Arkansas’ state tax revenues took a nosedive during state fiscal year 2002. Net available general revenues for SFY 2002 were down 2.3 percent from SFY 2001, and were 6.2 percent less than originally forecast for the year. The shortfalls resulted from an already declining economy, the events of Sept. 11, and an unrealistic state general revenue forecast adopted during the 2001 legislative session.

Arkansas experienced three budget shortfalls during the year: a $142 million budget shortfall in November 2001, a $29 million shortfall in April 2002, and a $56 million in May 2002. The shortfalls required $171 million in budget cuts and the tapping of $56 million in one-time money and special accounts. The Public School and Human Services funds took the biggest budget cuts during SFY 2002 at $68 million and $39 million, respectively.

Rather than simply relying on across-the-board budget cuts, Arkansas should reconsider its process for dealing with revenue shortfalls. It should adopt new principles for dealing with state fiscal decisions in tough economic times. Such principles would help prevent budget cuts in programs serving the state’s most vulnerable children and families.