There are some pretty mixed messages coming out of Little Rock.
One is that state revenue is flush enough to afford the $50 million income tax cut Gov. Asa Hutchinson just signed into law.
The other is that state revenue is down enough that this same governor is telling some state agencies to plan for potential budget cuts.
The logical mind might suggest that revenue cuts are premature, but this is government, remember.
Last week, Gov. Hutchinson did say he had asked some agencies to come up with contingency plans for spending cuts, but he won't decide until March whether any budget adjustments really are needed.
The Department of Finance and Administration had advised that the state's net available revenue is not quite what had been projected over the last couple of months. Collections are off about $57 million out the billions the state takes in.
Still, it is money that had been budgeted for the agencies, albeit in category "B" of the budget, a lesser priority for spending by the state.
Naturally, when the governor looked to agencies that could sustain cuts, he looked to those that require the most funding -- human services, education and correction.
After that long court fight over public school funding some years back, Arkansas made spending for public education its top priority, so the likely target for cuts would be higher education, along with human services and correction.
Keep in mind that the budget that might get cut is what the state is operating on right now, for a fiscal year that ends June 30.
The proposed $50 million tax cut won't happen for a couple of years yet. So there's time for some hoped-for gains in revenue to afford it.
Plus, the tax cut is part of a package that also called for increases in other tax collections.
Other legislation that has made its way to Hutchinson's desk will exempt military retirement benefits from state income taxes. That's obviously going to cost the state some tax receipts but it is being done with the aim of rewarding veterans for their service and attracting retired military to the state for second careers.
That particular legislation also would increase sales taxes on candy and soft drinks, levy income taxes on unemployment compensation and put a sales tax on some digital products.
See how this works?
The state will lose some money here, gain some there and hope that the people making the projections are getting the numbers right as they balance the overall state budget from year to year.
If they don't get the numbers right or something happens to drain the budget more quickly, that's when government agencies have to suck up the difference by cuts in spending.
This most recent income tax cut was aimed at Arkansas taxpayers whose taxable incomes are under $21,000. The cut begins with the tax year that starts Jan. 1, 2019. Something like 650,000 Arkansans will see this particular cut -- eventually.
The "cost" to the state is a reduction in general revenue of more than $25 million in the first half of 2019 (the last half of that particular fiscal year). The cost will be more than $50 million each fiscal year thereafter.
Even though its impact will be delayed, Hutchinson and the lawmakers behind the cut consider it a boost to the state economy.
For one thing, they expect the people who eventually get the tax cut to spend the extra money in their pockets.
Again, the amount of the cut isn't huge but it is what Hutchinson said the state can afford. The most an individual taxpayer might see from the tax cut would be $156 or twice that for a married couple, according to state calculations.
Nevertheless, state officials expect the money to go right back into the economy.
This is actually the second round of tax cuts passed during Gov. Hutchinson's administration. Two years ago, he sought and won a tax reduction aimed at middle-income taxpayers.
He's also agreed this time around to create a tax reform and relief tax force to recommend still more tax cuts for consideration at a later legislative session.
This is what comes with a Republican-controlled state government, full of people elected on pledges to cut taxes.
No one's going to complain about not paying the taxes.
The question is what services aren't being funded or will have to be cut back as state revenue keeps being rolled back along with the tax rates.
Commentary on 02/08/2017