Arkansas’s budget basics

According to the National Association of State Budget Officers (NASBO), Arkansas’s total expenditures in fiscal year (FY) 2022 were $32.1 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2022 were $2.9 trillion, ranging from $5.6 billion in Wyoming to $510.0 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 $25.7 billion in FY 2020 (the most recent year census data were available), or $8,519 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 $10,540.

(Note: We cite data from both NASBO and Census to provide a broader picture of each state’s fiscal situation. However, these sources detail spending from different levels of government in different years, and the COVID-19 pandemic and the federal government’s response to it significantly affected these totals in different ways in different years. Please only use one source if you are looking for historical comparisons.)

Arkansas’s largest spending areas per capita were public welfare ($2,445) and elementary and secondary education ($1,828). 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 $28.6 billion in FY 2020, or $9,504 per capita. National per capita general revenues were $10,933. Arkansas uses all major state and local taxes. After federal transfers, Arkansas’s largest sources of per capita revenue were general sales taxes ($1,668) and charges ($1,353), such as state university tuition and highway tolls.

Arkansas’s politics

Governor Sarah Huckabee Sanders, a Republican, was elected in 2022 with 63 percent of the vote. The next gubernatorial election is in 2026.

Republicans control both the House of Representatives (82 Republicans to 18 Democrats) and Senate (29 Republicans to 6 Democrats), 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 2024 because representatives serve two-year terms. Senators serve four-year terms; roughly half the senatorial seats are on the ballot in 2024, and the other half will be up for election in 2026.

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 Sanders has not yet released her FY 2024 budget proposal or given her state of the state address.

Arkansas enacted its FY 2023 budget in March 2022. The enacted budget included $6.2 billion in general fund spending. Under the previous governor, Asa Hutchinson, Arkansas passed a large tax cut in both calendar year 2021 and 2022. Among other changes, the tax cuts reduced the state’s top individual income tax rate from 5.9 percent to 4.9 percent and reduced the corporate income tax rate from 6.2 percent to 5.3 percent.

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 2022: $5.8 billion/$32.1 billion
• FY 2021: $5.5 billion/$31.1 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 $51,787 in 2022, ranking 46th among the states. It was below both the national average of $65,423 and the Southeast regional average of $56,118. The state’s median household income (five-year estimate) was $52,123 in 2021, ranking 48th among the states and below the national average of $69,021. Arkansas’s poverty rate was 16 percent in 2021 (five-year estimate), above the national rate of 12.6 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 $35,099, and its poverty rate was 25.3 percent; the city of Bentonville’s median household income was $89,653, 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.

Unemployment rates (like other economic indicators) often vary significantly by race and ethnicity. In Arkansas, the average unemployment rate in 2022 was 3.4 percent for white residents, 5 percent for Black residents, and 3.4 percent for Hispanic or Latino residents.