A bill that would transfer about $105 million in the Arkansas Healthy Century Trust Fund from tobacco settlement funds to the state's Long-Term Reserve Fund failed to clear the Legislature's Joint Budget Committee on Monday afternoon.
The committee's 23-20 vote on Senate Bill 5 by Senate Republican leader Jim Hendren of Sulphur Springs fell six votes short of the 29 votes required for approval from the 56-member committee. A Joint Budget Committee co-chairman, Sen. Larry Teague, D-Nashville, said he expects the committee to consider the bill again this morning.
Asked if the bill fell short of clearing the committee because of some lawmakers' frustration over Gov. Asa Hutchinson on Friday announcing a $70 million cut to the state's $5.33 billion general revenue budget for fiscal 2017, Hendren said, "There are multiple agendas going on here."
He added: "If you look at the folks who are opposed, it is all over the map as far as why. There are a lot of different things going in their minds, and I think we tended to get off of the main issue, which was what makes good fiscal sense as to where we store those dollars."
Hutchinson unveiled his proposal to shift funds from the trust fund to the Long-Term Reserve Fund on Friday, after he announced the $70 million cut. The Republican governor cited lagging sales- and corporate income-tax collections and higher-than-expected individual income-tax collections for what he called a revenue shortfall.
Earlier Monday, in a speech to a joint session of the Legislature, Hutchinson said the Arkansas Healthy Century Trust Fund doesn't fund any existing programs and that it's "a chunk of money that is gaining interest and it is accumulating."
"But it is not giving our state any benefit in terms of our bond rating, because it is sitting there tied to the obligation to the trust fund," he said in asking lawmakers to pass the legislation to transfer money from the trust fund to the reserve fund.
Hutchinson said Arkansas is tied with five other states for being the least-prepared state for handling expected revenue declines during future recessions due to the lack of a reserve fund with any significant money. The ranking was based on a report from Mercatus Center at George Mason University. The other five states are Kansas, Montana, New Jersey, Pennsylvania and Wisconsin, according to the state Department of Finance and Administration.
The state's current bond rating is AA/Stable by S&P Global, which cited the deficit of reserve funds as hampering the state's ability to get a better rating, Hutchinson said.
"I believe that if you will support the creation and strengthening of these funds over time our bond rating will improve and this will allow the state to issue bonds for future projects at less cost at a lower interest rate," he said.
During the Joint Budget Committee's meeting, Senate Democratic leader Keith Ingram of West Memphis asked Hendren whether the legislation is tied to the general revenue shortfall in fiscal 2017 and to any concern that the state's bond rating will be downgraded because of general revenue tax collections falling short of forecasts.
Hendren said the Senate approved similar legislation during this year's regular session, but there wasn't time left in that session for the bill to clear the House.
"There is no plan right now to access these funds this fiscal year, or they probably would have been on the call and there would have been legislation to do that," Hendren said.
"There is a lot of scary things going on in the world, and, if they blow up, it is going to cause an economic downturn and states that have not adequately prepared themselves with reserves are going to fare far worse than those that have."
Under current law, the state's chief fiscal officer may, with the approval of either the Legislative Council or the Joint Budget Committee, transfer funds from the Long-Term Reserve Fund if he determines that "a revenue shortfall" exists when the state's official forecast of gross general revenue is projected to increase by less than 3 percent over the collection in the previous fiscal year due to changes in economic conditions.
The funds could go to provide an adequate education for public school students, the effective operation of state general revenue-financed programs, and/or economic development projects under Amendment 82 to the Arkansas Constitution.
"The purpose of this is when the state rolls into a recession that there is a process where we can access these funds," Hendren said.
"The governor has to submit documentation to [the Legislative Council] saying that there is no other place to go for the funds and certifying the economic conditions that have caused the downturn."
He said SB5 would remove the $125 million cap on the amount of funds in the Long-Term Reserve Fund.
"My hope is that we are able to grow that to three or four times that amount over the next several years with some good fiscal management," Hendren said. He said the bill could help the state improve its bond rating and save the state up to $1.8 million a year.
A Section on 05/02/2017