Arkansas state government closed the fiscal year June 30 having taken in $1.16 billion more than it had budgeted to spend over the preceding 12 months.
That's a surplus, an obscene one, but not of a size uncommon in recent years.
The development invites worthy consideration of tax-and-spend policies and practices. The discussion might, if only for a time, take our minds off gender, sexuality, library books and the war on traditional public education.
There are generally three ways to think about such a fiscal circumstance:
1. It is fairly conventional conservative thinking that governments do not exist to turn profits. A surplus that large simply goes to show that we ought to draw down state income-tax rates even more and put that money where it belongs, back in people's pockets, probably to pay sales taxes as the economy revs up.
2. It also is fairly conventional liberal thinking that governments do not exist to turn profits. It's that we only turned this one because the Legislature made a too-tight budget based on too-tight revenue estimates. Then those estimates were blown through by pandemic-enhanced federal aid and an economy returning aggressively to normal after the virus. It's that we should have spent that unspent money as we went along to meet more human needs chronically unaddressed in our historically poor state.
3. It is fairly conventional centrist thinking that we ought to sit tight, save that bountiful overage and wait to see if the economy continues to perform at this level after all the special pandemic manna goes away. Later, with deeper context, we could decide whether to do rebates, reduce taxes or hang on to the money for capital projects and rainy days, or some combination.
Obviously, the answer right now is No. 3 and, for the longer term, a combination of No. 3 and possibly a little of No. 1. That's to hang on to the money except for a portion that, depending on facts as they unfold, could be used later for responsible tax reduction.
Personally, I'd go with No. 2, keeping taxes where they are and expanding spending through natural growth and emphasizing human needs. But, in the current Arkansas political context, that's a pipe dream.
The first thing to know is that state government will always have a surplus, meaning extra cash on hand at the end of the fiscal year.
Otherwise the law will have been broken. The Revenue Stabilization Act mandates that, if the budgeted spending rate exceeds during the year a downward-revised official forecast of fiscal-year growth--because the economy is turning downward--then those spending levels must be dropped proportionately to comply with the revised forecast.
It is infinitely better politics--speaking strictly in the political and not human or policy context--to budget tightly and leave needs unattended than to budget optimistically and get forced in midyear to reduce spending in a way that will take money away from some of or all of those human needs covered by the more optimistic budgeting.
For example: If you don't spend more for mental health treatment in the first place, then you don't have to cut mental health treatment.
Taking aid away seems somehow meaner than never extending aid. It produces real human stories rather than abstract concerns.
The other thing to remember is that surplus funds are integral to responsible budgeting. The accumulated overages of a fiscal year get dealt with by the next regular session, at which time legislators typically provide for a governor's emergency fund, some rainy-day protection and capital improvement projects, which will always arise legitimately.
Whether such projects should include a tunnel so that legislators can get to offices and committee rooms across the drive by going under without getting wet or cold ... the wisdom of that is something the conservative Republican legislators will need to work out with their conservative Republican constituents.
It would be a helpful convenience that might enhance productivity. But we might not need enhanced productivity from this Legislature. It might not be so bad for legislators already all-wet to get wet.
Obviously, I'm less doctrinaire in these later years in my aversion to income-tax cuts.
Former Gov. Asa Hutchinson drew down the personal income tax incrementally in a paid-for way thanks to a good economy, and we continually compiled surpluses exceeding conservative budgets without great wailing about suffering.
That still leaves the issue that across-the-board income-tax cuts lather heaps of money on the upper-income taxpayers and deliver mere pittances in the pockets of poor working people.
But, for the moment, I'm delighted to focus on taxing and spending policy and legitimate supply-side versus demand-side arguments instead of such things as private parts, be they grabbed by an indicted former president or checked by a monitor at the bathroom door.
John Brummett, whose column appears regularly in the Arkansas Democrat-Gazette, is a member of the Arkansas Writers' Hall of Fame. Email him at [email protected]. Read his @johnbrummett Twitter feed.