LITTLE ROCK — Gov. Mike Beebe’s proposal to further cut the sales tax on groceries took its first step in the Legislature on Monday when it cleared the Senate Revenue and Taxation Committee.
Two other tax cut plans also got the committee’s recommendation: one to reduce the sales tax on energy for manufacturing, including power plants, and another to reduce the sales tax on used vehicles.
Also Monday, it was revealed that the governor’s plan to revamp the prison system, including sentencing laws, is estimated to cost as much as $9.4 million.
Beebe has said his proposed $4.59 billion general revenue budget for fiscal 2012 doesn’t have room for any tax cuts in addition to his grocery tax cut plan.
But the governor said he would be flexible after the tax committee’s action.
“As long as [legislators] know what they’re doing and they’re prepared to adjust the budget, then so am I,” Beebe told reporters.
If that’s the case, the governor said, money marked for cost-of-living adjustments for state employees and increases to higher education institutions would be the first things to be cut back.
Last week, three other tax cut bills were passed by the House of Representatives: cutting the sales tax on energy in manufacturing, cutting the income tax for capital gains, and cutting the income tax for certain low-income people.
Beebe said he was more likely to reach an agreement on passing tax cuts for energy use in manufacturing and for used vehicle purchases than agree to a cut in the capital gains tax, which he has likened to “voodoo economics.”
Senate President Pro Tempore Paul Bookout, D-Jonesboro, said he expected the Senate today will vote on the three bills that cleared the tax committee Monday.
Sen. Larry Teague, D-Nashville, the tax committee chairman, said he expected they will be the only three tax cuts enacted this session.
“I think we’ve given up about all we can give up,” Teague said.
Teague is the sponsor of Senate Bill 276, which is Beebe’s plan to cut the grocery tax. SB276 would reduce state revenue by $20.8 million in fiscal 2012 by shaving off one-half percentage point from the sales tax on groceries to bring it to 1.5 percent.
But he gave a less-than-enthusiastic endorsement of it to reporters.
“I don’t love the [grocery] tax cut,” Teague said. “But it was going to happen. I offered to help the governor with it. He said, ‘Yes, please do.’ Somebody had to sponsor it, and I was more than willing to do it.”
He pointed out that 34 of the 35 senators are co-sponsors. Only Sen. Jerry Taylor, D-Pine Bluff, is not.
Teague said there are “a lot of reasons” why he doesn’t “love” the grocery tax cut.
“It’s the only tax some people pay,” Teague said. “It provides stability to tax collections in down times.”
Teague said he expects the Senate will pass SB276 and Senate Bill 274, regarding the used-vehicle sales tax, and Senate Bill 275, regarding the manufacturing energy tax.
SB274 would increase the threshold for an exemption from paying sales tax when buying a used vehicle from the first $2,500 of the sales price to $5,000. It would reduce revenue by $5.9 million in fiscal2012, according to the Department of Finance and Administration.
SB275 is similar to House Bill 1052 by Rep. Lane Jean, R-Magnolia, which passed the House last week. It would reduce the state sales tax on energy used in manufacturing from 3.125 percent to 2.625 percent. The department estimates a revenue reduction of $4.2 million a year.
Revenue Commissioner Tim Leathers told the committee that SB275 goes further than Jean’s bill. He said SB275 would also include power plants and would reduce state revenue by $7 million in fiscal 2012 which would grow to $21 million when fully implemented by fiscal 2014.
“I don’t guess we know how they are going to fit into the budget yet,” Teague said. “As proposed, they don’t fit. I assume the budget people and the administration will be talking as we move forward. It will all work out.”
Sen. Gilbert Baker, R-Conway, co-chairman of the Joint Budget Committee, is the sponsor of the SB274. Bookout is also a sponsor of that bill.
“Look, we’ve got $130 million in growth [from fiscal 2011 to fiscal 2012],” Baker said. “I want to use some of that to give a tax cut on used cars. We’ll just work through that process.”
He said cost-of-living adjustments for state employees would be one area likely to be cut.
Baker said he has about 22 senators as sponsors so he is confident SB274 can pass the Senate but isn’t so sure about getting it through the House.
Likewise, he said the House tax cuts would have a harder time in the Senate.
SB275, the manufacturing tax cut, is sponsored by Sen. Bill Sample, R-Hot Springs, andhas 13 other Senate sponsors.
Bookout said the grocery and used car tax cuts would be a direct benefit for “average hardworking Arkansans.”
He said legislators must do what they can to cut taxes but be responsible about it. He saidthe capital gains tax cut, which would reduce revenue by $44 million, will have a tougher fight in the Senate.
“That’s a real problem,” Bookout said. “You can’t do everything. You’ll break the bank. That cuts into services.”
PRISONS
The estimated cost of a proposed prison overhaul, supported by the governor, is between $5 million and $9.4 million, “which is yet another reason we’re worried about possible tax cuts,” Beebe spokesman Matt DeCample said.
DeCample said as much as $3 million of the cost would be covered by a proposed $10 increase in the fines paid by those on probation or parole. The rest would come from within the budgets of the state Department of Correction and state Department of Community Correction.
A draft of the bill was leaked to the Arkansas Democrat-Gazette on Wednesday. It has not been filed as a bill in the current legislative session, but the intended sponsor, Sen. Jim Luker, D-Wynne, said he plans to file it this week.
Its cost will be determined once a final version of the bill is filed.
The measure focuses on reducing the rate of growth in the prison population by changing the sentencing laws to keep violent offenders behind bars while treating and monitoring nonviolent offenders, including drug users.
Luker said the increased costs would likely come from new probation and parole officers, expanding drug courts and mental health programs.
A Washington, D.C.-based Pew Center on the States study commissioned by Beebe and released in January found that if Arkansas doesn’t make changes to its correction system, it will spend an extra $1.1 billion on prisons in the next 10 years, and the prison population will grow by 43 percent. Making the recommended changes soon could save $875 million, the study said.
“The idea is to stabilize the continued growth then reinvest some of the savings that come with that,” Luker said.
COMMISSION ON WOMEN
Several female House members spoke Monday against a Senate bill that would establish a commission to study the status of women.
Senate Bill 119, by Sen. Linda Chesterfield, D-Little Rock, was rejected by the House of Representatives 58-27. Three of the 22 female House members voted for the bill.
Chesterfield said she was disappointed by the vote but not surprised.
“Women are not a monolith, and we don’t always agree on everything,” she said.
Opponents of the bill said the nine-person commission did not have a specific enough stated purpose.
Rep. Ann Clemmer, R-Benton, said that because there are so many women’s issues the commission could get dragged in too many directions.
“How will nine people successfully address such a broad range?” Clemmer said. “How is it we hope that nine people will solve the problems of 53 percent of the population?”
Chesterfield said after the vote that the commission was not given a specific topic in her bill so that it would not be limited to a single issue affecting women.
Some House members also argued that the legislature didn’t need to create another group aimed at studying a specific issue.
The Legislature recently passed a resolution aimed at cutting down the number of task forces they set up.
Rep. Tracy Steele, D- North Little Rock, said lawmakers were equating a commission with a task force, which are not the same.
He said it is up to the Legislature’s 30 women to come to a consensus and decide if they want to bring it back. There are 133 legislators.
GAS DETECTORS
By a slim margin, the Senate passed House Bill 1385 by Rep. Fred Allen, D-Little Rock, to require carbon monoxide detectors to be installed in newlyconstructed homes.
Sen. Jack Crumbly, D-Widener, said it’s favored by the state fire marshal and has no opposition. He said home builders are OK with it.
But Sen. Bill Pritchard, RElkins, spoke against it because he said the bill doesn’t define who is responsible for putting the detectors in the homes.
HB1385 passed 18-14. It now goes to the governor.
Front Section, Pages 1 on 02/22/2011