Arkansas lawmakers give approval to $6 billion budget
Identical proposed Revenue Stabilization Acts authorizing a $175.1 million increase in the state’s general revenue budget to $6.02 billion in the coming fiscal year sailed through the Arkansas House of Representatives and Senate earlier this month.
The action came in the 23rd day of the fiscal session before the House and Senate recessed. House and Senate leaders said they plan to adjourn the session next Tuesday.
Gov. Asa Hutchinson doesn’t expect to veto any bills or parts of bills that the House and Senate sent to him during the fiscal session, Hutchinson spokeswoman Shealyn Sowers said afterward.
The House of Representatives voted 97-1 to send to the governor Senate Bill 101, the proposed Revenue Stabilization Act for fiscal 2023, which begins July 1. On the other side of the state Capitol, the state Senate voted 35-0 to send to the governor House Bill 1117, an identical proposed Revenue Stabilization Act.
State Rep. Josh Miller, R-Heber Springs, who was the only lawmaker to vote against SB101 and HB1117, said he supports many parts of the the proposed general revenue budget, including increased funding for law enforcement, but there was enough that he didn’t agree with that he felt he couldn’t vote for the the identical bills.
He said he voted against the proposed Revenue Stabilization Acts because he opposes the Medicaid expansion program that provides health care coverage to more than 300,000 low-income Arkansans, and he opposes giving more state funds to the state’s higher education institutions, while tuition for students increases and some of the institutions are using funds to hire “what I consider to be immoral folks to come in and indoctrinate our students with transgender and that type of stuff.” He didn’t name any particular schools.
The $6.02 billion general revenue budget for fiscal 2023, under the current revenue forecast for that fiscal year, is projected to leave a general revenue surplus of $193.9 million at the end of fiscal 2023 before up to $50 million of that surplus goes to the state Department of Transportation for highways, said Kevin Anderson, an assistant director for the Bureau of Legislative Research.
Most of the increase in the general revenue budget would go to the public schools and human service programs under the proposed Revenue Stabilization Acts for fiscal 2023 in Senate Bill 101 and House Bill 1117. The bills would increase
the state’s general revenue budget by 2.9% in fiscal 2023.
On Jan. 11, Hutchinson proposed a $194.6 million, or a 3.3%, increase in the state’s general revenue budget to $6.04 billion in fiscal 2023. The governor’s proposal envisioned leaving a $174.4 million general revenue surplus at the end of fiscal 2023.
The major difference between the proposed budget agreed upon by the governor and legislative leaders and the governor’s initial proposal is a smaller increase in the state’s general revenue budget for Medicaid, according to legislative leaders.
Priorities for general revenue funding of programs are set in the Revenue Stabilization Act, which is enacted every year by the Legislature and the governor 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 proposal would create two categories for spending priorities in fiscal 2022: A and B.
Category A, the highest priority, would be allocated $5.685 billion. Category B would be allotted $338.5 million.
Legislative leaders said the state’s general revenue forecast for fiscal 2023 would fully fund Category A and Category B in the proposed Revenue Stabilization Act.
PUBLIC SCHOOLS, HUMAN SERVICES
The measure would increase the general revenue allocation for the public school fund by $69.6 million, or 3%, to $2.32 billion in fiscal 2023, according to Bureau of Legislative Research records. The proposal also
would increase the general revenue allocation by $28.5 million for the educational facilities partnership program to $70.3 million.
Both increases are in line with the educational adequacy recommendations made by the House and Senate education committees.
The proposed Revenue Stabilization Act also would increase the general revenue allocation for the Department of Human Services by $46.3 million, or 2.5%, to $1.82 billion, according to Bureau of Legislative Research records. Hutchinson initially proposed a $66.3 million increase for the department to $1.84 billion.
The proposal would increase the general revenue allocation for the Department of Human Services’ grants account, including Medicaid, by $23.5 million, or 1.7%, to $1.39 billion, Bureau of Legislative Research records show. Hutchinson initially proposed a $43.5 million increase in the general revenue budget for grants to $1.41 million.
Senate Bill 54 would set aside the first $37.6 million of funding allocated to the Department of Human Services’ grant account to be used for Hutchinson’s plan to reduce the waiting list of developmentally disabled people. In mid-December, Hutchinson unveiled his plan to provide services by June 2025 to the 3,204 people on the state’s waiting list for people with intellectual and developmental disabilities who want to stay in their homes and communities.
According to Bureau of Legislative Research records,
the proposed Revenue Stabilization Act would increase the general revenue allocation for colleges and universities by $12.9 million, or 1.6%, to $775.6 million in fiscal 2023.
The measure would increase the general revenue allocation for county jail reimbursement by $6.4 million to $25.7 million in fiscal year 2023. The increase would be for raising the rate that counties are reimbursed for holding state inmates from $32 to $40 per day for each state inmate, Bureau of Legislative Research records show.
The increased rate paid to the counties will become effective July 1, Scott Hardin, a spokesman for the state Department of Finance and Administration, said.
The proposal also would increase the general revenue allocation for the Division of Correction by $3.8 million, or 1%, to $378.9 million in fiscal 2023, and boost the general revenue allocation for the Arkansas State Police by $7.4 million, or 10.5%, to $78.1 million in fiscal 2023 to help bolster the salaries of state troopers.
In the Dec. 7-9 special session, the Republican-dominated Legislature enacted individual income and corporate tax rate cuts that state officials project will eventually reduce general revenue by nearly $500 million a year by fiscal 2026.
The tax cuts are projected to reduce general revenue by $135 million in the current fiscal 2022 and $307 million in fiscal 2023.
If the state taps its catastrophic reserve fund, formerly called the long-term reserve fund, during certain periods, that would forestall individual income and corporate income
tax rate cuts in the future under the laws enacted in the special session. The state’s catastrophic reserve fund totals about $1.2 billion.
OTHER STATES
The National Conference of State Legislatures reported this month that general fund revenue collections across the states are strong based on its survey of legislative fiscal offices completed primarily in December and January.
Twenty-five states expect to exceed their forecast revenues in fiscal 2022, and in many cases those estimates have already been revised upwards since the beginning of the fiscal year, the conference reported. Another 17 states are on track to meet their current general fund revenue projections for the current fiscal year.
Over the long-term, there is less certainty about the strength of state fiscal conditions, according to the conference.
“The one-time nature of federal funds potentially sets states up to face a fiscal cliff as federal funding runs out, but projects and programs funded with federal aid continue,” the conference said. “States are cautiously optimistic that robust revenue growth will continue, but there are many external factors that could affect revenue growth, and accurate revenue estimating continues to be a challenge for states. The continued presence of COVID-19, inflation, supply chain issues and global conflict are all risks to the U.S. economy that affect state finances.”