Last week our state received some great financial news. The Arkansas Department of Finance submitted the year end revenue summary for 2016. I am pleased to report that Arkansas finished the year with a $177 million budget surplus. This is an excellent reflection of our growing economic success.
Our budget surplus is a direct result of conservative principles in action. One of the first steps I took upon being elected Governor was to sign the largest middle class tax cut in Arkansas' history. This tax cut affected what I like to call the "sweet spot" of the state's economy by easing the burden on individuals making between $21,000 and $75,000 a year.
Opponents of tax cuts often cite the opinion that cutting taxes will reduce the government revenue base and hinder its ability to fund services. After this week's news, it is clear that the exact opposite has been the case. The tax cuts we passed in 2015 went into effect on January 1 of this year. Even with the impact from $100 million in tax cuts, net revenue from the state income tax grew by 4.4% over last year's collections.
Reducing the state income tax rate to a more competitive level is a key component of our economic development plan. When we pitch our state to companies who are exploring establishing or relocating in Arkansas, one of the first things they consider is the income tax rate of the target state. Companies want to make sure their employees are able to maximize their take home pay, so they tend to favor states with a lower tax burden. A competitive tax rate will help us recruit more companies like Big River Steel and Sun Paper to the state which in turn will expand our tax base and increase the total tax collections without the need to raise taxes.
Relieving the financial burden on the middle class not only helps us bring more jobs to the state, it also drives economic growth by putting money back in the hands of wage-earners. After all, the more money hardworking Arkansans have in their pockets, the more likely they are to support local businesses, buy school clothes for their children and to spend in manner that creates growth for our state.
It is important to note that economic growth is just part of what is necessary to build a $177 million surplus this year. It was also important to control spending. At my direction, our state agencies have continued to look for savings and efficiencies in their budgets. One of the ways we have kept costs down is the continuation of the hiring freeze for state agencies. Before the hiring freeze went into effect our agencies often filled vacant positions with no consideration as to whether the positions were still needed. Now our agency directors are taking a deeper look at ways they can streamline their agencies to be more efficient to ensure that we are making the best use of public funds. In fact, current estimates, as of the end of the 2016 fiscal year, show nearly $7 million in savings from the hiring freeze.
Conservative budgeting also means that we need to be well prepared for the future. While we are doing well right now, it is important that we protect ourselves against the possibility of another economic slowdown. For that reason, I plan to direct as much of our $177 million surplus to our state's rainy day fund as possible. Currently, we have $41 million in our fund and we'll be adding another $13 million in monthly payments to the rainy day fund throughout the year.
As Governor, I am working hard to lead our state in preserving funds and wisely allocating money to best grow our economy, ultimately putting money back into the pockets of hard-working Arkansans