DALLAS — Arkansas had the largest January revenue collection in its history last month, but the flow of money still fell short of expectations as the state continued its uneven recovery from the 18-month recession that ended in June 2009.
Arkansas took in $529.9 million of general revenue in January — $4.6 million more than a year ago. However, that tally was 2.8%, or $15.2 million less than expected, according to a monthly revenue report the Department of Finance and Administration issued Wednesday.
DFA director Richard Weiss said the January revenue gain indicates Arkansas' economic recovery is gaining strength.
John Shelnutt, director of economic analysis for the finance department, said January collections fell short due to soft holiday retail sales and weaker-than-expected corporate taxes. Sales tax revenue in January totaled $173.9 million, down $5.5 million from a year ago and $9 million less than expected. Corporate income tax collections totaled $11.6 million — $21.1 million less than in January 2010 and $11 million below expectations.
Shelnutt said collections were buoyed by an unexpected increase in individual income tax revenues and lower than expected income tax refunds. Individual income taxes generated $311 million in January. That's $28.9 million more than a year ago and $5.9 million more than predicted.
"The good news is that people are working, because it is up pretty good," Gov. Mike Beebe said. January income tax refunds drained $20.6 million from the treasury — $10.3 million less than expected.
General revenue collections for the first seven months of fiscal year 2011 totaled $3.2 billion, up $68 million from a year ago, but $21.6 million below expectations.
Legislative leaders are concerned by the continued weakness in collections and taking a close look at Beebe's plan for a 1.86% cost-of-living salary increase for 30,000 state workers. His proposed budget includes $23.5 million for the pay raise.
Sen. Paul Bookout, D-Jonesboro, said lawmakers are weighing a plan to limit the increase higher-paid employees receive. House discussions are focusing on a similar proposal for a sliding pay scale, according to Rep. Kathy Webb, D-Little Rock.
An analysis by the Bureau of Legislative Research found Arkansas could save $7 million by limiting pay increases to 1.86% for workers making $40,000 a year or less; limiting raises to 1% for employees making $40,000 to $75,000 a year; and providing no raises to higher paid employees. Fewer than 1,500 state employees make more than $75,000 a year.
