LITTLE ROCK — Gov. Asa Hutchinson said Thursday he is asking agency heads to develop plans for potential budget cuts in light of a report showing state revenues for the fiscal year to date are $57 million below forecast.
“I’m going to instruct the agency directors that may be impacted down the road, in the event there is an adjustment of the budget, to have contingency plans,” Hutchinson told reporters in his office.
“We’re not adjusting the budget today. We want us to have another month of experience at least. But I do want to take this step to have contingency plans in the event this is a pattern and there’s a problem this month or the following month,” he said.
The report by the state Department of Finance and Administration was released a day after Hutchinson signed into law a $50 million income tax cut for Arkansans whose net taxable income is below $21,000 a year. The governor told reporters he was aware of the new revenue numbers when he signed the bill and said he still feels “very comfortable” about the tax cut.
The tax cut will take effect Jan. 1, 2019. Because it will only affect the second half of the 2019 fiscal year, its impact in that year is projected to be about $25 million.
Asked if he might readjust his proposed budget for fiscal 2019, Hutchinson said, “You never say never, but I did go over that with my team at DF&A, and they continue to feel confident in the forecast for ’18 and ’19. But we’ll continue those discussions with both legislative leadership and DF&A. If we have to revise it, we will revise it, but that’s not something that I see needing to be done at this time.”
If the governor were to order cuts, the programs affected would be those in the “B” category of the budget, which are funded after “A” category programs are funded. Hutchinson said $127 million is scheduled to go to agencies in the “B” category — which include the education, correction and human services departments — on June 1.
The governor said he did not expect layoffs to be part of any cuts.
The monthly revenue report released Thursday shows that net available general revenues for the year to date total $3.16 billion, which is up $22.3 million, or 0.7 percent, from a year ago but $57.1 million, or 1.8 percent, below forecast.
The agency said revenues for January totaled $535.9 million, which was down $15.9 million, or 2.9 percent, from a year ago and $47.1 million, or 8.1 percent, below forecast.
Individual income tax collections last month totaled $358.7 million, which was up $4.5 million, or 1.3 percent, from last year and $26.8 million, or 6.9 percent, below forecast.
“A significant payroll timing shift occurred relative to forecast that is expected to benefit collections in February,” DF&A said in the report.
Corporate income tax collections in January totaled $22.6 million, which was down $17.2 million from a year ago and $19.4 million below forecast.
“Corporate tax payments have been volatile in recent quarters due to excess tax payments in prior years compared to liabilities and subsequent adjustment,” the agency said in the report.
Sales tax collections last month totaled $200.5 million, which was up $2.9 million, or 1.5 percent, from last year and $6 million, or 2.9 percent, below forecast.