The state is on pace to have a record surplus of more than $1 billion, which is a strong indicator that the Arkansas economy is recovering from the negative effects of the pandemic.
The monthly revenue report for May shows that all categories of state taxes improved significantly over the same period last year.
With one more month remaining in the state’s fiscal year, the surplus is a record $980 million. The enormous surplus is attributable to several factors: a rebound in business activity in Arkansas and conservative budgeting by the legislature.
Also, federal relief funding helped Arkansas families maintain household spending levels, and helped Arkansas companies remain in business. More people went back to work.
At the height of the pandemic last year, the legislature and the governor reduced spending by state agencies.
The size of the surplus is impressive when compared to the overall size of the state’s general revenue fund. In the 2021 regular session, which ended in late April, the legislature approved a budget for state government that calls for spending $5.8 billion in Fiscal 2022, which will begin on July 1.
The record surplus will be a strong argument for legislators who want to reduce state income taxes. The governor has announced that he intends to call a special session in the fall to lower the top state income tax rate.
During the 2021 regular session, the legislature voted to continue providing funds to the state’s medical school from a privilege tax on medical marijuana.
The tax had been scheduled to expire on July 1, but Act 434 of 2021 extends the sunset date for another two years, to July 1, 2023.
The privilege tax was first enacted in 2017. It requires businesses that cultivate and dispense medical marijuana to remit 4 percent of their sales to the state. The University of Arkansas for Medical Sciences, the state’s major medical college in Little Rock, receives much of the revenue for the goal of achieving a National Cancer Institute (NCI) designation for its Winthrop P. Rockefeller Cancer Institute.
Act 434 will generate $13.3 million next fiscal year. Of that amount, $12.4 million will be deposited to the UAMS National Cancer Designation Trust Fund.
There are 71 NCI centers in the country. The closest to Arkansas are in Memphis, Oklahoma City and Dallas.
The National Cancer Institute awards 68 percent of its grants to centers with the NCI designation, which means that UAMS and other facilities without the designation are left to compete for only 32 percent of the funding left available. For many research grants, only NCI centers are eligible.
The Rockefeller Institute also is raising money from private donations for getting its NCI designation.
The total operating budget for UAMS this year is $1.6 billion. That is projected to increase by 10 percent, or $174 million, by next year.
The hospital at UAMS expects the volume of clinical visits and surgeries to return to levels it had before the Covid-19 pandemic.
The Board of Trustees for the University of Arkansas System met recently, and the medical school did not request any tuition increases for next year.
While the pandemic severely impacted the industry in 2020, there are signs that tourism is rebounding and doing better than before the health emergency began.
The tourism tax collections for March 2021 exceeded collections from March 2019 by 14.6 percent. From mountain biking adventures to world-class art museums, Arkansas destinations play an essential role in our economy.
Before the pandemic, travel-supported jobs represented 6.6 percent of Arkansas’s total private industry employment.
We also know that 8.4 jobs are created for every $1million spent on tourism in our state.
That is why every session, we consider legislation to improve the industry.
In the most recent session, we passed Act 777, An Act to Establish the Arkansas Cultural Institutions Trust Fund Act. This legislation directs the Division of Arkansas Heritage to promulgate rules for the distribution of grants to non-profit organizations that acquire or exhibit works of art or works of cultural or historical significance.
Act 840 allows the Division of Heritage to issue up to $8 million in historic rehabilitation income tax credits each year. The current maximum amount of credits given is $4 million.
We passed Act 652, which allows for dynamic pricing at state parks.
The division may increase or decrease approved rates charged for lodging, camping, events, services, and all other accommodations using a dynamic pricing strategy based on market forces such as seasonal variation in demand, occupancy, market analysis, and special event interest to maximize revenues from the use of state resources to promote the fiscal soundness and long-term sustainability.
The legislature also created the Arkansas Legislative Arts and Technology Boot Camp with Act 577. The camp will issue a final written report, including an inventory of Arkansas’s statewide arts and cultural assets, and identify funding needs to maintain a statewide database.
Arkansas is home to experiences and attractions found nowhere else. We encourage you to explore everything our state has to offer this summer.
If you’re a dad, you may be in line to get some nice gifts on Father’s Day. But your greatest gift may be your ability to help your children. One way of doing that is to get them started in the world of investing – and making a few investments on their behalf.
Here are three possibilities:
n 529 plan – If you invest in a 529 education savings plan, your earnings can grow federally tax-free, provided the money is used for qualified educational expenses. (Withdrawals not used for these expenses will generally incur taxes and penalties on investment earnings.) If you invest in your own state’s 529 plan, you might receive some state tax benefits, too, depending on how your state’s tax laws apply to 529 plans. State-by-state tax treatment may vary, so you’ll need to consult with your tax professional about your situation.
Provided you stay within certain limits, you can also use a 529 plan to pay for qualified K-12 expenses and registered apprenticeship programs. And you can even use it to repay certain qualified student loans, within limits.
A 529 plan can affect financial aid, but its effect is generally lower than that of other assets. And as the account owner, you have control of your 529, so, if one child decides not to go to college or pursue further education, you can switch beneficiaries.
n UGMA/UTMA account – When you establish a special type of custodial account known as either UGMA (Uniform Gift to Minors Act) or UTMA (Uniform Transfers to Minors Act), you are providing financial resources that can be used for education or another purpose that benefits your child, such as summer programs.
One potential benefit of an UGMA or UTMA is that some of the earnings will be taxed at the child’s rate, which is likely lower than your own. Plus, UGMA/UTMA accounts typically allow a wide range of investment choices. However, once children reach the age of majority (typically 18 or 21) they gain complete access to the money and can do whatever they want with it.
n IRA – A child with any taxable compensation, such as money from an after-school job, is eligible to fund an IRA. You may want to open one on your child’s behalf – and you can “sweeten” the offer by matching some of their contributions. You can’t directly invest in the IRA, but you can give your child money for that purpose. Keep in mind, though, that the total amount contributed can’t exceed your child’s taxable compensation for the year.
An IRA is a great introduction to the world of investing. For one thing, your child can make small contributions throughout the year, so investing in an IRA doesn’t seem burdensome. Also, since an IRA can be invested in different types of securities, your child can learn about various investment vehicles – stocks, bonds, mutual funds and so on. Plus, you can point out that, with a traditional IRA, taxes won’t be due on the earnings until your child starts taking withdrawals decades from now. (And with a Roth IRA, withdrawals are tax-free, provided certain conditions are met.)
On Father’s Day, you can show your appreciation for whatever gifts you receive from your children. But by investing in their future, you can gain some longer-term contentment.
Kim Owen is at Edward Jones,309 Southridge Blvd. Suite G. in Heber Springs.
Arkansas, like other states, is rebounding from the pandemic in a stronger position than we might have expected around this time last year.
Recently, Governor Hutchinson announced the state had the largest budget surplus in our history at $980 million. Additionally, unemployment in the Natural State is now at 4.4 percent, down from 10 percent in May 2020 and almost two percent below the current national average.
Last month the governor announced Arkansas will opt out of the federal supplemental unemployment assistance program. The move, which becomes effective later in June, is designed to encourage more Arkansans to rejoin the workforce now that we are getting back to normal through widespread access to the COVID-19 vaccines and better understanding of the transmission of the virus.
I applaud the governor for taking this step to help spur economic recovery. As I talk with business owners around the state, it is clear that labor is in short supply. Common sense tells us that an enhanced $300 per week federal unemployment supplement, on top of existing benefits, is contributing to this shortage of workers.
When the governor made the decision to end Arkansas’s participation in the supplemental payment, there were more than 40,000 open jobs across the state of Arkansas.
According to the Arkansas Division of Workforce Services, when combining the federal unemployment stipend with the maximum state benefit, weekly unemployment insurance payments in our state can be as much as $751 per week – or about $19 an hour.
You don’t have to look far to see the effects of that reality in our communities.
Many businesses, including local restaurants and retailers, are being hit hardest when it comes to the difficulties that come with being short-staffed – limiting hours of operation, capacity and services. Even those able to offer higher wages and other competitive benefits are having trouble filling open positions.
Paying people not to work, especially now that we can safely and confidently return to activities that were risky at the height of the pandemic, is clearly an obstacle that the private sector can’t compete against.
Even the Biden administration has tacitly acknowledged the connection between continued enhanced unemployment benefits and labor shortages. The president recently directed the Department of Labor to work with states to reinstate requirements that those receiving unemployment benefits show they are actively seeking work and must accept a suitable offer of employment.
Employers are desperate for more help. They are telling anyone who will listen about how this crisis is affecting their ability to stay open and provide the services their customers rely on.
It is incumbent on policymakers at every level to help create an environment where work is encouraged and rewarded. Temporary relief was necessary to help Arkansans and all Americans directly impacted by the pandemic, but thankfully we are rapidly closing the door on that chapter.
The “help wanted” signs we see hanging in the windows of our favorite local shops and restaurants are as clear a sign as any that we’ve got to do everything we can to mobilize and empower workers to get back into the job market. In Arkansas, we are on that path now and must keep at it.