LITTLE ROCK — The Legislature must come up with $23.5 million to pay state employees’ a 27th pay period next year - up from the usual 26 - the state Department of Finance and Administration revealed in a request to legislators Wednesday.
It’s a quirk that happens every decade or so as a result of having a payday every two weeks, said state Budget Director Mike Stormes.
The co-chairmen of the Joint Budget Committee -Sen. Gilbert Baker, R-Conway, and Rep. Kathy Webb, D-Little Rock - said they wished they had been told about it sooner.
“I would expect a spirited discussion,” Baker told the committee.
The committee voted Wednesday to draft bills reflecting Gov. Mike Beebe’s request for how to spend the General Improvement Fund, which is made up of interest collections and surplus dollars and is currently estimated by Stormes at about $70 million.
The money for the extrapay period in fiscal 2012 is included in the governor’s proposal for how to use the fund.
Baker said debate on the governor’s requests will occur once the bills are presented to the Budget Committee.
“It was put off five years ago,” Baker told reporters. “I was made aware of it yesterday. I need a lot more explanation. Why now? I’m not sure now is the right time to correct it. At some point it’s got to be corrected. But I’m not sure in these tough economic times that that’s when youcorrect that.”
Baker said he’d like to look into “deferring” the payment since it was already put off once, in 2005, which was when Mike Huckabee was governor.
He said it could eliminate a significant amount of money available for one-time projects, which are the sort of things - construction of buildings, grants to fire departments and such - that legislators historically have preferred.
Webb said she and otherlegislative leaders will talk more with Finance Department officials about the extra pay period.
“We’re not happy about the late notice of this,” Webb said. “We had close to $1 billion in surplus a few years ago [in 2007]. Why didn’t we talk about it then? We’ve got real concerns about it.”
Stormes explained that the usual 26 pay periods in a year each cover 14 calendar day, or 10 work days. He said that equals 364 days in a year, not the 365 days in a usual year.
He said that extra day in each year accumulates and must be paid in a 27th pay period about every 10 years.
Beebe hasn’t included that 27th pay period in his proposed $4.59 billion general revenue budget for fiscal 2012 because it isn’t a recurring expense, Stormes said.
“Such a one-time obligation is most logically addressed with one-time funds [from the General Improvement Fund],” he said.
Stormes said about 30,000 employees in the executive branch agencies funded by general revenue would be covered by the request.
He said he gave the proposal to legislative staff “over a week ago.”
Kim Arnall, assistant director of the Bureau of Legislative Research, said the bureaureceived it Feb. 17 as part of the 12-page request from the administration, dated Feb. 14, on spending the General Improvement Fund.
Stormes said that the 27th pay period has been “fairly well known” within the Finance Department.
He said the department didn’t bring it up earlier in the legislative session because “traditionally, discussion of whatever one-time funds that may be available to any General Assembly does not occur until close to the end when the most accurate projections of available funds can be had.”
The last time the Legislature came up with money to pay the 27th pay period was in 1995, and that also came from the General Improvement Fund, Stormes said.
He said it came up again in 2005.
“In the 2005 [legislative] session, the legislative leadership asked that we research any possible alternative solution to what otherwise would have been a 27th pay period programmed for the 2007 fiscal year,” Stormes said.
It would have cost about $22 million at that time, Stormes recalled.
He said the Finance Department came up with a solution to delay payment another five years.
“This represented a onetime solution that is now lost,” Stormes said. “We are now out of other options.”
Former Sen. Jim Argue, D-Little Rock, who was Senate president pro tempore in 2005, said he has “no memory” of that 27th payroll discussion that session.
Former Rep. Bill Stovall, D-Quitman, who was House speaker at that time and is now House chief of staff, didn’t return a message.
Webb said she also plans to talk to former Rep. Sam Ledbetter, D-Little Rock, who was the budget co-chairman in 2005 when the issue was deferred.
Beebe, a Democrat, was attorney general in 2005 and became governor in 2007, replacing Huckabee, a Republican.
“I’m a little irritated they didn’t do it in 2005 when they should have,” Beebe said.
Beebe spokesman Matt De-Cample said Beebe found out about the issue about the time the session started, which was Jan. 10.
DeCample described the $23.5 million as a “legal obligation” for the state because employees must be paid for working.
Stormes said after that is paid and after debt payments for the Arkansas Public School Computer Network ($2.9 million) and for prisons ($13 million), the General Improvement Fund will have about $30 million left.
That amount would have to cover any projects favored by the governor and the Legislature.
Beebe is requesting that $10 million go toward the general revenue budget for prisons,Medicaid and education.
He’s also seeking more money for the Quick Action Closing Fund, a discretionary fund for economic development incentives.
Baker said he favors setting aside money for that fund but wants to know how much is left in the fund.
Joe Holmes, spokesman for the Arkansas Economic Development Commission, said the Legislature approved $50 million for the fund in 2007 and another $50 million in 2009.
Of those amounts, $65.4 million has been paid or obligated, leaving a balance of $34.6 million. Of the balance, “several million” has been committed to potential projects that haven’t been finalized yet, Holmes said.
Beebe has repeatedly cited reports by national groups that describe Arkansas’ finances as better off than most other states.
DeCample said that perception of the state budget shouldn’t be altered by the issue of the 27th payday.
“We don’t feel this jeopardizes any claim about how the state is doing financially,” he said. “This is a one-time expense.”
As to whether the administration should have planned for it during the 2007 or 2009 sessions, DeCample said the 2005 fix extended the issue for five years.
Information for this article was contributed by Sarah D. Wire of the Arkansas Democrat-Gazette.
Northwest Arkansas, Pages 7 on 02/24/2011