Budget, then can go home, legislators say

Leaders expect easy week weighing governor’s plan

Arkansas legislative leaders hope to pass a fiscal 2017 general-revenue budget and wrap up action in the state's fourth-ever fiscal session by the end of this week.

"I think it is really going to be uneventful," Joint Budget Committee co-Chairman Sen. Larry Teague, D-Nashville, said of the week ahead.

The fiscal legislative session started April 13. Members of the House and Senate are to return to Little Rock for meetings Tuesday.

Senate President Pro Tempore Jonathan Dismang, R-Searcy, said Friday that the tentative goal is to put the state's proposed Revenue Stabilization Act on lawmakers' desks today. The Revenue Stabilization Act will outline the priorities for distributing general revenue to agencies for fiscal 2017, which starts July 1.

"That would allow us to work through a normal week, and we'll be out of here on Friday," he said.

"Tentatively, what we are looking to do is to stick pretty close to the governor's budget," Dismang said.

Gov. Asa Hutchinson's proposed $5.33 billion fiscal 2017 budget increases the general-revenue budget by $142.7 million and factors in a nearly $101 million cut in individual income tax rates that was passed by the Legislature in 2015.

A linchpin in the budget blueprint was the Republican-controlled Legislature's reauthorization of using federal Medicaid dollars to buy private health insurance for low-income people -- Arkansas' version of Medicaid expansion. The program covers 267,000 Arkansans, mostly under the "private option." On April 21, lawmakers approved that expansion, now named Arkansas Works, and sent it to Hutchinson.

Most of the increased general-revenue funding in the governor's budget plan would go to the Department of Human Services and public schools.

"At this point, I think the most significant change is going to be related to the facilities funding," Dismang said. Hutchinson has proposed increasing funding for public school buildings by $9.5 million to a total of $51.3 million.

"It is our understanding that those funds aren't going to be needed until [fiscal] 2018 and, so for the time being, what was going to be a $9.5 million increase in facilities funding will be a $9.5 million increase to the ongoing rainy-day fund," Dismang said.

In addition, he said, "what we are looking to do right now is to move a significant amount of the money from the current surplus ... to the rainy-day fund."

The rainy-day fund is used for emergencies and the governor's priorities that can't wait for the next legislative session for funding.

"One of the things that we've been pushing for all year ... is for us to really start putting back money and actually building up the rainy-day fund, keeping it back there for emergencies -- not necessarily going in all the time and using it to fund projects," said House Speaker Jeremy Gillam, R-Judsonia.

Hutchinson spokesman J.R. Davis said unallocated surplus funds will be used to build up the rainy-day account.

"In FY2017 both the governor and Legislature will jointly determine its uses as needed. Using the rainy day fund is the best way to protect the balanced budget," Davis said in a written statement.

The state has $51.6 million in surplus funds and $31.1 million left in its rainy-day fund, said Jake Bleed, a spokesman for the Department of Finance and Administration. Also, the state is projecting a $35.9 million surplus at the end of fiscal 2016, which ends June 30.

Under proposed plans, Dismang said, $1 million of the rainy-day fund would go to libraries, and about $1 million would go to the DHS Division of Aging and Adult Services for long-term-care grants.

In last year's regular legislative session, lawmakers reduced fiscal 2016 general-revenue funding for libraries from $5.6 million to $4.6 million and for the Division of Aging and Adult Services from $17.6 million to $16.5 million.

Some legislators want to restore that funding. Using one-time, rainy-day funds to restore the funding to libraries and the Division of Aging and Adult Services in fiscal 2017 would give legislators time to figure out how they can restore it for years beyond, and they can present their ideas during next year's regular legislative session, Dismang said.

Hutchinson's proposed budget increases general-revenue funding for DHS by $111.9 million, for a total of $1.44 billion.

His plan increases the budget for the agency's grants, including Medicaid, by $88 million, to a total of $1.06 billion; the budget for the Children and Family Services Division by $20.4 million, to $91.5 million; and the budget for the Division of Behavioral Health Services by $3.5 million, to $82.3 million.

State Budget Administrator Duncan Baird has said the increase for the Medicaid program covers the state's required match of about $50 million a year for federal funds in fiscal 2017.

The state's required match of about $40 million for the private-option program for the final six months of fiscal 2017 will be covered by increased insurance premium tax collections, Baird has said. On Jan. 1, the state will begin paying 5 percent of the cost of the private option, and its share will gradually increase to 10 percent by 2020.

Hutchinson also proposed increasing the public school fund's general-revenue budget by $23.7 million, to $2.18 billion, in fiscal 2017.

The budget for the Department of Correction would increase by $4 million, to $340.7 million, and the Arkansas Community Correction agency's budget would remain the same at $78.6 million. The amount budgeted to reimburse county jails for holding state inmates would be cut by $11.4 million, about 40 percent, to $16.4 million, now that those facilities are holding fewer prisoners.

Hutchinson proposed no changes in the higher-education budget of $733.5 million for the state's two- and four-year colleges.

Dismang said the proposed Revenue Stabilization Act wouldn't include a fiscal 2017 cost-of-living raise for state employees because Hutchinson is revising the state's pay plan and "is looking at merit pay as the alternative right now."

Senate Democratic leader Keith Ingram of West Memphis said the proposed Revenue Stabilization Act is "a compromise. It's a good conservative budget, and hopefully we'll be able to get out of here next Thursday."

After the fiscal session ends, Hutchinson plans to call legislators into a special session to consider highway funding.

In January, Hutchinson proposed increasing highway funding by $46.9 million in fiscal 2017 as a way to match and receive more federal highway dollars, but he didn't want to raise taxes to do it. Instead, he said he wanted to use $20 million of the state's unobligated surplus; $20 million of the state's rainy-day fund; $5.4 million that now goes to state central services, which includes money for constitutional offices; and to reallocate $1.5 million from sales tax collections on new and used vehicles.

Dismang said that under Hutchinson's plan, the rainy-day fund would be shored up with surplus funds, and then $40 million in rainy-day funds -- with Legislative Council approval -- would be used to match federal funds for highways, with or without a special session.

"I don't see at this point, where we have a consensus" in the Senate on a plan to increase highway funding, he said.

Hutchinson has projected that tapping surplus funds and other state revenue would raise $64.1 million in fiscal 2018, $71.1 million in fiscal 2019, $76.1 million in fiscal 2020 and $81.1 million in fiscal 2021 to put toward more federal matches for the state's highways. He estimated that $48 million a year of the increased highway funds in fiscal 2018-21 would come from devoting 25 percent of the state's General Improvement Fund.

Starting this week, "we're going to start talking to the [senators] about all the different ideas that are out there and see if there is something that we can get a majority behind," Dismang said of looking for money for highways.

The governor's proposal "may be the plan that moves forward," he said.

"But I don't think the [Senate] members have had time to focus on the highways. There are groups of members that have spent some time looking at that, but there hasn't been time for anybody to have discussions with the rest of the [Senate] about what their plans are and what they are wanting to do," Dismang said.

Dismang and Gillam said they expect the Legislature to adjourn next week.

"There needs to be at least a couple of days time [after wrapping up action this week] to make sure that there weren't any errors that we need to go back and correct," Dismang said.

After the Legislature adjourns, Gillam said, "we'll probably have a break and see where things are at with highways and what kind of consensus is building on that before everybody I think will be notified from the governor's office on when he is going to bring us back in for a special session.

"My hope is that we'll be able to get a consensus on a general plan -- the short-term phases and the long-term phases," he said.

Gillam said raising taxes for highways doesn't seem to be on legislators' A-list of options right now.

"But I have talked to a great number of members that have said they are keeping an open mind to see where we are at, what all the different ideas are, and which ones we can actually build some consensus around."

"If it looks like [raising taxes] is really the only option that we have that everybody can get behind, then there might be more willingness to actually look at it," Gillam said.

Hutchinson plans to call the highways special session by no later than the end of May, Davis said, adding that other issues that might be considered in the session are under review.

SundayMonday on 05/01/2016

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