More than 670 laws go into effect in Arkansas on Monday, including one designed to phase out most of the state’s 1.5 percent sales tax on groceries.
Act 1450 would eventually reduce the grocery tax to the 0.125 percent rate levied for conservation under Amendment 75 to the Arkansas Constitution.
The tax cut is contingent on the state paying off bond obligations that won’t end for years or resolving a decades-old lawsuit that requires the state to pay millions for desegregation efforts. If, in combination or separately, the bond and desegregation costs drop by at least $35 million over a six-month period, the tax cut would kick in.
It would reduce state tax revenue by $70 million during its first year, according to the state Department of Finance and Administration.
Act 1450 is the latest manifestation in Democratic Gov. Mike Beebe’s bid to make good on his 2006 campaign pledge to phase out the tax on groceries.
At Beebe’s behest, the Legislature cut the tax from 6 percent to 3 percent in 2007, then trimmed it to 2 percent in 2009 and to 1.5 percent in 2011.
The cuts saved taxpayers $996.8 million between July 1, 2007, and May 2013, according to Whitney McLaughlin, a tax analyst for the Finance Department.
As for when the tax will be sliced to 0.125 percent, Beebe said: “Ask the federal court” when it will rule that the state is no longer obligated to make disbursements under a decades-old desegregation settlement with the Little Rock, North Little Rock and Pulaski County Special school districts.
“Whether it is six months, one year, two years, four years, we don’t know when the court is going to ultimately rule and cease deseg payments to the three school districts from the state of Arkansas,” he said. “But we know it is going to happen, and when it happens the mechanism is in place to automatically [cut] the balance of the burden on the sales tax on food.”
Jason Rapert, R-Bigelow, who is the Senate sponsor of the bill that became Act 1450, said he’ll try to change the law in the 2015 regular legislative session to immediately trim the tax to 0.125 percent, if the cut hasn’t kicked in by then.
He said he expects tax revenue to be robust enough that the state will be able to afford such a tax cut then.
After that, the only grocery sales tax will be 0.125 percent, which is mandated by the state constitution. Voters in 1996 approved that tax, earmarking the money for conservation efforts to bolster the Arkansas Game and Fish Commission and the state parks system.
While Rapert envisions surplus tax revenue in the years ahead, the governor is urging caution.
Beebe said he has warned lawmakers that “they are out $30 million to $40 million … for [fiscal] 2016” because of tax cuts that they enacted earlier this year for fiscal 2015 and 2016.
MEDICAID INSPECTOR GENERAL
Act 1499, creating the state Office of Medicaid Inspector General, also becomes effective Monday.
That office will take over audits now handled by the state Department of Human Services’ Medicaid Program Integrity Unit.
The unit investigates complaints; conducts audits of doctors, hospitals and other providers; and makes referrals to the Medicaid Fraud Control Unit, which then decides whether to file lawsuits or pursue criminal charges.
Arkansas’ first Medicaid inspector general is Jay Shue, who has been the chief of the state attorney general’s Medicaid Fraud Control Unit.
Shue will supervise 34 employees and report directly to Beebe. The office will investigate reports of fraud and recommend policies to reduce unnecessary spending.
The sponsor of the bill that became Act 1499 - Sen. David Sanders, R-Little Rock - said states like Georgia, New York and Texas have Medicaid inspectors general.
“We will have a dedicated group of people focusing on rooting out waste, fraud and abuse in the Medicaid system,” he said. “I think there is a fair amount of waste and abuse in the system. Out and out fraud is a criminal matter, and it does happen.”
As to whether the new office will save the state any money, Beebe said, “We’ll just have to wait and see. This obviously was a legislative initiative, and we’ll see if it works.”
Beebe signed Act 1499 on April 23, the same day he signed legislation expanding eligibility for Medicaid to an estimated 250,000 adults that have household incomes of up to 138 percent of the federal poverty level - $15,860 for an individual or $32,500 for a family of four. Under the so called private option, newly eligible recipients will be able to enroll in private health-insurance plans starting Oct. 1 and have their premiums paid by Medicaid. Their coverage will start Jan. 1.
Acts 1450 and 1499 are the two most notable nonbudget-related bills that become effective Monday.
OTHER NEW LAWS
About three dozen nonbudget-related laws become effective Monday, and half of them deal with the state’s retirement systems, mostly the Arkansas Teacher Retirement System, according to a review of the Bureau of Legislative Research’s summary of general legislation.
The trustees for the teacher retirement system said they don’t expect to make any major changes to retirement benefits or increase the amount charged to system members or employers, who are mostly school districts, during the next two years.
The nonbudget-related laws include Acts 480, 481 and 482 that, respectively, transfer the Board of Health Education, Board of Sanitarians and State Athletic Commission to the state Department of Health.
The transfer of the athletic commission comes more than a year after a state audit found that the commission had documentation problems ranging from failing to issue receipts to individuals when the commission received funds at events to not maintaining adequate records to support credit-card charges and travel reimbursements. The commission even had a laptop stolen that contained personal information - such as Social Security numbers, dates of birth and addresses - for more than 5,000 license-holders, according to the audit.
The commission regulates certain combative sports, including professional boxing and wrestling, and amateur and professional mixed martial arts.
The governor recommended that the Legislature place the athletic commission under the Health Department because the commission didn’t have an adequate administrative staff to support its operational need, said department spokesman Ed Barham. The commission will retain its regulatory authority, he said.
The boards of health-education and sanitarians are small, and the board members mostly work for the Health Department, he said.
About 640 appropriation or budget-related laws become effective Monday, the first day of the state’s fiscal 2014, said Kim Arnall, assistant director of fiscal services for the Bureau of Legislative Research.
Front Section, Pages 1 on 06/30/2013