Treasurer funding bill cleaned up, moves on to Arkansas Senate

School-savings plan issue stripped out

Rep. Charles Blake (top right) applauds passage of funding for the treasurer’s office Thursday after it was stripped of language allowing use of college-savings funds for elementary and high school expenses.
Rep. Charles Blake (top right) applauds passage of funding for the treasurer’s office Thursday after it was stripped of language allowing use of college-savings funds for elementary and high school expenses.

Debate over an appropriation bill that roared in like a lion this week went out like a lamb Thursday.

With no debate, House lawmakers voiced their approval to strip controversial policy language from a spending bill for the treasurer's office, and later passed the spending plan along to the Senate, thus ending a standoff that Republicans had claimed could lead to a state government shutdown.

But Democrats had refused to budge over their objections to the language, which would extend tax benefits to families that withdraw funds from their state-run 529 college-savings plans to pay for kindergarten-through-12th-grade education expenses, including private school tuition.

The appropriation, House Bill 1122, needed 75 votes to pass. While there are enough House Republicans to pass spending bills by themselves, GOP members had failed to cajole the few holdouts in their caucus, and fell a single vote short of passing the appropriation the day before, on Wednesday.

Wednesday evening, House Speaker Jeremy Gillam, R-Judsonia, walked into the press room at the state Capitol and told reporters he planned to allow the fiscal session to adjourn without an approved budget to keep the treasurer's office open past June 30.

That prospect led several Republicans to accuse Democrats on social media of steering the state government toward a shutdown should the treasurer's office, lacking an appropriation, not be able to disburse funds to state agencies.

Democrats, in turn, pointed out that Republicans did not need their support to pass HB1122.

"I don't think anybody in the Democratic caucus thought for a second the Republican leadership would be willing to shut down the government," Rep. Greg Leding, D-Fayetteville, said Thursday.

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When the House gaveled into session at 11 a.m. Thursday, Gillam had apparently agreed to take a new tack.

The House budget chairman, Rep. Lane Jean, R-Magnolia, declared that the chamber had reached an "impasse" and that supporters of the spending bill had even lost votes since the previous day. He offered a plan to strip the appropriation of the added language and move forward with a clean bill.

Lawmakers will have the opportunity to hold a stand-alone vote on the policy changes to the 529 plans during a planned special session, Jean said.

The House then stripped the policy language by a voice vote, sending the clean bill back to the Joint Budget Committee. The committee approved it by lunchtime. Later in the afternoon, the House voted 84-3 to send the bill on to the Senate.

"This process did not go as we would like it to go, as we think it should go," Gillam said on the House floor. "At the end of the day we must move forward."

With HB1122 now out of the way, lawmakers are looking ahead to a policy debate over the 529 plan during the special session that has been discussed for next week.

The investment plans, which are administered by the state treasurer's office, allow taxpayers to deduct from their state taxes up to $5,000 in contributions, or $10,000 per couple. Each year, an individual or family can then withdraw up to $10,000 from the plan, tax-free, to pay off higher education expenses.

Congress last year adopted changes to the plans, allowing withdrawals for K-12 expenses -- such as private school tuition and tutoring -- to be exempt from federal taxes. Under current Arkansas tax law, those kinds of withdrawals would still be subject to state tax unless the law is changed.

Sen. Jason Rapert, R-Bigelow, included language similar to the federal changes in the treasurer's appropriation, he said, to avoid confusion among taxpayers. Rapert's language was in an amendment sponsored by the Joint Budget Committee.

The Arkansas Department of Finance and Administration estimated that the hit to state revenue from expanding the tax breaks would be around $5.2 million a year. However, critics have noted that that analysis took into consideration only current Arkansas private school students, and the cost could be much higher. Rep. Charles Blake, D-Little Rock, said lawmakers would ask for a more expansive cost analysis if the legislation is considered in a special session.

Public-school advocates also want to know how far the changes will go in covering expenses beyond tuition, such as using funds for school supplies and online courses, said Richard Abernathy, the director of the Arkansas Association of Educational Administrators. He said his group has not taken a position on the proposal.

During a special session, policy legislation needs only a simple majority to pass. If all 55 House members who voted to add the special language to the treasurer's spending bill last month support the language in a bill in the special session, it should have an easy route through the House.

Critics, however, said adding the special language to a must-pass appropriation bill may have clouded how lawmakers actually feel about the policy change.

"I think what you have now is Republicans who are pulling away," Blake said.

The only Republican who voted against the spending plan Wednesday, Rep. Kim Hendren, R-Gravette, said he'd agreed to vote for the bill Thursday -- only to learn that a number of Republicans had changed their minds the other way.

On the flip side, Rep. Mark Lowery, R-Maumelle, said the "pressure" that caused the chamber to move forward with a clean appropriation led him to cast one of three votes against it.

"I don't like caving," Lowery said. "I thought we had brokered fairly with Democrats."

A spokesman for Gov. Asa Hutchinson said Thursday that lawmakers were expected to gather signatures in support of 529-related legislation in order to have it placed on a call for the special session. Gillam said late in the day that he had gathered the requisite signatures.

photo

Arkansas Democrat-Gazette

Republican Reps. DeAnn Vaught (leaning back) of Horatio and Jana Della Rosa of Rogers share a humorous moment Thursday during the House session.

Calendar

The calendar of public events of the 91st General Assembly for today, the 26th day of the 2018 fiscal session.

SENATE

9 a.m. Senate convenes.

HOUSE

9 a.m. House convenes.


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