, we might have been able to make up for it over time,” the Democratic governor said. “However, with only two months left in the current fiscal year, we are going to move other money, including rainy-day funds, to prevent any potential cuts in state services.”

The rainy-day fund originally totaled $40 million, but $8 million was allocated to the Department of Corrections after an earlier revenue drop. The fund now contains $14.6 million for use in fiscal 2011.

April’s gross revenues were $601.2 million, down from $650 million in April 2009. The record for April collections was $697 million in 2008.

Individual income tax collections totaled $364.8 million, which was $39.4 million less than expected.

Gross tax collections in fiscal 2010 total $4.5 billion, down $155.3 million from the first 10 months of fiscal 2009.

Net available general revenue totals $3.59 billion, which is $113.3 million below the same period in fiscal 2009 and $15.8 million less than expected in January’s general revenue forecast.

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