OCTOBER 2025 STATE REVENUE REPORT
STATE ENDS FIRST FISCAL QUARTER WITH OCTOBER REVENUE SURPLUS AND MIXED RESULTS
The Arkansas Department of Finance and Administration (DFA) reported today that October General Revenue was $16.6 million, or 3.4%, above forecast. This increased the fiscal year surplus to $90.5 million after the first quarter. October revenue was also above last year’s actual collections by $14.3 million, or 2.9%.
Despite being both above forecast and above actual collections from last October, the report demonstrates mixed categorical results. Individual Income Tax collections were below last October and below forecast, while Sales and Use Tax collections were above both last October and forecast. DFA paid out $17.9 million less in Individual Income Tax refunds in October, which contributed significantly to the Net General Revenue results. If refunds had equaled last October’s refunds, Net General Revenue would have been below forecast.
Individual Income Tax collections were $8.4 million, or 3%, less than last October. Individual Income Tax was $4.7 million, or 1.7%, below forecast. DFA attributed the shortfall to “less-than-expected return payments which may have been impacted by the extension of the due date to December 3, 2025.” If this is the cause of the shortfall, there could be a recovery of these payments later this year. If this is the only weakness, Individual Income Tax withholding payments should have held steady for October.
Sales and Use Tax collections were $6.2 million, or 2.1%, greater than last year. Collections were above forecast by $8.9 million, or 3.0%. DFA did not comment on the economic sector sources of strength or weakness in the Sales and Use Tax. The 2.1% growth is in line with consumer price inflation, which automatically increases Sales and Use Tax collections.
Corporate Income Tax collections totaled $23.9 million, an increase of $1.4 million from last October and $4.1 million above forecast.
October revenue did not demonstrate clear economic growth or decline. The offsetting of lower Income Tax by higher Sales and Use Tax indicates no definitive economic trend based on the October report. Fortunately, lower disbursements for Income Tax refunds made the bottom line appear very positive. However, improvement in Individual Income Tax and growth in Sales and Use Tax above inflation are needed to show an improving economy.
One fiscal area to watch in the coming months is how government shutdowns may impact Individual Income Tax and Sales and Use Tax. Lower pay may affect withholding income tax as the shutdown continues. It may also reduce Sales and Use Tax collections as consumers have less to spend. Recipients of SNAP benefits may shift their spending from taxable areas such as clothing and car repairs, etc., to non-taxable food.
Any month that ends above forecast is a good month. The varying results from October create anticipation for how the categories will perform in future months. This outlook is further complicated by the potential effects of a federal government shutdown, which could decrease money circulating in the state economy. We are fortunate to continue benefiting from conservative budgeting and forecasting, with a $90 million surplus available to offset any shortfalls.
The October 2025 revenue report may be viewed here.