Sen. Larry Teague
(left) and Rep. Lane Jean speak Tuesday in the Joint Budget Committee meeting about their identical $5.63 billion state budget bills. The bills, which mirror Gov. Asa Hutchinson’s proposed budget, sailed through the committee.
House lawmakers stalled Tuesday in approving the appropriation for the treasurer’s office, which includes language that would allow public 529 college savings plans to be used to pay for K-12 education expenses, including tuition at private and religious schools.
With the end of the fiscal session looming this week, the treasurer’s office, which administers the investment plans, is the only state constitutional office without an approved spending bill for the coming fiscal year.
“We’ve got to have a treasurer’s budget, so just think about that,” said the House budget chairman, Rep. Lane Jean, R-Magnolia, as he presented the office’s appropriation to lawmakers.
Still, Jean, along with many other Republicans and almost all Democrats, withheld support from House Bill 1122, which failed 56-22. Eleven lawmakers, including Jean, voted present. Appropriations bills require at least 75 votes to pass.
The current 529 program allows taxpayers to deduct up to $5,000 in contributions ($10,000 per couple) from their taxes, and then make tax-free withdrawals from the plans to pay for college tuition or other higher-education expenses.
The House last week voted to amend the spending bill to add special language that would allow those taxfree withdrawals to be used for expenses related to K-12 education, including private school tuition, test preparation or tutoring.
Republicans in Congress adopted those changes last year, allowing withdrawals for K-12 education to be exempt from federal taxes. But without changing the law in Arkansas, families that chose to withdraw money from their plans to pay for private school are subject to “confusion,” along with taxes and a 10 percent penalty, said Grant Wallace, the deputy chief treasurer.
Sen. Jason Rapert, R-Bigelow, introduced the special language to the spending bill so that it will comply with federal law, he said.
The Department of Finance and Administration estimated that if every Arkansas family with children in private school took advantage of the changes, the hit to state revenue would be about $5.2 million per year. Critics, however, said that cost could be higher if public school families also take advantage by using deductions for expenses such as tutoring.
All but two Democrats in the House voted against the bill Tuesday, and members have described the language as granting public benefits to private schools. Others, including Republicans, have cried foul over the consideration of a policy change during a budget-oriented session.
“The process by which it was done has a lot of mem- bers shaking their head at it, even if they’re not ideologically opposed,” said Rep. Michael John Gray, D-Augusta, who is the chairman of the state Democratic Party.
Despite the divisions over the proposal, it stirred little debate on the House floor Tuesday. Just before the failed vote, state Rep. Jana Della Rosa, R-Rogers, asked for more time to draft compromise legislation that could be considered during a coming special session on urgent policy matters.
“I’m just asking you to vote no today and give me 24 hours to try and find a less disagreeable pathway,” Della Rosa said.
Della Rosa did not elaborate on her compromise plan or respond to phone calls Tuesday. Gray, who had his plan to increase funds for special education voted down earlier in the day, said he would not seek a compromise during the fiscal session.
Republicans, who have a three-quarters majority in the House, don’t need Democrats’ support to pass spending bills, Gray noted.
Rapert, the sponsor of the language, accused House lawmakers of “dramatics” in holding up what he called an easy vote to approve the treasurer’s office budget. The Senate has yet to consider the plan.
Reacting to the vote, Wallace, the chief deputy treasurer, offered a dire warning.
“The reality is, if they don’t fund the treasurer’s office, no money moves throughout the state,” Wallace said. “You risk shutting down state government.”
Jean, the House budget chairman, said HB1122 will come up again today for a floor vote. If an agreement is still out of reach, he said, lawmakers will look at other options.
The House leadership has already floated the idea of meeting Friday in hopes of wrapping up the fiscal session this week.