Beebe: State can afford another grocery tax cut

LITTLE ROCK Arkansas can afford another cut in the sales tax on groceries, Gov. Mike Beebe and his fiscal chief said Monday after reporting that the state's revenues beat economist expectations last month but fell below last year's figures.

The Arkansas Department of Finance and Administration reported that state net available revenues in December totaled $399 million, or $16.3 million below last year. The revenues were $23.8 million above forecast.

Beebe said the latest figures show there's room for his proposal to cut $30 million annually from the state's budget by reducing the sales tax from 3 cents to 2 cents. Lawmakers are set to consider that proposal when they return to the Capitol next week for the regular legislative session.

"All of this is still within our forecast," Beebe told reporters.

Sales tax collections totaled $178.7 million, an increase of only $700,000 over last year and below forecast by $600,000. State finance officials said that because of a lag in reporting, the numbers don't reflect last month's shopping figures.

Richard Weiss, the department's director, said he believes the state can still afford the tax cut.

"I think we can still follow that plan," Weiss said.

Year-to-date net available revenues total $2.28 billion, or $74.6 million above last year and $34.8 million above the state's forecast. The finance report said the increase came mostly from gains in corporate income tax collections, which in December increased over last year by $10.5 million to $68.6 million.

The corporate income tax collections were above forecast by $20.2 million, or nearly 42 percent.

December's individual income tax collections totaled $190.6 million, a $31.6 million decrease compared to last year and $1.4 million below forecast. The report said that income tax collections were down from last year mainly because of $28 million in nonrecurring income tax recorded in December 2007.

Beebe has pushed for the grocery tax cut even as his budget includes $147 million in appropriations for state programs that may go unfunded if revenues don't come in above forecast. The governor has proposed using part of the state's projected $300 million surplus to help fund some of the unfunded appropriations in his balanced budget proposal.

Beebe has also said that he wants to use some of the surplus to create a so-called "rainy day fund" that the state could use in the future if revenues fall short.

Incoming Senate President Bob Johnson, D-Bigelow, has said he tentatively supports the tax cut but incoming House Speaker Robbie Wills says he's undecided on the reduction. Wills, D-Conway, has said his decision depends on how the state's revenues look in the spring.

Beebe said Monday that he's cautiously optimistic that the House speaker will support the tax cut proposal.

"Give him some time. He'll be OK," Beebe said.

In 2007, Beebe signed into law legislation that cut the sales tax on groceries in half from 6 cents to 3 cents. During his campaign for governor, Beebe promised to phase out the tax over time as revenues allowed.

Beebe noted that he faced some reluctance initially with House leaders over his tax cut proposal in 2007 and said he doesn't think his current push for the cut will be any easier.

"None of this is ever easy. Sometimes you all think it's easy, but I don't think it's easy," Beebe said. "So we'll be working hard."