JUNE 2026 STATE REVENUE REPORT
STATE FISCAL YEAR ENDS WITH $655 MILLION SURPLUS
The Arkansas Department of Finance and Administration (DFA) closed out the 2026 fiscal year and released the final General Revenue Report for the fiscal year and for the month of June today. DFA reported that the year ended with another substantial surplus of $655 million. DFA defined the surplus as, “Revenues in excess of the general revenue budget”. Revenue for the month of June contributed to the surplus, coming in above forecast by $59.1 million or 8.1%.
After absorbing tax cuts, Individual Income Tax came in $264.8 million or 7.4% greater for the fiscal year. Corporate Income Tax was below last fiscal year by $9.5 million which DFA attributed to two tax law changes which reduced corporations’ taxable income. DFA noted, “the extension of the Net Operating Loss carryovers and the phased-in repeal of the throwback rule”.
For the fiscal year Sales and Use Tax increased $138.7 million or 3.9%. Sales and Use Tax has a built-in increase in the tax base from inflation which reflects in actual collections. The inflationary increase is unrelated to economic growth. The last 12 months the consumer price index has increased by 4.2% as reported by the United States Department of Labor. Core CPI statistics exclude volatile food and energy costs which have been extraordinarily high. Core CPI rose only 2.9% The Sales and Use Tax base does not include basic food or road fuel (gasoline and diesel) sales because they are exempt. But the base does include restaurant and prepared food sales and energy related utility charges. By any comparison, the Sales and Use Tax does not appear to be demonstrating economic growth.
For the month of June total Net General Revenue was $12.8 million or 1.7% more than last June. This was S59.1 million or 8.1% above forecast.
June Individual Income Tax Collections increased $40.3 million or 13.5% compared to last June. This was $9.2 million or 2.8% more than forecast. DFA reported that Withholding Income Tax collections increased $5.3 million or 2.2%. Payments with returns and extensions increased $6.1 million. Withholding collections are based on current economy and return and extension payments are related to last year economy.
June Corporate Income Tax was $13.4 million more than last June. This was $14.9 million above forecast.
Sales and Use Tax for June was $13.5 million or 4.4% higher than last year and above forecast by $11.4 million or 3.7%. DFA attributed this increase to, “Moderate to strong growth in the major sectors of Retail Trade, Utilities, Construction, Motor Vehicles and Accommodation/Food Services while declines were reported for Manufacturing and Wholesale Trade”. This breakdown shows increases in the high price inflation categories and decreases in the economic related categories.
The State again ended the fiscal year in good standing with a substantial surplus and a fully funded budget. Recent tax Individual and Corporate Income Tax cuts have been absorbed and inflationary pressures have been weathered. This is due to two factors, conservative revenue forecasting and sound budgeting.
State income and employment appear to be solid as reflected in the tax base. There may be concern that the Sales and Use Tax economic base seems to have minimal increase when adjusting for inflation. As the State may further reduce income tax in the future and become more reliant on sales tax this could be an issue. If there is a national economic downturn this could become more significant. A close examination of the Sales and Use Tax may be appropriate for future forecast planners. The State’s fiscal condition should remain sound if the future planners continue with conservative forecasting and sound budgeting.
The June 2026 revenue report may be viewed here.