An expected decline in tax collections between now and June 30 caused state budget officials on Monday to downgrade the revenue forecast for the remainder of the fiscal year by 0.3 percent.
Revenues are expected to be down 1.7 percent compared to last year.
State Department of Finance and Administration Director Richard Weiss said in a letter to the co-chairmen of Legislative Council that net available revenues for the remainder of the fiscal year, which ends June 30, are expected to reach $4.9 billion, about $83.2 million — or 1.7 percent — below FY 2013.
Though state revenues have remained above forecast so far this fiscal year — 4.3 percent above forecast for the first four months — Weiss said in the letter that changing income tax policy is expected to negatively impact future collections.
Income tax collections were much higher than expected during the third quarter of the last fiscal year, Weiss said in an interview, because of people shifting income into the 2012 tax year to avoid federal income tax law changes related to the federal debate over the fiscal cliff in December 2012, which also delayed the collection and processing of tax returns electronically for a month.
“We had such a big surge of individual income tax because of those tax law changes,” he said.
A 2 percent increase in revenue is projected in fiscal year 2014-15 as the overall economy continues to improve, according to the letter.
State law requires the director of DF&A to submit an annual revenue forecast to Legislative Council no later than Dec. 1 of the year preceding a fiscal session. The fiscal session begins Feb. 10.
Matt DeCample, spokesman for Gov. Mike Beebe, said the governor was not surprised by the slight reduction in the forecast for the remainder of this fiscal year.
“It’s not completely unexpected,” DeCample said. “That’s why we keep things conservative. The one-time boost that we got last fiscal year with tax receipts is continuing to slow, and we do see it going back up in (fiscal year) 2015.”