By John Brummett

State government ended the fiscal year June 30 with nearly a hundred million dollars more than it had formally projected as the basis for spending levels.

That’s a nice little surplus and wholly illogical.

The state’s two dominant economic centers, the central and northwestern regions, are flat, more or less. The southern and eastern sections are historically weak. Statewide sales tax collections, the best indicators of consumer activity and confidence, are tepid.

Yet income tax payments and withholdings were strong enough to lift the year-ending collections to a level producing this nest egg of $95 million or so. That defied both national trends and what you saw, or didn’t see, as you walked around town looking for economic bustle.

Apparently one needs to “frack” below the surface, to borrow a term from the shale exploration for natural gas through the north-central sections of the state, to find a plausible explanation.

“It’s gotta be the Fayetteville Shale,” said state Sen. Gilbert Baker of Conway, the co-chairman of the Joint Budget Committee, to explain the illogical surplus.

Conway is near the hub of this “Fayetteville Shale,” this natural gas exploration boon via a process called “fracking” by which water-chemical mixes are thrust powerfully down into and across shale formations.

The political heat is being turned up on this “shale play” nationwide.

Arkansas regulators are tightening restrictions if only a tad. Environmentalists are saying water supplies are in jeopardy. France just banned fracking.

The New York Times published a major expose two Sundays ago quoting internal gas industry memoranda to suggest that all these bountiful shale projections may be unreasonably inflated and that the whole exercise might turn into a mortgage-like bubble.

For the moment, though, landowners in a few counties north of Pulaski County are reaping manna from leases and royalties, and presumably paying taxes thereon. Water quality threats and a rash of earth tremors may be the price.

Richard Weiss, director of the Finance and Administration Department, thinks Baker overstates. What state government reaps from the shale play is, while helpful, “marginal” in the grand scheme, he said.

What’s more relevant, he said, is that manufacturing rallied a bit beyond what was expected. In addition, Weiss said people with investments who pay estimated taxes tended to get refunds last year because investments performed poorer than estimated, but that those same people didn’t get refunds this year because investments fared as well or better than estimated.

That is to say that people with equity earnings are doing better than people with employment earnings. That may not mean precisely that the rich are getting richer and the poor poorer, though it is a possible and perhaps reasonable conclusion.

We already knew that businesses were shoring up their bottom lines, but, from trepidation, not hiring or investing at a pace equal to their earnings improvements. Republicans say this fear has to do with looming health care reform and the federal debt’s implications for long-term stability.

It’s the chicken and egg: Is the economy weak because you’re sitting on your money or are you sitting on your money because the economy is weak? Answers tend to vary politically.

More to the local point politically, tea party types may look upon this $95 million or so in state government overage and see a case for cutting taxes.

But Gov. Mike Beebe is right, again, when he says that Medicaid will start to strangle us in a year or two unless we reform it, as he seeks, and that, until pending reforms actually produce savings, we ought to hold on to this money to plug up Medicaid shortfalls. (Well, he still wants to draw down the grocery tax a bit.)

P.S. — As of July 1, the state is in the odd position of spending at a rate for the new fiscal year that is actually below the level of revenue flow of the previous year. The state is budgeted to spend about $88 million more than it spent last year, but that’s about $7 million less than it just took in.

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John Brummett is a columnist for the Arkansas News Bureau in Little Rock. His e-mail address is jbrummett@arkansasnews.com; his telephone number is (501) 374-0699.