Arkansas’s budget basics

According to the National Association of State Budget Officers (NASBO), Arkansas’s total expenditures in fiscal year (FY) 2021 were $31.2 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2021 were $2.7 trillion, ranging from $4.7 billion in Wyoming to $512.8 billion in California.

Each state allocates spending and taxes differently among different levels of governments, and local governments often administer programs with state funds, so combined state and local government data show a more complete picture of individual benefits and contributions when comparing states.

Per the US Census Bureau, Arkansas’s combined state and local direct general expenditures were $25.5 billion in FY 2019 (the most recent year census data were available), or $8,448 per capita. (Census data exclude “business-like” activities such as utilities and transfers between state and local governments.) National per capita direct general expenditures were $10,161.

Arkansas’s largest spending areas per capita were public welfare ($2,570) and elementary and secondary education ($1,823). The Census Bureau includes most Medicaid spending in public welfare but also allocates some of it to public hospitals. Per capita spending is useful for state comparisons but is an incomplete metric because it doesn’t provide any information about a state’s demographics, policy decisions, administrative procedures, or residents’ choices.

Arkansas’s combined state and local general revenues were $27.0 billion in FY 2019, or $8,934 per capita. National per capita general revenues were $10,563. Arkansas uses all major state and local taxes. After federal transfers, Arkansas’s largest sources of per capita revenue were general sales taxes ($1,601) and charges ($1,382), such as state university tuition and highway tolls.

Arkansas’s politics

Governor Asa Hutchinson, a Republican, was elected in 2018 with 65 percent of the vote. The next gubernatorial election is in 2022.

Republicans control both the House of Representatives (78 Republicans to 22 Democrats) and Senate (26 Republicans to 7 Democrats and 1 independent), with veto-proof majorities in both houses. Control of the governor’s mansion and each house of the legislature gives Republicans a trifecta in Arkansas. All Arkansas House seats are on the ballot in 2022 because representatives serve two-year terms. Senators serve a combination of two- and four-year terms during each decade’s legislative district apportionment cycle. This 2-4-4 term system ensures all Senate seats are up for election after new legislative district boundaries are drawn. All senators are therefore up for election in 2022.

Arkansas’s budget institutions, rules, and constraints

Arkansas uses a biennial budget. The legislature must pass a balanced budget, but it can carry a deficit into the following year. Arkansas also limits annual revenue increases and requires a three-fourths legislative supermajority for any legislation that increases property, excise, privilege, or personal income taxes. The state does not have any limits on either debt service or authorized debt.

(Note: Some states have informal budget institutions that constrain overall spending growth or a specific expenditure’s growth.)

Arkansas’s current budget

Governor Hutchinson released his FY 2023 budget proposal budget proposal in January 2022 and gave his state of the state address in February 2022.

Arkansas enacted its FY 2022 budget in April 2021. The enacted budget included $5.85 in general fund spending. In December 2021, Arkansas passed a large tax cut that, among other changes, reduced the state’s top individual income tax rate from 5.9 percent to 4.9 percent (over multiple years).

Under the American Rescue Plan, Arkansas will receive $1.6 billion in direct state fiscal aid and $795 million in local government aid from the federal government. As of January 2022, Arkansas had not reported how it plans to spend its state ARP funds.

According to NASBO, Arkansas’s recent expenditure totals (general fund spending/total spending, including federal transfers) were:

• FY 2021: $5.5 billion/$31.2 billion

• FY 2020: $5.5 billion/$27.8 billion

• FY 2019: $5.6 billion/$25.8 billion

For more on Arkansas’s budget, see

• the Arkansas Department of Finance and Administration and
• the Arkansas Bureau of Legislative Research.

Arkansas’s economic trends

Arkansas’s per capita income (per the Bureau of Economic Analysis) was $51,148 in 2021, ranking 45th among the states. It was below both the national average of $63,444 and the Southeast regional average of $56,118. The state’s median household income (five-year estimate) was $49,475 in 2020, ranking 48th among the states and below the national average of $64,994. Arkansas’s poverty rate was 16.1 percent in 2020 (five-year estimate), above the national rate of 12.8 percent.

Although Arkansas’s averages tell a story about the entire state, Arkansas is composed of diverse localities. For example, the city of West Memphis’s median household income was $32,601, and its poverty rate was 26.6 percent; the city of Bentonville’s median household income was $84,340, and its poverty rate was 7.1 percent.

Arkansas’s unemployment rate historically tracks the national average, though it was below the national average following the Great Recession. (See how COVID-19 is affecting state employment and earnings data.)

Unemployment rates (like other economic indicators) often vary significantly by race and ethnicity. In Arkansas, the average unemployment rate in 2021 was 3.6 percent for white residents, 6.8 percent for Black residents, and 3.4 percent for Hispanic or Latino residents. (This is preliminary data. See the 2020 data for a more detailed breakdown of state unemployment rates by race and ethnicity.)

The major industries that contributed the most to Arkansas’s gross domestic product (GDP) in 2020 were finance, manufacturing, government, professional services, and social services (i.e. health and education). Manufacturing and social services contributed more to Arkansas’s GDP than they did to the nation’s and region’s GDP, while finance and professional services were less important to Arkansas than they were to the nation and region in 2020.

Looking at more specific industries, among those that accounted for at least one percent of Arkansas’s GDP in 2019, management of companies produced far more for the state than for the nation, contributing 4.3 percent to Arkansas’s GDP and 1.9 percent to the nation’s. Other industries that overperformed in Arkansas relative to national averages in 2019 were wholesale trade, food and beverage manufacturing, state and local government, and truck transportation.

Arkansas’s demographics

As of July 2020, Arkansas’s population was 3,030,522. That was up 3.7 percent from 2010. The state’s population growth rate was slower than than the nation’s 6.5 percent growth over the same period. The Urban Institute estimates the state’s population will increase 15.3 percent between 2010 and 2030, less than the nation’s estimated growth rate of 16 percent.

Additional resources

• The State and Local Finance Initiative’s Backgrounders explain the tax and spending issues highlighted in these briefs.
• The State Economic Monitor presents updated data and customized visualizations of state economic indicators.
• State and Local Finance Data: Exploring the Census of Governments allow users to sort, customize, and download the Census of Governments State and Local Finance series data featured in these summaries.
• The State Tax and Economic Review series provides quarterly reports on state tax collections and underlying economic trends in all 50 states.
• The Urban Institute’s State Tax Data Subscriptions provide access to up-to-date revenue data in all 50 states.