Budget bills sent off for final ink

Hutchinson sets session on roads

Rep. Lane Jean, R-Magnolia, (left) congratulates House Speaker Jeremy Gillam, R-Judsonia, after the House on Thursday passed the final bills for the fi scal session and adjourned.
Rep. Lane Jean, R-Magnolia, (left) congratulates House Speaker Jeremy Gillam, R-Judsonia, after the House on Thursday passed the final bills for the fi scal session and adjourned.

The Arkansas General Assembly wrapped up action Thursday on the general-revenue budget for next fiscal year, and then Gov. Asa Hutchinson announced that a special session on highway funding and other legislation will begin May 19.


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Legislative leaders said they plan to meet May 19, 20 and 23. The session would be the third in two months.

Hutchinson said he hasn't yet decided what legislation other than highway funding will be on his call for the special session. However, he said that because there is not yet a consensus, he isn't likely to make one of the items a proposal to end the joint holiday for Martin Luther King Jr. and Gen. Robert E. Lee.

He said he supports splitting the holiday, held the third Monday of each January, and giving King a separate day to honor his memory and contributions.

The state's fourth-ever fiscal session started April 13. Legislative leaders said Thursday that lawmakers will return to the Capitol on Monday to adjourn the session.

The Senate voted 22-9 Thursday to approve House Bill 1141, which would distribute $5.33 billion in state general revenue in fiscal 2017 -- up from $5.19 billion in fiscal 2016 -- with most of the general-revenue increase of $142.7 million targeted for the state Department of Human Services and public schools.

The legislation sent to the governor factors in nearly $101 million in individual income-tax cuts enacted by the 2015 Legislature and Hutchinson.

The House subsequently voted 87-5 to approve an identical bill -- Senate Bill 129 -- to send to the governor's office.

The bills, called the Revenue Stabilization Act, largely mirror the governor's budget proposal released in March.

Hutchinson said he's "very delighted with what we've been able to accomplish.

"We have seen the historic funding of Arkansas Works in a unique strategy that was developed in a bipartisan way and supported in a bipartisan way," the governor said in a news conference in the governor's conference room.

"The line-item veto strategy was a creative means of using the constitutional tools that are available to me ... and what was accomplished is that we avoided the extreme budget cuts across every agency and a prolonged debate," Hutchinson said in projecting the consequences if the reauthorization of Arkansas' Medicaid expansion had failed.

A linchpin in Hutchinson's proposed budget was the Republican-controlled Legislature's reauthorization of using federal Medicaid dollars to buy private health insurance for low-income people -- Arkansas' version of Medicaid expansion. The program covers 267,000 Arkansans, mostly under the "private option."

In April, lawmakers approved Hutchinson's revised version of the private option called Arkansas Works in a special session, and they reauthorized the use of federal funds for the program in the fiscal session. Hutchinson vetoed a provision in the fiscal session bill that would have ended on the program on Dec. 31; the bill passed only after that provision was added.

The state will begin paying 5 percent of the cost of the program, starting Jan. 1, and its share will gradually increase to 10 percent by 2020.

Among the increases in SB129 and HB1141 were funds for the Department of Human Services' grants, including Medicaid, by $88 million, to a total of $1.06 billion; for the public school fund by $23.7 million, to $2.188 billion; and for the department's Children and Family Services Division by $20.5 million, to $91.5 million, to shore up the foster care system in fiscal 2017, which starts July 1.

About $50 million of the increase for the Medicaid program is needed to match federal funds, according to state officials.

A Joint Budget Committee co-chairman, Rep. Lane Jean, R-Magnolia, said he wanted to spend "a little less" money during budget negotiations between legislative leaders and the governor. "But the consensus in the room was that we had this budget, so I can go along with it.

"I think going down the road we need to look at trying to make some cuts in the Department of Human Services [through] efficiencies -- not to hurt people. But don't tell me there aren't efficiencies that we can't get, and the governor knows that," Jean said. "We may need to start shifting our priorities from what we are trying to do [in the public schools] -- to try to get people college-bound that are not college material -- to make sure they're vocational-bound, and put some more money into pre-K."

In this fiscal session, Democratic lawmakers made an unsuccessful push to increase the general-revenue budget for pre-kindergarten by $10 million to $121 million.

Hutchinson said, "I am certainly going to work with them to increase the funding for pre-K in the next biennium."

RAINY-DAY FUND

The Revenue Stabilization Act would allocate $13.8 million for the so-called rainy-day fund in fiscal 2017. The proposal also would transfer about $50 million in unallocated surplus to the fund.

The rainy-day fund is intended to be used for emergencies and the governor's priorities that can't wait for the next legislative session for funding. The fund has about $31 million, according to the state Department of Finance and Administration.

Hutchinson wants to tap $40 million from the rainy-day fund as part of his plan to increase state highway funding in fiscal 2017 to match additional federal highway dollars. Hutchinson's highway plan, released in January, relies on both surplus funds and other state revenue to obtain those federal dollars.

The governor and legislative leaders said they plan to provide $1 million more each for public libraries and senior-citizen centers through the rainy-day fund in fiscal 2017. Those budgets were cut by that much in fiscal 2016.

Senate President Pro Tempore Jonathan Dismang, R-Searcy, and Jean said the plan for the rainy-day fund will provide $5.5 million for higher-education workforce development grants, possibly some startup funds for the North Little Rock Veterans Home and possibly funds for the University of Arkansas for Medical Sciences to protect its bond rating.

Hutchinson said he hasn't made decisions about using rainy-day funds for those purposes.

He said he made a commitment to UAMS officials "to spend a little bit more time working on that." Changes would be considered in the next regular session in January.

UAMS officials seek $10 million in new funding, spokesman Leslie Taylor said.

"Although we receive $106 million in state appropriation, $85 million of that is used as state matching funds for Medicaid programs leaving only $21 million as our net state appropriation," Taylor said in a written statement. "This amount of funding (less than 1.5% of our operating budget) is inadequate to cover costs for our more than 70 academic programs and to maintain facilities and equipment. We cross subsidize all areas of UAMS through patient care revenue but cannot generate sufficient funds to cover all educational, facilities and equipment costs."

"We are requesting additional funds for academic support and to enable us to keep our facilities and equipment current. The UA System has its own bond rating that is not guaranteed by the state of Arkansas. That bond rating is critical because if we, and other UA System schools, do not have sufficient financial strength, we can't access funds for needed capital projects, academic programs, facilities and other needs," Taylor said.

HIGHWAY FUNDING

Hutchinson said he's also ruled out the option of eliminating the InvestArk economic-development incentive or other economic-development incentives to help pay for the phased-in use of general revenue as part of his highway plan.

If the InvestArk program were discontinued, effective July 1, the estimated savings would be $1.5 million in fiscal 2017; $8.1 million in fiscal 2018; $14.6 million in fiscal 2019; and $21.3 million in fiscal 2020, a spokesman for the Department of Finance and Administration said earlier this year.

"Based on my discussions with legislators, I want you to know that those economic-development incentives will continue," Hutchinson said.

"But I have to fulfill my commitment that we offset that revenue taken from general revenues by utilizing the additional funds that are available from the office of the treasury for improved investment returns that will yield an additional $20 million a year that can be utilized for our highways," the governor said. That $20 million will not only offset what would be taken from general revenue from sales taxes collected on new and used vehicles, but "it also gives us an additional $12 million in fiscal year 2018 and $5 million in fiscal year 2019 that can be applied toward our highways."

But House Democratic leader Michael John Gray of Augusta said earlier in the day that new revenue sources should be considered.

"I don't think any of us -- Democrats or Republicans -- want to be the first guy out there saying the words 'new taxes,'" he said. "Counties are burdened. The state's burdened. Roads are in horrible condition in a lot of places, all over the state. So new revenue sources have to be a discussion that leadership -- on both sides -- has to have."

Hutchinson later reiterated that "I do not believe that this is the time for a tax increase.

"I want to be able to present a highway plan without a tax increase and the fundamental reason is that Arkansans are able to enjoy for the first time a little bit of extra jingle in their pocket because of lower gas prices. I do not want to take that away," Hutchinson said.

"My counsel [to lawmakers] is that there should be a longer-term view of highways. But I think that is something that has got to return to a vote of taxpayers of Arkansas, probably in an initiated effort," he said.

In addition to using a share of surplus funds, Hutchinson's plan proposes phasing in a reallocation of sales taxes from new and used cars up to $25 million a year over a five-year period, reallocating $2.7 million a year from the state's diesel tax and no longer deducting $5.4 million a year for state central services from the state's half-percent sales tax devoted to highways.

The state needs $46.1 million in additional matching funds by Sept. 30 and an average of about $50 million a year thereafter, and the governor has projected his plan would raise about $750 million in funds for highways over a 10-year period.

SPECIAL SESSION CALL

Hutchinson said he won't formally issue the call for the next special session "for some time," until officials are closer to determining what items need to be on the call.

Hutchinson said he would put on the call legislation to reaffirm the "sunset" date for Arkansas Works on Dec. 31, 2021, at the request of legislative leaders.

They have said that legislation would legally protect the program, in the event a judge overturned the governor's line-item veto of the provision that would have ended the Arkansas Works program on Dec. 31.

Some lawmakers said they want the governor to include on the call proposed legislation on levee oversight, licensing of security officers, strengthening an individual's rights to his own image, and campaign contributions.

A Section on 05/06/2016

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