Record revenue provided the state with a pleasant “April Surprise” as income tax collections jumped dramatically, possibly due to small business profits and gains in real estate and stock market investments, legislative budget analysts said May 27.

General fund collections in April totaled $1.01 billion, an increase of 33 per cent from April 2004, the Joint Legislative Budget Committee’s staff said in a monthly report.

April historically is by far the biggest month for state collections because of the April 15 deadline for filing income-tax returns.

The April collections also were $160.8 million higher than the amount forecast in a projection that the Legislature included in the fiscal 2006 budget approved May 6, the JLBC staff said.

The only previous month that saw collections top $1 billion was June 2003, a month with results inflated by a federal aid payment and postings of special transfers as the state coped with a budget crunch.

While the JLBC analysts said they suspected that the big jump in April individual income tax collections was due to small business profits and capital gains, they said the reasons for what they called an “April Surprise” may not be clear until the Internal Revenue Service releases relevant tax data in late 2006.

April also saw a 10.7 per cent increase in sales tax collections compared with April 2004.

Going Up: 34 States Have Revised Revenue Estimates

The analysts said Arizona is not alone in experiencing higher than expected revenue collections. They cited a National Conference of State Legislatures report that found that 34 states have revised their current-year estimates upward.

In Arizona, the $8.2 billion fiscal 2006 budget approved by the Republican-led Legislature would have funneled above-forecast revenues left over at the June 30 end of the current fiscal year into the state’s Budget Stabilization Fund, a rainy day fund.

However, Democratic Governor Napolitano used her line-item veto to delete that provision. As a result, unspent money in the state’s treasury at the end of the fiscal year will simply stay in the treasury. That could make it easier to spend because lawmakers are reluctant to take money from the Budget Stabilization Fund.

The fiscal 2006 budget had predicted a $328.5 million carry-forward at the end of the current fiscal year, but it also envisioned spending nearly all of that money during the next fiscal year, leaving only a $14 million carry-forward by June 30, 2006.

The unexpected $160.8 million in additional revenue collected in April should boost the current fiscal year’s carry-forward, but that figure is expected to grow once May and June collections are figured in. —

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