Hires add to state’s consultants tab

For a potential price tag of nearly $650,000, the Arkansas Legislature has hired consultants to assist a task force in the study of the state’s tax code and to help another panel study possible changes in the way agencies award contracts to vendors.

The Legislature hired PFM Group Consulting of Philadelphia as a tax consultant under a contract for up to $312,750 and Ikaso Consulting of San Bruno, Calif., as a procurement consultant under a contract for up $336,800. At least a handful of lawmakers question the necessity of the hirings, but others say the expertise is needed.

PFM’s contract started Sept. 14 and Ikaso Consulting’s contract started Thursday. Both contracts end Dec. 31, 2018.

In addition to those contracts, the Legislature’s workforce education task force has what Sen. Jane English, R-North Little Rock, called “a facilitator,” who is being paid through the Department of Career Education.

The facilitator is Nate Klinck, a former policy director for the Indiana Department of Workforce Development who now is vice president of Thomas P. Miller & Associates. The Miller firm, which has offices in Indiana, Kentucky and Ohio, has a contract for $19,573 that began in August and ends in March, according to a spokesman for the Department of Career Education.

Over the past decade, the Legislature has hired consultants to assist with specialized studies ranging from educational adequacy and broadband access in public schools, to analyzing a $125 million bond issue for Big River Steel mill near Osceola, to studying the state’s Medicaid program, according to Bureau of Legislative Research records.

During the past 10 years, the bureau’s costs for these special studies peaked in fiscal 2015 at about $1.3 million, according to bureau records. That included:

■ About $940,000 to CT&T Inc. of North Little Rock to study broadband access, equipment and connectivity in the schools.

■ About $149,000 to lottery consultant Camelot Global Services of Philadelphia and London to study the Arkansas Scholarship Lottery’s operations.

■ About $112,000 to The Stephen Group of New Hampshire to assist the Legislature’s Health Care Reform Task Force.

Before the Legislative Council approved the contract with PFM on Sept. 15, Sen. Bryan King, R-Green Forest, suggested that the Bureau of Legislative Research’s staff could do the work instead with the help of information from the National Conference of State Legislatures. The conference is a bipartisan national advisory organization and resource for legislatures and their staffs.

“It’s a total waste of money. This issue has been studied before. At least exhaust all available resources first before you stick it to the taxpayers,” King said Thursday in an interview.

But asked to justify spending up to $312,750 for the tax consultant, Rep. Lane Jean, R-Magnolia, said Friday, “If we get it right and do something that helps create jobs and build wealth, it will be the best $300,000 we have ever spent.”

“I am hoping we get it right,” said Jean, who is a co-chairman of a tax-overhaul task force that will use PFM and also is co-chairman of the Legislature’s Joint Budget Committee.

He added, “Remember [the cost of a tax consultant] isn’t as bad as the health care task force [consultant] that cost about $2 million.”

The Bureau of Legislative Research and the Department of Human Services paid a combined $2.16 million to the Manchester, N.H., consulting firm The Stephen Group, said Brandi Hinkle, a spokesman for the department. The bureau’s share of the bill was $1.08 million, according to bureau records.

Sen. Jim Hendren, R-Sulphur Springs, said the Department of Human Services reported it saved $175 million in state and federal funds by spending less than projected on the traditional Medicaid program in fiscal 2017 with the help of recommendations of the health care task force. Fiscal 2017 ended June 30.

“It’s one of the best returns on investments that we have ever seen,” said Hendren, a co-chairman of the Tax Reform and Relief Task Force who also served as a co-chairman of the health care task force.

Asked about relying on the bureau’s staff and the National Conference of State Legislatures rather than hiring a consultant, Hendren said the bureau’s staff members are “really good at assessing state issues and the effect on the state of Arkansas.

“But they are not equipped to look at it from a national perspective, to do national comparisons with 50 states, to look at the impacts of policy, how did the tax code in North Carolina differ from the one in Kansas. They just don’t have the staffing first off,” Hendren said in a recent interview.

When an agency such as the Human Services Department says its recommendations come from two years of work by a consultant-advised task force, Hendren said, “It has a whole new level of credibility, versus this is what three or four legislators thought, and [Bureau of Legislative Research] gave them these facts, especially when you are doing hard things.”

He said the tax task force’s mandate is twofold: to look at changes that would be “revenue neutral” and tax cuts.

“You are talking about hundreds of millions of dollars in tax cuts and policy and we can’t afford to get it wrong,” Hendren said.

Taxes paid to state government minus refunds totaled $8.15 billion in fiscal 2016, the most recent fiscal year for which accurate data are available, said Scott Hardin, a spokesman for the state Department of Finance and Administration.

Bureau of Legislative Research Director Marty Garrity noted the tax overhaul task force “is looking for dynamic scoring of each component of the proposal.” She said “if the bureau were to do this, it would require an outlay of funds to purchase the software package to run the data. Even if the bureau were to purchase this software and run the data, the bureau could not perform a significant component of the studies.”

Garrity noted the duties assigned to lawmakers studying taxes and procurement include recommending legislation and policy changes based upon an objective and subjective determination of the best method to provide those changes.

“As nonpartisan staff of the Legislature, bureau employees do not take policy positions on issues or legislation. To do so would place bureau employees in the position of advocating for or against legislation and policies and this is a role we cannot provide,” she said.

The 16-member Tax Reform and Relief Task Force was created under Acts 78 and 79 during this year’s regular legislative session in part to placate some lawmakers who favor granting more income tax cuts, particularly for Arkansans who earn more than $75,000 a year.

Under Acts 78 and 79, the Republican-controlled Legislature approved Republican Gov. Asa Hutchinson’s plan to cut individual income taxes for Arkansans with less than $21,000 a year in taxable income. This plan is projected to reduce general revenue by about $25 million when it takes effect in mid-fiscal 2019 and then by $50 million each year thereafter.

An earlier income tax cut, approved in 2015, reduced the rates for taxable income between $21,000 and $75,000 a year. That tax cut was expected to reduce general revenue by $100 million a year starting in fiscal 2017.

Hutchinson has said he favors additional tax cuts. The next regular session starts in January 2019.

The tax overhaul panel’s preliminary report is due by Dec. 1 and a final report by Sept. 1, 2018.

The Legislative Council assigned to its Review Subcommittee a study of procurement laws, regulations and policies with a report to be presented to the council in December 2018.

Senate President Pro Tempore Jonathan Dismang, R-Searcy, said he is not sure lawmakers needed to hire a procurement consultant, though he favored hiring a tax consultant.

“But we have had plenty of controversy about the procurement process,” he said.

The Hutchinson administration and some lawmakers have disagreed over who is awarded various state contracts and for how much money. In August, the administration decided to move forward with a proposed Human Services Department technology contract even though a majority of senators on the Legislative Council voted twice against favorably reviewing the proposal.

A Legislative Council co-chairman, Sen. Bill Sample, R-Hot Springs, said the

“It’s a total waste of money. This issue has been studied before. At least exhaust all available resources first before you stick it to the taxpayers.”

— Sen. Bryan King, R-Green Forest

Legislature needed to hire a procurement consultant because the state’s process to request proposals for contracts “has been all over the board.”

Sample said it seems like lawmakers have received conflicting information that has confused them.

“We decided that as much money is being spent for procuring contracts and as much conflicts and questions there were about contracts, that we needed to study up on it because, if we can save the state money, we can have that money to take and apply it to another contract or something,” he said. “If we are going to take on a project like that, we need to have somebody that we can really trust and some experts to give us guidance.”

In fiscal 2017, agencies spent $1.47 billion buying everything from staples to automobiles through the state procurement system, said Hardin. That total doesn’t include colleges and universities, the Department of Transportation, and Game and Fish Commission, he said.

Meanwhile, English, who is co-chairman of the Legislature’s Task Force on Workforce Education Excellence, said her panel has a facilitator rather than a consultant partly because “the bureau is providing all the reports and all that stuff.

“Look at me, I am not a good facilitator and he has got some experience looking at this. He has gone through this process in Indiana and I am sure other places,” said English, who also is chairman of the Senate Education Committee.

Chip McAfee, a spokesman for the Department of Career Education, said in a statement the task force’s duties “include over twenty additional tasks that will require time and knowledge that the Career Education Director [Charisse Childers] and staff will have difficulty providing in a timely manner without the assistance of a facilitator that is an expert in the field and across many programs and states.”

Thomas P. Miller & Associates was recommended based on its experience with workforce development, and the firm proposed Klinck serve as the facilitator because of his more than 15 years of experience at all levels of workforce development, McAfee said

He said Klinck most recently served as the director of the Indiana Career Council, an executive-level board chaired by Indiana’s governor, that was established by the Indiana General Assembly to develop and implement strategies that coordinated the activities of the state’s education, job skills development and career training system. Indiana’s former governor is Republican Vice President Mike Pence.

The workforce education task force is required to issue a preliminary report by Feb. 1 and a final report by Dec. 1, 2018, under state law.

“It’s one of the best returns on investments that we have ever seen.” — Sen. Jim Hendren, R-Sulphur Springs and a co-chairman of the Tax Reform and Relief Task Force