Legislative, regulatory reform discussed at economic luncheon

Randy Zook, president and chief executive officer at the Arkansas State Chamber of Commerce and Associated Industries of Arkansas, spoke at the El Dorado – Union County Chamber of Commerce’s second Economic Outlook Luncheon of the year on Wednesday, discussing legislative and regulatory reform that he thinks could benefit the business community in Arkansas.

“We’re all focused on one thing — the Holy Grail is economic growth,” he said. “It allows people to enjoy a higher standard of living … That’s what we’re all trying to do.”

In April, Arkansas changed the way corporate taxes are calculated. Zook said the state will now use a single sales factor, rather than an apportionment formula taking into account property, payroll and sales factors, to figure corporate tax bills.

The new method will be a mixed bag for businesses – those based in Arkansas whose sales take place largely outside the state will likely see a tax cut, since they will only be paying taxes based on the percentage of their sales made in the state, while those who primarily sell within Arkansas could see a tax increase, since their taxes will be based on nationwide sales.

“For accountants, it’s a big deal,” Zook said. “We’ll move into the mainstream with about 29 other states in terms

of that definition.”

A pressing issue for Arkansas businesses, Zook said, is the lack of a trained, qualified workforce.

“This really is the most pressing issue facing every business in the state and the country, for that matter,” Zook said. “Not a week goes by, sometimes not even a day goes by, that I don’t hear from somebody in our membership or some other business person around the state ‘I can’t find the people I need to do the work that’s available.’ It’s just commonplace.”

Union County has begun to face that issue, as the workforce in local heavy industry and manufacturing has started to age. Local leaders have tried to nip the problem in the bud by implementing yearly Manufacturing Days for the county’s high school students.

Manufacturing Day, started last year, brings ninth-grade students from every school in Union County together to learn about career opportunities locally, specifically within our local industrial, chemical and manufacturing plants.

South Arkansas Community College has also seen the need, responding last year with the grand opening of their Advanced Manufacturing Training Center, located on their East Campus.

Technology housed there trains students in welding, chemical process technology, industrial technology – mechatronics, electronics and instrumentation (E & I), forklift driving, OSHA safety training and loading and offloading rail and tanker cars.

Zook said Governor Asa Hutchinson is starting even earlier – last year, at his direction, the Arkansas Department of Education launched the Reading Initiative for Student Excellence (RISE) program, designed to ensure all public school children read at or above their grade level.

“Right now, if you look at the reading preparation numbers, grades three through ten, which are measured by the ACT Aspire test, 41% of them are reading at grade level, or reading at the proper level,” he said. “What does that mean? That means 59% are not. That’s not okay. … So we’ve got to get better at this, and the good news is, we’re moving to do it.”

Moving forward, several issues expected to appear on voters’ 2020 ballots could also affect the business community, Zook said.

The Arkansas Transportation Sales Tax Continuation Amendment would make permanent a .5 percent sales tax first authorized in 2012. The tax is set to expire in 2023 if the amendment is not passed. Funds collected from the tax are used for highway, road and bridge improvement, expansion and maintenance.

“The governor has undertaken and adopted this as his top priority … to make the sale to the people of Arkansas that it’s worth the investment, it’s worth the very modest individual cost to make that a permanent tax to fund a robust highway program — maintenance as well as expanding some of these important sections of our highway that we’re missing,” Zook said.

The second proposed amendment, titled the Arkansas Initiative Process and Legislative Referral Requirements Initiative, would make citizen initiatives to amend the state Constitution more difficult.

Zook said many recently passed and proposed amendments to the state Constitution would not have appeared had the state had stricter standards for citizen initiatives.

“We have allowed the initiative reform process in Arkansas to be abused. We have amended our state Constitution 20 times in the last six election cycles,” he said. “It’s no longer a Constitution; it’s a menu.”

The amendment would require that citizens collect signatures from 45 counties, rather than the 15 currently required; eliminate an option to allow petitioners 30 extra days to collect signatures if they fail the signature requirement with over 75 percent of the necessary signatures; and require signatures for citizen initiatives to be submitted by Jan. 15 of the election year, rather than four months before the election, the current deadline.

The amendment would also require a three-fifths vote of both chambers of the Arkansas Legislature to refer a proposed amendment for the ballot and require challenges to ballot measures to be filed by April 15 of the election year.

“Look at what we’ve done — we’re going to have an $11 minimum wage a year from this coming January,” he said. “We’ve done medical marijuana. We very likely, possibly, will have an initiative on the ballot next year for recreational marijuana. If it doesn’t get on there next year, it’ll be on there two or four years down the road. We’ve got casino gambling now, where we’re going to have at least four casinos in Arkansas. We’re doing a lot of things that probably would not pass muster in a normal Constitutional amendment process like you see in other states, where the process is much more rigorous.”

Zook said that while progress has been made for the business community in recent years, the state can continue to improve conditions for businesses and make the state more attractive to new businesses.

“We have made enormous progress in the last several legislative sessions on issues relative to the competitiveness of our business climate, but we have a long way to go. We have opportunities that abound in terms of taxes, in terms of regulatory matters,” Zook said. “We can do a lot better to make ourselves more compelling, more attractive.