Cleaned-up treasurer funding bill sent to governor

The Arkansas Senate on Friday voted to approve an appropriation for the state treasurer's office that was stripped of a controversial provision to extend tax benefits to families that withdraw funds from their state-run 529 college-savings plans for expenses at kindergarten-12th grade private, religious or public schools.

The Senate's 31-0 vote on House Bill 1122 sent the measure to Gov. Asa Hutchinson.

The appropriation for state Treasurer Dennis Milligan's office authorizes 33 positions and spending authority of $5.3 million for operations and $275,000 for investment operations in fiscal 2019, which starts July 1. Milligan is a Republican from Benton.

HB1122 authorizes a new position -- chief information technology officer -- and eliminates a vacant treasury manager post. In January, the Legislative Council authorized Milligan to create this new position with a maximum authorized salary of $97,400 a year. A former consultant, Craig Johnson of Hot Springs, started work in the job at a slightly less salary of $97,300 a year in February.

The Senate's approval of HB1122 came a day after the House voted to strip the 529 college plan policy language when it became clear the bill wouldn't get the 75 votes required for approval in the House.

House Democrats had declined to vote for the bill over their objections to the language. While there are enough House Republicans -- 75 -- 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 on Wednesday.

That 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.

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

The investment plans, which are administered by the 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.

The state Department of Finance and Administration projected that a proposal allowing Arkansans to use funds from their 529 college savings plans for K-12 expenses would cost the state up to $5.2 million a year.

Sen. Jason Rapert, R-Bigelow, who backed the amendment that had the 529 plan language, estimated his proposal would probably cost the state about $2 million to $2.5 million million a year. But critics of the proposal suggested the proposal would cost more than $5.2 million a year.

Information for this article was contributed by John Moritz of the Arkansas Democrat-Gazette.

A Section on 03/10/2018