The Joint Budget Committee on Wednesday endorsed identical versions of the state’s Revenue Stabilization Act under which the state’s general revenue budget would increase by $177.7 million to $6.2 billion in the fiscal year that begins July 1.
Most of the increased general revenue would be allocated to education and corrections programs under Senate Bill 569 and House Bill 1833, which the budget committee recommended approval of without any debate.
The general revenue budget under the the bills would increase by about 2.95% in fiscal 2024, according to Joint Budget Committee Co-Chairman Sen. Jonathan Dismang, R-Searcy.
The Revenue Stabilization Act prioritizes the distribution of state general revenue to state-supported programs.
Gov. Sarah Huckabee Sanders’ spokeswoman Alexa Henning said Wednesday night in a written statement that, “The Governor’s proposed RSA is $135 million less than the previous administration proposed and adds less than 3% growth over the previous fiscal year budget.
“This aligns with the governor’s promise to taxpayers to take a responsible and conservative approach to fiscal spending,” Henning said.
Joint Budget Committee co-chairman Rep. Lane Jean, R-Magnolia, said in an interview that “ We’ve invested a lot of money in education [and] we are doing a little bit for prison and correction reforms.
“We’ve got a budget that we can manage for the next couple of years and then, quite frankly, we’ll just have to see how the economy goes,” he said.
“If the economy does fine, we’ll be OK,” Jean said. “If not, we’ll have to do some tightening up.” The budget committee on Wednesday also endorsed Senate Bill 578 by Dismang that would authorize the use of up to $1.4 billion in unallocated and unobligated state funds, including $1.3 billion from the general revenue allotment reserve balance, and up to $380.6 million in surplus funds in fiscal 2023 to be largely set aside in restricted reserve fund accounts for nearly 30 projects.
With legislative leaders aiming to wrap up the regular session Friday, the Senate subsequently voted 32-0 to send SB578 to the House for further consideration.
SB578 would authorize the transfer of $200 million from the general revenue allotment reserve fund to the federal Infrastructure Investment and Jobs Act set aside for state matching funds for the federal infrastructure funds, and $40 million from the general revenue allotment reserve fund to the Arkansas Major Historic Rehabilitation Income Tax Credit program.
It also would authorize the transfer of up $35 million to replenish the state’s Economic Development Incentive Quick Action Closing Funds to retain and recruit private industry, and $12 million from the general allotment reserve fund to the University of Arkansas for Medical Sciences to be used for grants for various expenses and working capital for hospital expansion in south Arkansas.
Among other large allocations of one-time funds, SB578 also would authorize the funding of up to $500 million for the educational facilities set-aside, up to $330 million for the correctional facilities set-aside, and up to $200 million for the new state Crime Lab building set-aside.
To tap the funds in the set-asides created in the restricted reserve fund for state agencies, Sanders would be required to submit requests to either Legislative Council outside of a session or the Joint Budget Committee in a session for the funds and get the panel’s approval.
In the Revenue Stabilization Act for fiscal 2024 under SB569 and HB1833, the general revenue allocation to the state’s public school fund would increase by $118.7 million to $2.4 billion in fiscal 2024 under the proposal. General revenue totaling $31.7 million would be allocated for Educational Freedom Accounts to help pay for students to attend private, parochial or home schools.
EDUCATION SPENDING
The state Department of Education has projected Sanders’ education overhaul law, Act 237 of 2023, will cost $297.5 million, including $150 million in “new money,” in fiscal 2024. Act 237 will raise the state’s minimum teacher salary from $36,000 to $50,000 a year, grant other teachers $2,000 salary increases, create Educational Freedom Accounts and enact many other changes in the education system.
House Bill 1688 by Rep. Brian Evans, R-Cabot, would increase per-student foundation funding by $205 to $7,618 for the 2023-2024 school year and to $7,771 for the 2024-2025 school year. The Senate Education Committee on Wednesday endorsed the bill.
Full-time classified staff, bus drivers, custodians and other school workers would receive funding for about a $2-per-hour raise, Evans said. In addition, the state would fund a 1.8% cost-of-living adjustment for teachers and school secretaries in fiscal 2024 and a 2.2% increase in fiscal 2025, he said.
SB578 would set aside up to $45 million for educational adequacy, and up to $15 million for the Educational Freedom Accounts in the restricted reserve fund.
Dismang said in an interview that up to $45 million would be set aside in the restrictive reserve fund for educational adequacy because there are some general concerns among some lawmakers that there wouldn’t be sufficient funds to cover cost-of-living raises for teachers.
He said up to $15 million would be set aside in the restricted reserve fund for the Educational Freedom Accounts because “there was a commitment [to fund] 7,000 students for the first year,” but the state Department of Education doesn’t believe that 7,000 students will use the program during the first year.
“All that does is set aside $15 million if we need it to fulfill that obligation, but we didn’t feel like it was necessary to put in Revenue Stabilization Act,” Dismang said.
SB578 also would set aside up to a total of $50 million for school safety, up to a total of $24 million for the teacher academy scholarship, and up to $12 million for charter school facilities in the restricted reserve fund.
PUBLIC SAFETY SPENDING
Under the proposed Revenue Stabilization Act for fiscal 2024 in SB569 and HB1833, the state Division of Correction would get a $55.3 million increase in general revenue to $434.3 million, and the Arkansas State Police would get a $10.5 million increase to $88.6 million.
According to Dismang, $20 million of the general revenue increase for the Division of Correction would be allocated toward the increased cost of a new medical contract and $20 million would help with increased staffing and salaries. The increase in general revenue for the Arkansas State Police would help provide $5 million for overtime and allow for a second trooper school each year, he said.
In addition, SB578 also would set aside up to $20 million in the restricted reserve fund for motor vehicles for the Arkansas State Police and other state agencies and up to $6.4 million in the restricted reserve fund for the Arkansas State Police troop school and recruitment.
The state’s colleges and universities would get a $5.6 million increase in general revenue to $781.2 million under SB569 and HB1833 with University of Arkansas for Medical Sciences getting a $5 million increase to $93 million in fiscal 2024.
The general revenue allocation to the Department of Human Services would increase by $5.5 million to $1.8 billion. A child care grant program would be transferred to the Department of Education and get a $7 million general revenue allocation.
The general revenue allocation for the Human Services Department’s grant category would drop by $7 million in fiscal 2024 to $1.38 billion under the proposal. The general revenue allocation for the department’s Division of Children and Family Services would increase by $7.7 million to $138.6 million, and the allocation for the Division of Aging, Adult, and Behavioral Health Services would increase by $2.3 million to $103.5 million.
Priorities for general revenue funding of programs are set in the Revenue Stabilization Act, which is enacted every year by the Legislature and the governor and keeps the state from deficit spending. The state’s two largest sources of general revenue are individual income taxes, and sales and use taxes.
The proposal would create two categories for spending priorities in fiscal 2024: A and B. Category A, the highest priority, would be allocated $6.009 billion. Category B would be allotted $192.6 million.
In November, then-Gov. Asa Hutchinson proposed a $314 million increase in the state’s general revenue budget to $6.33 billion in fiscal 2024, with $200 million of the increase earmarked for public schools.
At that time, the former Republican governor said his proposed budget for fiscal 2024 would represent a 5.2% increase over the current budget of $6.02 billion, leaving a projected general revenue surplus of $254.9 million at the end of fiscal 2024. Considering annual inflation was more than 8% at that time, limiting the growth of the state’s general revenue budget to 5.2% reflects conservative budgeting, he said.
The proposed Revenue Stabilization Act for fiscal 2024 doesn’t include $70.3 million in general revenue allocated for the educational facilities partnership program, under which the state pays for a share of school building costs in fiscal 2023 and that Hutchinson recommended continuing in fiscal 2024.
Instead, SB578 would set aside a total of $500 million for the program to cover the state’s share of the cost for school buildings for about five or six years, Dismang said.
In his budget proposal for fiscal 2024, Hutchinson set aside $41 million in general revenue in fiscal year 2024 for an overhaul of the state’s pay plan for executive branch employees. The proposed overhaul of the state’s pay plan would cost a total of roughly $80 million after factoring the cost of other revenue sources beyond general revenue.
On March 15, Sanders announced she will not support a broad-based pay plan increase for fiscal 2024.
She said Arkansas taxpayers should not be saddled with the $80 million total cost for a proposal that doesn’t consider the strategic needs in education, public safety, health care and corrections. She asked the Department of Transformation and Shared Services to review and rework the existing classification and compensation structure. The plan covers more than 22,000 executive branch employees.
SB578 also would establish an up to $100 million set-aside for various general discretionary projects, an up to $47.1 million set-aside for the state’s Employment Benefits Division, an up to $10 million set-aside for the state Game and Fish Commission grants, and a $10 million set-aside for state Department of Commerce economic stimulus programs.
Among other things, the bill would create a total set-aside of $100 million for UAMS’ National Cancer Institute designation effort, an $8 million set-aside for the Department of Human Services’ human development center master plan upgrades, a total set-aside of $4 million for the University of Arkansas at Pine Bluff to match federal land grant institution funds, and a $1 million set-aside for pregnancy help organizations.