Northwest Arkansas Democrat-Gazette
Spending draft based on forecast of $5.6 billion
The state’s latest revenue forecast shows that $5.68 billion of the state’s proposed $5.89 billion general revenue budget would be funded in the coming fiscal year under a draft of a bill released Thursday that would set spending priorities.
“This is still a draft,” Rep. Lane Jean, R-Magnolia, a co-chairman of the Joint Budget
Committee, said of the proposed Revenue Stabilization Act.
“It can change, but that’s the latest draft,” he said after the committee’s meeting Thursday. The Legislature will consider the bill in its current fiscal session.
Priorities for general revenue funding of programs are set in the Revenue Stabilization Act, which is passed every year and keeps the state from deficit spending. The state’s two largest sources of general revenue are individual income taxes, and sales and use taxes.
The draft — released by a House spokeswoman — would create five categories for spending priorities in fiscal 2021: A, A1, B, C and D.
Category A, the highest priority, would be allocated $5.3 billion, including $60.3 million for the restricted reserve account.
Category A1 would be allotted $184.3 million.
Categories B and C would each be allocated $90.6 million.
Category D, the lowest priority and a new category, would be allotted $212.2 million, including $15.8 million more for the restricted reserve account.
“Right now, they project A through C will be funded,” Jean said.
“If the economy goes down, C could be in jeopardy, B could be in jeopardy, A1 could be in jeopardy,” he said.
But if tax collections exceed the state’s forecast, Category D spending could be funded.
BUDGET CUTS
Jean said Gov. Asa Hutchinson wants funding for the restricted reserve account in the general revenue budget “to help with the [budget] shortfall.”
Eight days ago, the state Department of Finance and Administration cut the state’s forecast for net general revenue available to state agencies by $205.9 million, to $5.68 billion, in fiscal 2021, citing an expected recession from the coronavirus pandemic. Fiscal 2021 starts July 1.
In comparison, the state’s general revenue budget totaled $5.62 billion in fiscal 2019.
Before the first positive test for coronavirus in Arkansas on March 11, Hutchinson proposed a $5.83 billion general revenue budget and setting aside a $54 million surplus for fiscal 2021.
On March 23, the finance department cut the budget for fiscal 2020, which ends June 30, by $353.1 million, to $5.38 billion, citing economic changes brought on by the coronavirus pandemic.
In a special session from March 26-28, the Legislature authorized creation of a $173.6 million covid-19 “rainy day” fund for the governor to use with the approval of legislative leaders to fill budget holes and unexpected needs resulting from the pandemic.
Hutchinson has attributed the fiscal 2020 cut to projections that the pandemic will lead to reduced tax collections in April through June, and to the state moving the deadline for filing and paying individual income taxes from April 15 to July 15 to match the same move by the federal government.
The governor on Wednesday, in a state of the state address, asked lawmakers to help him trim the budget while maintaining a commitment to education, public safety and the Medicaid program.
TOP PRIORITIES
• Under the draft Revenue Stabilization Act, the public school fund would be allocated $2.23 billion, and receive $2.12 billion in funding in Categories A, A1, B and C, based on the latest forecast. The unfunded Category D would include $11.5 million for the public school fund.
The March 23 budget cut reduced the budget for the public school fund in fiscal 2020 by $122.9 million to $2.1 billion.
• The proposal would allocate $1.8 billion to the Department of Human Services, and provide funding of $1.71 billion in Categories A, A1, B and C in fiscal 2021 under the latest forecast. The unfunded Category D would include $86.6 million for the department.
The March 23 budget reduced the general revenue budget for the department in fiscal 2020 by $134.4 million to $1.6 billion.
Department of Human Services Director Cindy Gillespie said the department’s finances have been helped by the federal government increasing its matching federal funds for the traditional Medicaid program as a result of the coronavirus, but the department also expects increased use of its programs in the next fiscal year.
• The draft Revenue Stabilization Act would allocate $755.1 million to the state’s colleges and universities, and would provide funding of $717.4 million in Categories A, B and C based on the latest forecast. The unfunded category D would include $37.7 million for the colleges and universities.
The March 23 budget cut reduced the general revenue budget for the colleges and universities by $43.3 million to $706.4 million in fiscal 2020.
Sen. Keith Ingram, D-West Memphis, said public twoyear colleges maintain that the higher-education productivity funding formula law protected them from receiving two funding cuts in a year when the general revenue forecast fell short of projections.
But Sen. Breanne Davis, R-Russellville, countered that “everybody is making cuts” at the state’s higher-education institutions and “making hard decisions.”
It’s outrageous that twoyear colleges are reaching out to lawmakers to protect their budgets when the University of Arkansas for Medical Sciences and the four-year colleges are cutting their budgets, she said.
Ingram replied that the productivity funding formula might not exist if not for the support of two-year colleges.
• The University of Arkansas, Fayetteville, would be allocated $122.8 million under the draft proposal and would get $116.7 million in Categories A, B and C in fiscal 2021. Unfunded Category D would provide $6.1 million for UA. The March 23 budget cut reduced the university’s general revenue budget from $122 million to $113.7 million in fiscal 2020.
• UAMS would be allotted $88 million under the proposed Revenue Stabilization Act and be provided $83.6 million in Categories A, B and C in fiscal 2021 based on the latest forecast. The unfunded Category D would provide $4.4 million to UAMS. The March 23 budget cut reduced UAMS’ general revenue budget from $88 million to $82.8 million in fiscal 2020.
• The Department of Health would be allotted $82.8 million under the proposed Revenue Stabilization Act for fiscal 2021 and would be provided $78.7 million in general revenue under Categories A, B and C. The unfunded Category D would give the department $4.1 million.
The March 23 budget trimmed the Health Department’s general revenue budget by $3.4 million to $78.4 million in fiscal 2020.