Hutchinson offering $22 million to get road aid

The rainy-day fund, from which the governor proposes transferring $21.9 million to the Transportation Department, has a balance of $45.68 million, Hardin said.

Gov. Asa Hutchinson said he wants to use $21.9 million of the state’s rainy-day fund to ensure the Arkansas Department of Transportation has enough matching funds to obtain $200 million in federal highway money.

Under the 2016 law that enacted Hutchinson’s highway funding plan, the Department of Transportation already has received $28.1 million of the $50 million in state funding needed to meet the department’s needs, the Republican governor said in a letter to department Director Scott Bennett. The $28.1 million includes $20 million from the state treasury’s interest earnings and $8.1 million in diesel and sales taxes reallocated under the 2016 law.

Hutchinson has asked that the Legislative Council approve transferring $21.9 million from the rainy-day fund to the department in order “to utilize available federal aid funds for scheduled transportation projects.” The governor made the request in a letter sent last week to the council’s co-chairmen, Sen. Bill Sample, R-Hot Springs, and Rep. Jim Dotson, R-Bentonville. The council’s next meeting is Aug. 18.

In an interview Thursday, Sample said he had been wondering how Hutchinson was going to make sure that the department had sufficient matching funds to obtain the $200 million made available under a federal highway law.

“I am happy we are meeting our obligation,” he said.

Bennett said Friday that “this completes our matching funds” for this federal fiscal year from Oct. 1, 2017-Sept. 30, 2018. The state fiscal year runs July 1 to June 30.

“It’s an 80/20 ratio, so $50M in state funds matches $200M in federal funds,” he said in email to the Arkansas Democrat-Gazette.

The governor’s highway plan was enacted by the Legislature in a special session in May 2016. It requires 25 percent of the state’s general-revenue surplus each year, plus $20 million a year in interest earnings by the treasurer’s office. The plan also reallocates several million dollars a year in diesel and sales taxes for the match.

But the Transportation Department didn’t receive any surplus funds because of state officials’ interpretation of the 2016 law.

That’s because although general revenue came in above forecast, it did not exceed the maximum allocation in the law, after factoring in a $43 million cut in the fiscal 2018 budget, said Scott Hardin, a spokesman for the state Department of Finance and Administration. The state’s net general revenue exceeded the forecast by $41.7 million.

Of that $41.7 million, $4.4 million was kept by the public school fund, state library and school facilities. The rest will be available to spend in the future if the Legislature and governor enact authorizing legislation, according to records of the Bureau of Legislative Research.

The rainy-day fund, from which the governor proposes transferring $21.9 million to the Transportation Department, has a balance of $45.68 million, Hardin said.

That fund received a $34 million infusion from the state Department of Human Services out of $90 million in surplus funds originally set aside for the state’s Medicaid program during the 2017 regular legislative session, Hardin said.

The Department of Human Services’ effort to efficiently control Medicaid growth resulted in $34 million “not being required,” so it was released to the rainyday fund for reallocation, Hardin said in an email. “Due to this, those funds remain available and may be allocated toward the highway match. No funds were ‘taken from’ Medicaid.”

State Medicaid Director Dawn Stehle said in a letter dated June 14 to finance department Director Larry Walther that the Human Services Department “is very comfortable that it is well situated to finalize the year with excess funding in its budget.

“As a result, I am pleased to release back to the Department of Finance and Administration, Office of Budget, excess funds in the amount of $34,000,000.00,” Stehle wrote.

Hutchinson said Friday that the 2016 highway funding plan “was designed to be a short-term fix to meet our federal highway funding match.”

“It has been successful in meeting that obligation and has resulted in $98.9 million of new highway funding with an additional $21.9 million pending legislative approval next month,” the governor said in a written statement.

“Our state surpluses combined with other designated revenue streams have been sufficient to meet the estimated $50 million annual requirements each year,” Hutchinson said.

Last year, the Transportation Department provided $20.6 million of the state funds needed to reach the $50 million in matching funds, Bennett said. He said the other $29.3 million was provided through rainy-day funds and reallocated tax revenue. That also included $3.9 million in surplus funds, according to Hardin.

In fiscal 2019 that started July 1, the state’s Revenue Stabilization Act would set aside $16 million of what the governor considers surplus revenue to help match federal highway funds and $48 million is earmarked for a restricted reserve fund that the governor said would set the stage for future tax cuts.

That law also increases the general-revenue budget for state-financed programs by $172.8 million, to $5.63 billion, in fiscal 2019.