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Funding expected to grow despite revenue fluctuations
Funding expected to grow despite revenue fluctuations
Posted by Eleanor Wheeler on December 3rd 2013

Even with wide fluctuations in General Revenue over recent years, Arkansas is expecting a small increase in funding available to state agencies that provide important services like public safety, health, and education. According to yesterday's General Revenue Forecast from the Arkansas Department of Finance and Administration, state general revenues for the previous fiscal year (FY13) came in above expectations surpassing FY2012 by 5.8 percent and resulting in a generous surplus. It's worth noting that FY13 net available revenue came in significantly higher for that year - $161.8 million - than the amount previously forecast for FY13 back in May. As a result of higher than anticipated collections for FY13, the current fiscal year's revenue (FY14) looks to have taken k a moderate dip (by 1.7 percent or $83.2 million). In comparison to FY14, the revenue available for the next fiscal year (FY15 beginning July 1 of 2014) is predicted to swing up again (by $96.9 million or 2 percent).

General revenue can vary from year to year, but because much of the extra funds from last fiscal year's gain were put into reserve accounts, the amount actually distributed to state agencies is still expected to grow. Compared to last fiscal year (FY13), the actual funds distributed to state agencies-known as "net available for distribution"- are anticipated to increase by 4.6 percent (or $216 million) in the current fiscal year, while the revenue available for distribution next year (FY15) is expected to increase  by two percent (or $96 million).

The rise in forecasted General Revenues opens the budget debate for the Fiscal Session starting in February 2014. The Arkansas Department of Finance and Administration anticipates that the current year's projected revenue will be enough to maintain a fully funded budget for FY14 as well as $18.9 million for the Rainy Day Fund. However, it should be noted that the impact of tax changes enacted during the 2013 legislative session were small during the current fiscal year -with a revenue loss of only $10.2 million-and will increase dramatically in FY15 and FY 16, with state general revenue losses of $85.2 million and $141.2 respectively. The DFA bases next year's forecast on a 5 percent estimated increase in Arkansas wages, relatively low inflation, and a projected annual gross state product surpassing $118 billion. The DFA is mitigating growth expectations with reservations about prospective business expansions and new equipment purchases, but a possible decrease in energy costs could boost the economy by prompting consumer spending and lowering production costs.

Even if this forecast holds, it would only generate a small increase of two percent in net available revenues for next year (FY15). It's worth noting that would barely provide a cost of living increase for the overall state budget and would not yet address the structural budget shortfall that a number of critical programs for children and families-such as the Arkansas Better Chance program, child welfare (DCFS), and juvenile justice (DYS)-are facing due to flat funding in recent years. Nor would it provide any new money for other investments-such as funding for quality out of school programs or a state EITC-that could help promote future investments in our families.

Net Available General Revenues for Distribution:

FY 2013: $4,727.5 million

FY 2014: $4,943.8 million (forecasted)

 FY 2015: $5,040.7 million (forecasted)

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Arkansas Advocates for Children & Families
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