Panel backs bid to cap spending growth at 3%

— Legislation requiring the state’s chief fiscal officer to limit growth in general-revenue spending to a maximum of 3 percent a year cleared an Arkansas House committee Tuesday. Gov. Mike Beebe called the bill “awful” but didn’t say he’d veto it.

House Republican leader Bruce Westerman of Hot Springs said the Revenue Stabilization Act has stopped deficit spending in state government since the 1940s, but it hasn’t solved all of the spending problems.

He said his House Bill 1041 “would introduce true fiscal conservative controls on our state spending and it will limit our state government from growing faster than the economy.”

“We can be more fiscally responsible than what we have done in the past,” Westerman told the House Revenue and Taxation Committee.

State general-revenue spending increased annually by more than 5 percent for several years during the past decade before the recession forced state spending reductions, he said.

“And this was done with a Republican governor and a Democratic governor. I am not putting blame on one party or the other.”

Westerman’s bill would require the director of the state Department of Finance and Administration, who is the state’s chief fiscal officer, to cap increases in general revenue expenses.

Under the legislation, general revenue expenses could rise no more than 3 percent over the previous fiscal year’s expenses.

And the growth of general revenue spending couldn’t outpace the average growth rate in the state’s gross domestic product - the value of all the goods and services produced in the state - over the previous three fiscal years.

Westerman said 3 percent annual growth is sufficient, adding that the inflation rate has averaged 2.5 percent a year for the past 10 years.

The bill would allow the chief fiscal officer to authorize an expenditure exceeding the cap if the governor recommends the expense and either the Legislative Council or Joint Budget Committee approves it. Westerman saidthis provision would cover emergency situations.

If enacted, the bill states that it would go into effect on or after July 1, 2014.

Westerman’s bill is sponsored by 46 House Republicans and six Senate Republicans.

Richard Weiss, director of the state finance department, said the state has operated and been described as one of the more fiscally conservative and responsible states in the nation in recent years

He described Westerman’s proposal as unnecessary and unconstitutional.

The legislation delegates the responsibility of determining state expenditure levels to the chief fiscal officer, and that’s contrary to the appropriation and funding laws enacted by the Legislature, Weiss said.

“It violates the basic constitutional principle the legislative branch of government makes laws,” said Weiss, who has served as chief fiscal officer under Republican Gov. Mike Huckabee and Beebe, a Democrat.

But Reps. Nate Bell, R-Mena, and Randy Alexander, R-Fayetteville, said they doubt that Westerman’s bill is unconstitutional.

Westerman said his bill is constitutional and “doesn’t cede any power to the executive branch.

“It exercises legislative control over expenditures,” he said.

Westerman said his bill doesn’t “cut anything.”

Weiss said requiring the chief fiscal officer to lower spending levels set by the Legislature would severely jeopardize critical programs such as Medicaid, state police and prisons because a provision of law, called the “doomsday clause,” maintains public school spending at the expense of spending for other programs.

“You guys can set the budget anywhere you wanted [under the bill] and, after you go home, then I am supposed to just reduce the budget I guess ever how I want to do it to meet either an arbitrary limit [of] 3 percent or something less,” he said. “That’s where we have problems. Which ones am I supposed to cut ?’

But Westerman said his bill complements the Revenue Stabilization Act that distributes general revenue to agencies.

“Do you wish to vote for continued growth of state government or controlling the growth so that it more closely emulates growth in the economy,” Westerman asked before the House committee approved the bill by a voice vote.

Afterward, Beebe declined to say whether he would veto the bill.

But he said, “I think it has the potential to wreak havoc with the best budget system in the country and I don’t think you throw away 60-something year with the best budget system with this bill.”

Front Section, Pages 1 on 02/13/2013

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