Rainy-day cash gets closer watch under Senate bill

Lawmakers would be told money’s use within 1 day

The Joint Budget Committee has endorsed a bill that would require the executive branch to give some lawmakers quicker notice of when state rainy-day funds are committed, obligated, spent or transferred.

The bill would require the state’s chief fiscal officer to, within one day, report an “agreed-upon commitment or other obligation of funds” from the Rainy Day Fund to the co-chairmen of either the Joint Budget Committee, which meets when lawmakers are in session, or of the Legislative Council, which meets when they are not.

Senate Bill 205 by Senate President Pro Tempore Jimmy Hickey, R-Texarkana, also would require the chief fiscal officer to do the same for expenditures and transfers.

The co-chairmen would then promptly distribute the information to members of their respective groups, under SB205, which cleared the Joint Budget Committee on Thursday.

If enacted, the bill would expire 31 days after the 93rd General Assembly adjourns its regular session. The session started Jan. 11; no end date has been set.

The rainy-day fund includes set-aside funds for projects previously approved by the Legislature; rainy day funds that the governor requests for projects that are subject to Legislative Council or Joint Budget Committee approval; or funds the governor may spend on projects for which the General Assembly has approved Development and Enhancement Fund appropriations.

Under Act 1023 of 2019, $54.6 million was allocated for set-aside projects, and $21.8 million of that had been distributed as of Dec. 31, according to the Bureau of Legislative Research. None of the $30 million in set-aside funds for the Quick Action Closing Fund had been distributed as of Dec. 31.

The bureau said $22.5 million was distributed by the governor after getting approval from the Legislative Council or Joint Budget Committee and $28.6 million was distributed by the governor for projects that had Development and Enhancement Fund appropriations.

The Rainy Day Fund had $11.6 million in unallocated money as of Dec. 31.

Asked whether he supports or opposes the bill, Gov. Asa Hutchinson said his office will continue to study the bill as its proceeds through the legislative process.

“It is important that the governor has discretionary funds to address a multitude of needs in our state,” the

Republican governor said in a written statement last week. “I also support transparency on the use of the funds.”

Rep. Lane Jean, R-Magnolia, co-chairman of the Joint Budget Committee, said the General Assembly receives monthly reports on the use of rainy-day funds.

Hickey, who addressed the Joint Budget Committee, said he proposed the legislation for budgetary and transparency purposes.

“What [SB205] does is just makes it during the session that we will know about [a commitment] upon that happening, because once that commitment is made, it has to be given to the chairs within one day and then the chairs will disperse it out to this body,” Hickey said.

House Speaker Matthew Shepherd, R-El Dorado, asked what Hickey meant by “agreed-upon commitment” because he said a commitment is one thing and an agreement is another thing “just from a legal sense.”

“If somebody goes to the governor’s office and there is an agreement that says that I am going to disperse something for some college’s air conditioning and that we were going to do that out of rainy day [funds], that would be a commitment and/or an agreement, but I would call that a commitment,” Hickey said.

Shepherd said later he “is fine” with Hickey’s bill.

BEEFING UP RESERVES

In addition to SB205, Hickey said more legislation is coming that would rework the rainy day fund and put the money in a reserve account.

“We are working on that legislation now, so [that’s] the reason that [SB205] doesn’t continue” beyond 31 days after the adjournment of the session, he said.

Jean asked whether Hickey and some other senators are proposing to eliminate the rainy-day fund.

Hickey said the governor has proposed transferring $25 million out of $240 million in surplus funds to the rainy-day fund, but a group of senators wants to put that $25 million into a restricted reserve account instead.

“That funding would still be in that account and we also are looking to sweep what other funds that were left in that rainy-day account into that restricted reserve account,” he said.

The current balance for the restricted reserve account is $26 million, said Scott Hardin, a spokesman for the state Department of Finance and Administration.

Under Hickey’s plan, Jean said, “any type of special project would need to come before the council with a three-fifths vote [required for approval] and the governor would not have any money at his discretion” only.

Instead, “it would be his discretion and a vote of the three-fifths of the council,” he said. “Would that be correct?”

Hickey said, “That is the way it is supposed to have been anyway” with the Legislative Council’s Performance Review and Expenditure Review Subcommittee and the Legislative Council reviewing the governor’s proposed uses of rainy-day funds.

“There has been a way to get around that … if there is what was called the Development and Enhancement Fund appropriation,” he said.

Sen. Jonathan Dismang, R-Searcy, said there have been discussions with senators about this plan.

“This is a conversation that we have had with the 35 members of the Senate and something that we are looking to put forward at some point,” he said. “We have talked to the House leadership about the plan. I am assuming you all are in communication with the leadership on what that is going to look like.”

Dismang , a co-chairman of the Joint Budget Committee, said he would be happy to meet with representatives to discuss the plan, even before the introduction of the bill.

Hutchinson declined to comment on Thursday about this proposal because, he said, “these are only ideas that are being floated at the present time.”

The state’s Long Term Reserve Fund currently totals $209.9 million, according to Hardin.

Hutchinson has proposed transferring $100 million from the $240 million surplus to the reserve fund, which he has described as the state’s long-term savings account. Hutchinson aims to increase that long-term reserve fund to at least $420 million by the end of his gubernatorial tenure in January 2023.

“We need about $420 million sitting in there to start helping us with our bond rating,” Hickey said in an interview. “We have had a little bit of trouble with trying to figure out exactly if it needs to be all in long-term reserve or if we can take what we currently have in restricted reserve in a year.”

State Rep. Les Eaves, R-Searcy, asked Thursday whether senators are considering increasing the governor’s emergency funds in case of a tornado or levee break.

The state budget administrator, Jake Bleed, said the governor has a $500,000 a year emergency proclamation fund, and the state has a disaster assistance fund of $13.2 million a year.

“The way the law is written, there are mechanisms in place that would allow us, with legislative approval or otherwise, to go ahead and respond if an earthquake hits or something big happens,” Bleed said.

House Bill 1214 by Rep. Jeff Wardlaw, R-Hermitage, would increase the state’s disaster assistance fund to $16.2 million.