DECEMBER 2025 STATE REVENUE REPORT

DECEMBER STATE REVENUE FALLS SHORT OF FORECAST

The Arkansas Department of Finance and Administration (DFA) reported today that December state revenue did not meet forecast. Net Available General Revenue was $7.8 million, or 1.2%, less than actual December 2024 collections and $5.8 million, or 0.9%, less than forecast. After six months in the fiscal year, this decreased the year-to-date surplus to $102.9 million. DFA has forecast the surplus at fiscal year-end to be $240 million.

Individual Income Tax collections were $10.7 million, or 3.6%, less than last year but $5.4 million, or 1.9%, higher than forecast. DFA cited the fact that taxpayer estimate payments and withholding of Income Tax from employee pay were both lower than last December. DFA stated that “lower estimate payments were offset by increased return payments resulting from the extension of the due date to December 3, 2025.” Estimate payments are based on taxpayers’ current economic growth while extended return payments are based on last year’s economy. This occurrence does not portend economic growth. DFA stated that Income Tax Withholding was lower because there was one less payday week this December.

DFA reported that Sales and Use Tax collections were $8.9 million, or 3.0%, greater than last year and that collections were above forecast by $6.4 million, or 2.1%. This is essentially keeping up with consumer price inflation, which means there was no significant increase in economic or holiday spending. DFA did not report a breakdown by major reporting sectors for the month. A closer review of consumer goods sales by retailers, utility sales, restaurant and hotel sales, and vehicle sales could provide a clearer view of economic performance versus inflationary growth.

DFA indicated that the growth in Individual Income Tax and Sales Tax was offset by lower net Corporate Income Tax collections, which they defined as “gross revenues less refunds.” Corporate Income Tax collections were $3.4 million less than last December and $5.5 million less than forecast. Corporate Income Tax refunds were $7.1 million less than last year but $4.8 million more than forecast. These two categories combined lowered total collections for December by $10.3 million.

Revenues were obviously down for December, and there were no indications from the DFA report of any economic bright spot in income growth or consumer or holiday spending. Observers must keep this report, as any monthly report, in perspective. The State is in great shape budget-wise, retaining a six-month surplus of $102.9 million. There is no indication that total collections for the year will not fund the budget. Additional reporting experience will demonstrate whether any downward trends are developing or if this month was an anomaly.

One bright spot may be on the horizon for revenue collections. State lottery payments are subject to Income Tax Withholding in Arkansas. When payments to the recently announced $1.8 billion lottery winner are made, Income Tax collections should increase. A rough estimate is that if a lump-sum payment is made, the State could receive more than $30 million in one payment. Let’s watch for that. I would bet DFA is watching!

The December 2025 revenue report may be viewed here.