JUNE 2025 STATE REVENUE REPORT
STATE ENDS FISCAL YEAR WITH LESS TAX COLLECTIONS AND A $367.9 MILLION SURPLUS
The Arkansas Department of Finance and Administration (DFA) reported today that the state ended the 2025 fiscal year with $221.1 million less in Net Available General Revenue than was collected in Fiscal Year 2024. The decline in revenue was attributed to Individual and Corporate Income Tax cuts implemented during the year. However, revenue still exceeded the amount req necessary to fund the state budget, resulting in a larger-than-expected surplus of $367.9 million.
June collections exceeded the recently updated May forecast, contributing to the larger-than-expected surplus. Net General Revenue came in $136 million, or 21.3%, above forecast. According to DFA, this was largely due to fewer taxpayers than anticipated taking advantage of the extended Corporate and Individual Income Tax payment deadlines, which were granted in response to severe weather. DFA had expected the extension to shift a substantial portion of tax payments into the next fiscal year, which began on July 1, 2025. Corporate Income Tax contributed the largest share to the June surplus, coming in $67.3 million above forecast. Individual Income Tax collections were also strong, exceeding the forecast by $27 million, or 9.9%.
Sales and Use Tax collections totaled $307 million, which was $11.9 million, or 4.0%, more than last June. Collections were $8.1 million, or 2.7%, above forecast. This brought total growth in Sales and Use Tax collections for the fiscal year to $47.6 million, or 1.4%, which is below the economic inflation rate that has been above 2.3%. Price inflation is inherently reflected in Sales and Use Tax collections. Therefore, this level of growth does not indicate a growing economic trend.
The state can count Fiscal Year 2024 as a success, having collected substantially more revenue than needed to cover expenses and creating a $367.9 million surplus. This success is attributable to conservative budgeting and cautious revenue forecasting. In Fiscal Year 2026, which just began, collections should better reflect the performance of the Arkansas economy, with tax cuts already implemented.
The May forecast should have accounted for DFA’s expectation of a windfall in Corporate and Individual Income Tax payments early in the new fiscal year, due to extended payment deadlines. However, since the impact of those extensions was less significant than anticipated, early income tax collections may fall short of forecasted levels. Hopefully, this shortfall will not place undue strain on early fiscal year revenues.
We can hope for continued conservative budgeting and forecasting to balance the state budget. Then, with settled tax rates and payment schedules, we can look forward to economic growth that eclipses tax cuts and sales tax inflation. With economic growth, the state can support new tax cuts and critical state expenditures.
The June 2025 revenue report may be viewed and downloaded here.