LITTLE ROCK — Gov. Mike Beebe announced Thursday that he’s reinstating cost-of-living raises for state employees, costing about $18 million a year.
As justification, he cited a Thursday report on state general revenue collections for November.
The report showed gross general revenue down 13.6percent for the month compared with last year and 1.2 percent below the department’s predictions.
But the numbers for the first five months of the current fiscal year were positive, 2.4 percent above last year and 0.6 percent above the forecast.
However, Beebe said the state also needs to find more money for roads, which are funded largely through gasoline taxes and not through general revenue.
He said he potentially could go along with having the Legislature in the 2011 session come up with a tax increase plan for highway work that would give voters the final word on approval. He said there is no desire to raise taxes in the Legislature, but a referral plan might meet better success.
“It’s hard for anyone in elected office to say they don’t want the people to make a decision,” Beebe said. “I don’t know if anybody [in the Legislature] would say, ‘I don’t want the people to have a say in that.’”
Richard Weiss, the director of the Department of Finance and Administration, cited increases this year in the gross receipts taxes (up 7.8 percent so far) and individual income tax (up 4.7 percent).
“While we didn’t hit forecast, we’re still convinced we’re on track,” Weiss said. “This does not reflect any of the Christmas shopping. There is always a 30-day lag on that. But all the reports we’re getting is that Christmas shopping is good.”
He described the November decline as an anomaly resulting from unusually high collections last year as a result of a “bunch of audits” that led to a high amount of corporate income taxes being paid.
Richard Wilson, an economist for the Bureau of Legislative Research, said he agreed with Weiss that the state’s revenue situation looks improved compared with the past couple of years.
Beebe’s office later released a statement saying that the governor had decided to go ahead and give state employees raises.
“Going into this current budget, we froze state salaries out of an abundance of caution to see how our economy would recover,” Beebe said. “After seeing the strength of our economic indicators and remaining ahead of forecast for the year so far, I’ve decided to reinstate the [cost-of-living adjustment] for our employees.”
Weiss said money for the raises was factored into the existing state budgets but suspended as a precaution while officials waited to see whether a perking-up economy would produce the needed revenue.
He said the budget for fiscal 2011 called for cost-of-living raises of 2.3 percent, but the governor reinstated them at 2 percent.
The governor is also withdrawing his suspension of raises at higher-education institutions, he said.
Beebe’s comments about highway funding came a day after the Arkansas Blue Ribbon Committee on Highway Finance submitted its report calling for a vote of the people on several types of tax increases and for a shift of some general revenue to highways.
The Arkansas Highway and Transportation Department has said that over the next decade there will be $19 billion of highway needs but only $4 billion to pay for the work.
Beebe said if people want better highways, bridges and roads, they are “going to have to sacrifice for it.”
Beebe repeated his previous opposition to shifting general revenue to highways. He said that would hurt schools, prisons and Medicaid.
“We cannot afford to do that,” he said.
One option, Beebe said, is changing the state motor-fuel tax from a per-gallon tax to a tax based on the price of the gasoline.
Beebe said he hasn’t polled members of the General Assembly to gauge the level of support for referring a tax plan to the voters.
Sen. Paul Bookout, DJonesboro, the incoming Senate president pro tempore, said whether the Legislature would go along with it depends on what’s in the plan.
“I think the public needs to be fully made aware of what the situation is [by showing ] from corner to corner [of Arkansas] these are what our needs are,” he said. “We have been losing ground for many years and I don’t think a Band-Aid approach comes close to address the needs.”
Rep. Robert Moore, DArkansas City, the incoming House speaker, said the idea is “worth considering. I want to try to start getting feedback from the members. It’s a tough sell to ask for a fee or tax increase. But the old saying goes there is no such thing as a freel lunch.”
Also Thursday, the Arkansas Advocates for Children and Families released a statement complaining that the Beebe administration hasn’t gone through with an expansion to ARKids First Medicaid to cover more children, and with a planned new Medicaid electronic records system.
The Department of Human Services announced in January that it wouldn’t go through with the ARKids expansion, citing revenue shortfalls and the ballooning Medicaid budget.
Rich Huddleston, executive director of the advocacy grou, said the 56-cent tobacco tax increase, approved by the Legislature in 2009, is raising more money than projected. He said because of that the ARKids expansion should be funded.
“We appreciate Gov. Beebe’s diligence in protecting important services from major cuts,” Huddleston said. “But these critical programs can help working Arkansas families stay healthy and keep their jobs. Working parents can’t help pull our state out of the recession if they have to stay home with sick children.”
Weiss said Huddleston’s criticism was unfair.
“It’s just their rehash,” Weiss said.
He said it was clear “from the get-go” when the tax passed last year that it would help fund new health programs but wasn’t earmarked for those programs. He said agencies throughout state government were cut because of revenue shortfalls.
Weiss said there are no plans to fund the proposed expansion of ARKids. He pointed out that just funding current Medicaid programs will cause the Medicaid Trust Fund to go dry after fiscal 2012.
Front Section, Pages 1 on 12/03/2010