Legislature OKs shift of tobacco act’s cash

The state House of Representatives on Wednesday approved Gov. Asa Hutchinson’s proposal shifting more than $100 million in tobacco settlement money in the Arkansas Healthy Century Trust Fund to a fund that could be used to shore up state programs in future economic downturns.

The House voted 70-24 to send Senate Bill 5 by Senate Republican leader Jim Hendren of Sulphur Springs to Hutchinson on the final day of a three-day special session. The Senate voted 26-7 to approve SB5 on Tuesday.

At a news conference, Hutchinson said providing money to the Long-Term Reserve Fund “should put us in a better financial position and a better position as we are reviewed by the financial markets, industrial prospects and bond raters as well.”

Because of a 1998 settlement with tobacco companies, billions of dollars have been paid to Arkansas and other states.

Arkansas has put the money toward health-related programs. The state received its 2017 share, about $50.5 million, and the total received since 2001 was $947.3 million, according to Attorney General Leslie Rutledge.

An initiated act enacted by voters in 2000 specified the Healthy Century Trust Fund’s beneficiaries would “be the State of Arkansas and its programs, and other projects related to health care services, health education, and health-related research, as such are now in existence or as such may be created in the future.”

The fund’s balance is about $102.8 million, state officials said.

Arkansas has maintained a AA bond rating by S&P Global Ratings for the past 51 years, said Aaron Burkes, president of the Arkansas Development Finance Authority.

The state has about $1.5 billion in debt and improving Arkansas’ credit rating from AA to AAA would allow the state to borrow money at a lower interest rate, potentially saving $1.8 million a year, said Rep. Joe Jett, R-Success, the House sponsor of SB5.

Rep. Bob Ballinger, R-Hindsville, told colleagues the state needs money for the Long-Term Reserve Fund. He said any needed changes can be made in the next regular session in 2019.

“The question is, can we trust the governor between now and 2019 not to spend this money? Can we take him at his word to say that he is truly wanting to set this money aside for a long-term reserve to help shore up the economics of this state until we come up and take some of these great ideas that have been presented and incorporate it into this fund to make it even more safe, to make us more sound?” Ballinger asked the House.

“I think the answer to that from my standpoint is yes,” Ballinger said. “Now, I’m sticking out my neck, governor. You got to keep your word. You got to to keep this money set aside, or I am going to be looking pretty stupid coming down here and speaking for this.”

Afterward, Hutchinson said he told scores of lawmakers he doesn’t intend to use the money transferred to the Long-Term Reserve Fund.

“Obviously, we don’t know what the future holds, and it has to be there for unforeseen circumstances. But it is not my intent to use it or my desire to use it. I like it being in the Long-Term Reserve Fund,” he said.

SB5 would change the law to require a two-thirds vote of either the 60-member Legislative Council or the 56-member Joint Budget Committee for the state’s chief fiscal officer to use money in the LongTerm Reserve Fund.

Rep. Michael John Gray, D-Augusta, said he doesn’t subscribe to the theory the bill is linked to Hutchinson’s $70 million in cuts to the state’s $5.33 billion general-revenue budget for fiscal 2017.

The cuts, for the budget year ending June 30, are due to lagging state tax revenue. The state also is cutting $43 million from the $5.49 billion budget for fiscal 2018.

Gray said he wasn’t urging representatives to vote against SB5 because “it is a so-called slush-fund creation for the governor or the ulterior motive would be to spend it as soon as we get out of the [state Capitol] building and get the authority to put it into the account.”

He said he opposed the bill because he favors requiring a vote of both the House and Senate to use money in the Long-Term Reserve Fund, instead of committees.

“I do not think it would be in any of our best interest on either side of the aisle to surrender the power that the people that voted for us and sent us down, when we can still accomplish the same thing [by] the legislative body,” Gray said.