LITTLE ROCK — The Beebe administration on Tuesday will unveil to the Joint Budget Committee its blueprint for the state government to spend about $160 million more in general revenue next fiscal year than is being spent this year.
But it’s $4 million, not the $160 million, that stands to be a hot button in this year’s legislative fiscal session. That’s the amount of shortfall at the Forestry Commission that led to 36 layoffs and some calls for the governor to ditch the man in charge.
Gov. Mike Beebe started providing legislative leaders last week with preliminary estimates of what his spending plan will look like: “a little over” $100 million more for the state Department of Human Services with almost all of that going to the state’s Medicaid program; about $55 million more for the public schools to meet the state’s constitutional obligation to provide an adequate education for students; and possibly $3 million more for the state’s colleges and universities aimed at addressing inequities in funding among the schools.
The total general revenue budget will be about $4.727 billion, and the grand total state budget — general revenue, plus special revenue, plus cash funds and federal funds that the state spends, and other funds — will come to more than $24 billion.
The $100 million, $55 mil- lion and $3 million estimates “are in the ballpark, and generally that’s what I expect to be in our recommendations, but they won’t be final until Tuesday because we tweak them hourly,” Beebe said in an interview.
The state Department of Correction and the Department of Community Correction could get more funds under his blueprint, but “it doesn’t look like” his budget proposal for fiscal 2013 will include funds for cost-of-living raises for state employees, he said. The budget plan won’t include $15 million for a merit adjustment fund for employees, like the current budget does, he said.
The proposed 2013 budget will be based on his administration’s forecast that total general revenue will increase by 3 percent, or $174.3 million, to $5.931 billion. The state’s chief fiscal officer, Richard Weiss, called that “a good conservative” prediction.
The Department of Finance and Administration projects that what agencies will spend — after the gross amount is reduced by about a dozen off-the-top refunds and expenditures — will increase by $161 million, or 3.5 percent, to $4.727 billion in fiscal 2013. Legislators were largely muted in their reaction to the administration’s revenue forecast when it was announced last month.
The Joint Budget Committee will get the details of Beebe’s proposed budget Tuesday during the start of its budget hearings in advance of the legislative fiscal session, which starts Feb. 13.
Sen. Gilbert Baker, R-Conway, said there probably won’t be much discussion among lawmakers about Beebe’s request for about $55 million, or 2 percent, increase in general revenue for public schools.
As for the governor’s request for more than $100 million more for the Department of Human Services, largely for the Medicaid program, Baker said, “We have got to make sure Medicaid is solvent.
“There will be a lot of discussion about where we are headed with the reforms proposed by the governor, and there is a new Medicaid director,” Baker said.
Rep. Kathy Webb, D-Little Rock, said of the committee’s hearings, “Hopefully we are not going to have really big issues.”
But she said, “We have been talking a lot about the Forestry Commission and [the Administration of Justice Fund], but in terms of the overall budget impact, they are pretty small.”
Beebe said he could seek a $2.7 million supplemental appropriation for the Forestry Commission, an $8 million to $10 million supplemental appropriation for the Department of Correction, and supplemental appropriations for the Department of Community Correction and the State Hospital, as well as “a possible sum for the rainy day fund.”
FORESTRY
Several weeks ago, the Forestry Commission announced plans to lay off 36 employees, whose last day at work was Friday, because it projected that its costs will exceed available funds by $4 million. Those layoffs have left the agency that had about 425 employees three decades ago with 264 employees, according to its director, State Forester John Shannon.
Beebe, legislators and others have wondered about the management under which the shortfall happened.
Weiss has maintained that his department learned in November that its understanding of the commission’s financial situation was wrong. That realization came after the commission asked for additional money.
The department subsequently found that the commission had erroneously included certain federal funds in its operating budget. The department’s accountants found that for the past four years the commission included federal funds in the income it told the department it had available to operate on, but most of the federal money was not supposed to be used for that, according to Weiss.
Shannon, who has been in charge of the commission since 1994 when he was appointed by then-Gov. Jim Guy Tucker, has said he accepts official responsibility for the erroneous reports but that he learned about them being wrong in November.
Robert Araiza, the commission’s former fiscal officer, has contended that all his key decisions were known to and accepted by Shannon or other officials.
Shannon said last week that it was “a painful letter” for him to write disclosing to the U.S. Forest Service “we have some administrative errors in use of their grants.”
He said he wants to regain the trust of the U.S. Forest Service, Forestry Commission employees and lawmakers.
“I need to regain the confidence of the General Assembly, and part of that is absolutely assuring that these fiscal mistakes, which are largely grant-management mistakes, do not ever happen again, and I am confident that these mistakes will never happen again,” he said.
In this case, legislative leaders generally are deferring to Beebe, who took a rare step for a governor and requested an audit of the commission by the Legislative Audit Division. Some are saying they don’t know whether Shannon should remain as state forester. Last week, a legislative committee authorized the audit at the request of two lawmakers.
The Joint Budget Committee co-chairmen — Baker and Webb — said they plan to appoint a subcommittee to delve more into the commission’s finances and problems.
Baker said Sen. Missy Irvin, R-Mountain View, who requested the audit, will be a co-chairman of the subcommittee. Webb said she herself will serve on the subcommittee and may appoint someone else as co-chairman.
As for Shannon’s future, Webb said, “I am not going to make any declarations one way or the other. I think there is more information that we need to have. Things could have been handled better.”
Sen. Michael Lamoureux, a Republican from Russellville who generally has amicable relations with the Beebe administration and is cochairman of the Legislative Council’s personnel subcommittee, said it’s difficult for him to see how Shannon could survive this controversy as the head of the commission.
“I think the general consensus that I hear is, number one, it needs to be handled in a professional way,” he said. “This is a nonpartisan issue. The agency needs more money, and the agency mismanaged the budget. Is the Legislature going to be willing to give the same leadership more money? I think the question is ‘Do they need the money or is the commission more determined to keep him in place, or does he want to try to stay in place and not have the resources, or are they willing to put this behind us and put a new person in place to try to get the resources they need?’”
The state Republican Party dubbed Beebe’s supplemental appropriation request the “Beebe Bailout.”
Asked about the state GOP’s use of that term, Beebe spokesman Matt DeCample countered, “I think they are playing by the D.C. playbook. ... We are talking about making sure people can keep their jobs. That’s what the supplemental is for.”
Asked whether he believes that the commission can obtain a supplemental appropriation with Shannon remaining as state forester, Beebe said, “I will be dictated by the facts, not by anything else,” noting his request for an audit and that he wants to get answers to a few questions of his own.
“Some members of the Legislature are really upset with Mr. Shannon and some aren’t, but I think we ought to be guided by what the audit turns up and what the facts show before we make any final decisions,” he said. Legislative Auditor Roger Norman said he hopes to complete the audit during the fiscal session.
JUSTICE FUND
Last month, Beebe said he would transfer $40,000 from his emergency fund so that trial-court administrative assistants wouldn’t have to take furlough days this month because of a declining balance in the Administration of Justice Fund.
A panel of lawmakers and judges led by Chief Justice Jim Hannah had scheduled 31/2 furlough days for the assistants at the end of January because allocations from the fund that pays their salaries have been reduced.
The Administration of Justice Fund is the state’s share of filing fees and court costs generated by certain crimes. Its balance had dwindled from $5.8 million at the beginning of the fiscal year in July to $1.17 million at the end of November.
Deputy Legislative Auditor June Barron told lawmakers last week that auditors are reviewing the dwindling collections of eight courts to help determine why collections have declined, and she hopes to have a report by Feb. 1.
“One judge said people are opting to sit it out in jail on Saturday, so there is no cash being collected [from people paying tickets] and therefore collections will go down,” Barron said.
Webb said she wants to see the information from the Legislative Audit Division to help guide future decisions, and, “We hope to have substantive proposals done within a week.”
But Baker said, “It is going to come down to Gov. Beebe asking for a supplemental appropriation or not. If the governor asks for a supplemental, I think the Legislature will be open to taking care of the need. If he doesn’t ask for a supplemental, I am not sure that is something the Legislature is going to initiate on their own. If there is not a supplemental, it means the trial court assistants will be furloughed a few days a month.”
A supplemental appropriation of $300,000 to $400,000 would be needed to get through June, he said.
DeCample said the governor doesn’t have plans at this point to seek a supplemental appropriation for the Administration of Justice Fund.
“We don’t think the governor is the only person who can make a request,” he said. “The actual supplemental bill has to be filed by the legislators.”
House Republican leader John Burris of Harrison said he still has many questions that he wants to get answered during the budget hearings about the Beebe administration’s stated intent to have a partnership with the federal government for a federally-controlled health-care exchange.
Last month, Beebe announced that he had signed off on the state Insurance Department’s application for a $7.6 million grant from the U.S. Department of Health and Human Services and a proposed “cooperative agreement” to plan for the implementation of the federal exchange in the state. According to DeCample, that was the last alternative after state lawmakers last year blocked the creation of a state-run exchange.
Front Section, Pages 1 on 01/15/2012