The Arkansas House gave final approval Friday to a $4.6 billion budget for the coming year that increases spending for public schools and prisons but keeps state workers’ salaries flat.
On a 74-13 vote, the House gave final approval to the Revenue Stabilization Act, which sets spending priorities for the coming year based on expected revenues. It now heads to the governor’s desk.
The vote was one of the last hurdles for lawmakers before the Legislature recesses. During the session, lawmakers approved a $35 million tax cut package that included Gov. Mike Beebe’s proposal to cut the grocery tax by a half cent. Arkansas is one of the few states able to offer significant tax cuts while lawmakers in other states are grappling with deficits and major budget cuts.
The Arkansas Legislature still faces unfinished business. Legislative leaders could call lawmakers back to the Capitol for a Monday session to complete work on congressional redistricting before they formally adjourn April 27.
Arkansas’ new budget year begins July 1, and legislators lined up a number of one-time projects to be covered with a $50 million surplus.
The centerpiece of the tax cut package was a half-cent reduction in the grocery tax advocated by Beebe. The cut, which takes effect July 1, is expected to cost the state nearly $21 million in the coming year and will reduce the rate from 2 percent to 1.5 percent.
Beebe had initially told lawmakers that the grocery cut was the only one the state could afford, but later agreed to other cuts — including a used car sales tax cut and an annual sales tax holiday — in a compromise with the Legislature.
In order to help pay for the additional tax relief, Beebe dropped a proposal to grant state employees a 1.86 percent cost-of-living raise and instead kept their pay flat. Beebe also reduced his spending proposals for most state agencies.
Earlier in the roughly three-month session, the Legislature approved an overhaul of the state’s sentencing and probation laws in an effort to help curb the state’s growing prison population. Supporters of the legislation, which includes reduced sentences for some nonviolent and low-level drug offenses, say it will save the state $875 million that would have gone to additional prison costs over the next decade.
They also agreed to ask voters for two tax increases that would benefit the state’s highway system. A proposed constitutional amendment will appear on the ballot in 2012 seeking a half-cent sales tax increase for a highway bond program, and another bill allows Beebe to ask voters to approve a five-cent diesel tax increase to pay for roads.
The Senate also gave final approval Friday to the budget for the state Insurance Department. That agency’s budget had been held up in the House by a group of Republicans who were opposed to separate legislation that would have allowed the state to set up a health insurance exchange under a new federal health care law.
Republicans eventually relented after the sponsor of the health exchange proposal pulled his bill so it could be studied before the next session. Beebe has warned that by not setting up its own exchange, the state risks the federal government running it.