Weak sales tax collections push Ark. revenues down

LITTLE ROCK, Ark. (AP) - Arkansas finance officials said Wednesday that a drop in sales tax collections last month pushed the state's revenues below expectations and last year's figures, suggesting that consumers may have postponed purchases until the annual back-to-school sales tax holiday.

The Arkansas Department of Finance and Administration said Wednesday that the state's net available revenues in August totaled $369.1 million. That's $4.6 million below last year and $3 million below forecast. The department said the drop was driven by a shortfall in sales tax collections, which totaled $178 million last month. The sales tax collections were $2.8 million below last year and $9.3 million below forecast.

"We're seeing a slippage there," Richard Weiss, the department's director, told reporters at the state Capitol. "It's something we're going to keep our eyes and keep looking at and see where it goes."

Weiss said officials couldn't pinpoint a reason for the sales tax drop, but said it could be related to the state's annual back-to-school tax holiday in August. Since there is a one-month lag in sales tax collections, the figures don't reflect the revenue loss from the back-to-school tax holiday. Officials said consumers may have postponed purchases until the holiday.

Lawmakers last year approved the sales tax holiday. During that weekend, clothing items priced at less than $100 and clothing accessories or equipment less than $50 are exempt from state and local sales taxes. School supplies are also exempt that weekend.

State finance officials have estimated the holiday costs the state about $2.1 million a year.

Weiss said the state won't be able to determine whether the holiday was a factor, since businesses aren't required to report all sales of property by category.

Overall, the state remains up for the fiscal year that began July 1, with net revenues for the year to date totaling $773 million. That's a $22.2 million increase over last year and $12.3 million above forecast.

Individual income tax collections for August totaled $189.7 million, which was $2.2 million below last year and $700,000 above forecast. Corporate income tax collections totaled $3.7 million, $1.7 million below last year and $1.7 million below forecast.

Arkansas ended its fiscal year in June with a $145 million surplus, and state officials say that figure could to grow to $200 million by the time the Legislature meets in January.

A spokesman for Gov. Mike Beebe said his office will continue monitoring the revenue figures, but noted that the state was above forecast for the year.

"We're going to keep an eye on it, but really, with a $12 million difference after two months in a budget of this size, we're right in the ballpark for the forecast," Beebe spokesman Matt DeCample said.