Arkansas Legislature Passes Budget, Prepares To Adjourn Fiscal Session

May 5, 2016

Proceedings on the Arkansas Senate floor Thursday morning.
Credit Sarah Whites-Koditschek / KUAR News

The Arkansas legislature gave final approval Thursday to the state's $5.3 billion budget for the coming fiscal year that included over $142 million in spending increases.

House Minority Leader Democrat Michael John Gray said afterward he considers spending increases to education, human services and libraries to be victories, albeit compromised ones.

“I think there are some good parts in it," he said, citing rainy day funds allotted to libraries and senior citizen centers.

“The fight going forward will be getting it back in the budget and get even more funding going on. I’m disappointed that money for Pre-K and afterschool programs, and things that really matter to our communities kind of got left out of this budget," he added.

House Majority Leader Republican Ken Bragg said the budget process was a success, even if the state can’t fund everything that is needed right away.

“There’s just a limited amount, you know, that we can do right now," said Bragg.

“We did add some the last time for Pre-K, one time funding, but just like highway funding, you know, we can patch it and do a little bit here and there, but we’ve got to find a way for a longer-term sustained funding for it."

A formal adjournment of the fiscal session is expected Monday.

Lawmakers are likely to return at some point this month to take up state funding for highways, or risk missing out on matching federal transportation dollars.

Gov. Asa Hutchinson is calling for a revenue neutral plan, which would mean no new taxes and could involve tapping general revenue and rainy day funds.

Lawmakers also approved a requirement that the state seek new restrictions on welfare spending Thursday. Democratic State Senator Linda Chesterfield said the federal government is unlikely to grant the request, which would require Arkansas to monitor and limit how recipients of Temporary Assistance for Needy Families spend their money.

“It unnecessarily punishes poor people,” she said.

“A lot of the persons who receive these [funds] are poor and women." Chesterfield said. "Why would you then decide we’re going to have one level of responsibility to them, rather than the people who receive corporate welfare?”

She believes the effort would be costly to the state and might restrict poor families from using cash for things like housing or fresh food. The law’s sponsor, Republican Rep. Jim Dotson, said he isn’t against welfare altogether, but wanted to implement oversight.

“People who are receiving the benefits are protected, but also so are the taxpayers who are paying for those benefits, and so there has to be a level of transparency and accountability in place,” he said. “I don’t know how you track cash, but currently they’re not doing it.” A similar welfare restriction exists in Texas.

The Arkansas measure passed Thursday by wide margins in both the state House and Senate. The federal government must approve the restrictions before they can be implemented. Gov. Asa Hutchinson said Thursday afternoon that his administration was "neutral" on the legislation and had no plans to veto it.

Looking Towards Highway Funding Session

With the end of the fiscal session, lawmakers are preparing for a special session to direct more state money to highways, in order to receive about $200 million in federal matching dollars. In a press conference Thursday afternoon, Gov. Asa Hutchinson said he’s committed to raising the needed highway revenue without increasing gas taxes.

“Arkansans are able for the first time to enjoy a little jingle in their pocket because of lower gas prices. I did not want to take that away,” Hutchinson said.

A working group that Hutchinson tasked with finding more revenue for highways issued several proposals late last year. Some of the recommendations included raising fuel taxes.

Hutchinson said his plan seeks to redirect revenue from sales taxes on new and used vehicles from the state general revenue fund to the Highway Department. His plan also includes directing about $40 million in state rainy day money to the department.

House Speaker Jeremy Gillam, a Republican,  said lawmakers could also introduce legislation in the special session to safeguard general revenue, which funds a variety of state services, including education.

“If there’s a general revenue shift, there should be some increased oversight or some reforms in the way that we have our relationship with the highway department. And so, that’s one prevailing sentiment for sure. Outside of that, I think a lot of other folks are keeping an open mind at this point,” Gillam said.

Hutchinson said any vehicle sales tax revenue redirected from general revenue to highways should be offset by expected returns from state investments. Hutchinson said that was a change from an earlier plan that would have canceled economic development incentives he termed “outdated or no longer effective” in order to offset the redirected funds.

According to the governor, an additional $20 million from returns on the state treasury’s investments could go to fund state needs on an annual basis. He said about $12 million of the investment returns in the 2018 fiscal year and $5 million in the 2019 fiscal year could go to offset the general revenue redirected toward highways.

The special session on highways is expected to begin May 19th at 10 am. Hutchinson said a call for the session would be issued as soon as legislative proposals are worked out.

Fiscal v. Regular Session 

State lawmakers are increasingly sidestepping the constitutional purpose of the biannual fiscal session to propose substantive policy changes, according to Hutchinson.

In addition to policy changes that included adding restrictions for recipients of Temporary Assistance for Needy Families, lawmakers in the fiscal session also added a layer of oversight to decisions made by the Capitol Zoning District Commission. The change allows the director of the Arkansas Department of Heritage to reverse any permit denial issued by the nine-member commission if he or she finds the reasoning behind the rejection “clearly erroneous.”

In 2008, voters approved Amendment 86 to the Arkansas Constitution, which specified that the legislature take up the state budget in even-numbered years. Hutchinson said he has cautioned legislative leaders against turning a fiscal session into a regular session, where substantive policies are normally debated and written into law.

“I hope that in the future we can get back to really narrowly focus on budget issues that was the original intent of voters of Arkansas when they passed the amendment,” Hutchinson said.

Many of the policy changes in the fiscal session originated in the legislature’s Special Language subcommittee. Hutchinson said he had no plans to veto any of the amendments that he said represented "substantive changes."