Lawmakers see $5.3B budget, get set for votes

Information about the Proposed state budget.
Information about the Proposed state budget.

The state's general revenue budget would increase by $142.7 million to $5.33 billion in fiscal 2017 under a proposal agreed upon by legislative leaders and Gov. Asa Hutchinson.

Most of the increase would go to the state Department of Human Services and public schools under the proposed Revenue Stabilization Act, the legislation that would distribute general revenue to agencies in the fiscal year starting July 1.

Legislative leaders said Republican and Democratic lawmakers, with exceptions, generally support the proposal that largely mirrors the Republican governor's budget plan, which was released in March. Hutchinson's budget blueprint factored in his nearly $101 million cut in individual income-tax rates that the Republican-dominated Legislature enacted in 2015.

"We kept it about as tight as we can," said Sen. Bart Hester, R-Cave Springs.

He noted that most of the increased general revenue would go toward the state's increased match for federal Medicaid dollars, additional money needed to shore up the foster care system, and funding required to provide an adequate education to public school students.

Hester -- who has said he would push to cut funding to, among other things, the Arkansas Educational Television Network and War Memorial Stadium in this year's fiscal session -- said he has fought to cut budgets and would continue to do so.

"The battles are won in the long run," he said.

For fiscal 2017, general revenue funding for AETN and War Memorial Stadium would continue at the current levels of $5.29 million and $889,085, respectively, under the proposed Revenue Stabilization Act, said Kevin Anderson, assistant director for fiscal services at the Bureau of Legislative Research.

The proposed Revenue Stabilization Act -- distributed to lawmakers Sunday -- divides the projected general revenue into A and B categories with $5.205 billion going to the A category and $127.9 million to the B category.

The state's top spending priorities are placed in Category A, and lower spending priorities are placed in category B under the Revenue Stabilization Act. Funding to Category B only flows after Category A has been fully funded.

Category A includes a proposed $13.8 million allocation for the state's so-called rainy-day fund in fiscal 2017. The rainy-day fund is intended to be used for emergencies and the governor's priorities that can't wait for the next legislative session.

That allocation is $9.5 million larger than Hutchinson proposed in March. Legislative leaders said they decided to place Hutchinson's proposed $9.5 million increase in state funding for school buildings in the rainy-day fund, after they learned that the school building funds might not be needed until fiscal 2018.

The state has about $31 million remaining in its rainy-day fund, according to the state Department of Finance and Administration.

The proposed Revenue Stabilization Act also would transfer about $50 million in unallocated surplus funds to the state's rainy-day fund, said Senate President Pro Tempore Jonathan Dismang, R-Searcy.

House Democratic leader Michael John Gray, of Augusta, said he "absolutely" appreciates "the nature of wanting to rebuild the rainy-day. I just question, if every day becomes a rainy day, is it really a rainy-day fund?"

Hutchinson wants to tap $40 million from the rainy-day fund as part of his plan to increase state highway funding in fiscal 2017 to match additional federal highway dollars available under the new federal highway bill.

Hutchinson's highway plan, released in January, relies on both surplus funds and other state revenue to obtain additional federal highway dollars.

As for the proposed Revenue Stabilization Act, Dismang said most of the anticipated increase in general revenue would be placed in Category B.

An exception is a $20.4 million increase, to a total $91.5 million, for the Department of Human Services' Division of Children and Family Services, which is Category A.

"They feel like they needed that money on the front end, so it would be allocated as the revenue came in, as opposed to ... coming in on the back end," Dismang said.

Department spokesman Amy Webb said, "The additional funding is not for new services or additional staff.

"We have more children in care than we expected when we developed our budget," she said.

The Revenue Stabilization Act also would increase the state general revenue budget for the Department of Human Services' grants, including Medicaid, by $88 million, to a total of $1.06 billion; and the budget for the Division of Behavioral Health Services by $3.5 million, to $82.3 million. The increase for the Medicaid program covers the state's required match of about $50 million a year for federal funds in fiscal 2017, according to Duncan Baird, the state's budget administrator.

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.

The Revenue Stabilization Act also would increase the public school fund's general revenue budget by $23.7 million, to almost $2.19 billion, in fiscal 2017.

The governor said Monday that his priorities for this year's fiscal session were "to establish the balanced budget with the approval of Arkansas Works and to increase the funding for our state foster care needs."

"These goals have been accomplished" in the proposed Revenue Stabilization Act, Hutchinson said in a written statement.

Arkansas Works is what the state's version of Medicaid expansion is called under legislation enacted in last month's special session. Most of the 267,000 low-income Arkansans covered under the Medicaid expansion are enrolled in private health insurance plans.

Last month, the Legislature narrowly approved legislation reauthorizing the use of federal funds for the Medicaid expansion and other Medicaid programs with a provision to end Arkansas Works on Dec. 31. Hutchinson vetoed the provision that would have ended Arkansas Works and signed the legislation.

The governor and legislative leaders said last week that their plan is to provide $1 million more in state aid for public libraries and $1 million more for senior citizens centers through the state's rainy-day fund.

"I am very pleased that the leadership of the House and Senate has supported the general framework of my balanced budget and the agreed upon changes recognize the importance of restoring funding to our libraries and senior centers across the state," Hutchinson said in the statement.

Hutchinson said Monday that "the General Assembly has acted quickly and efficiently.

"This will allow a short fiscal session and then we will all need to work together to address the funding challenges for our highways. The agreed to budget lays the foundation for meeting the short-term highway needs without raising taxes," he said.

Lawmakers resume meeting today, the 21st day of this year's fiscal session.

Joint Budget Committee co-Chairman Sen. Larry Teague, D-Nashville, said he expects the committee will consider identical versions -- one House, one Senate -- of the proposed Revenue Stabilization Act on Wednesday.

Teague said he expects the House and Senate will each consider approving their bills and then each chamber on Thursday will consider the legislation approved by the other chamber.

Dismang said he's generally received position reactions from senators about the proposed Revenue Stabilization Act, but he said he doesn't expect each of them to vote for the legislation.

House Speaker Jeremy Gillam, R-Judsonia, said he hasn't received many complaints about the budget from representatives.

Sen. Bryan King, R-Green Forest, said the budget includes "too much spending" and that he "will propose changes." However, he noted the budget lacked a cost-of-living increase.

"No COLA for state employees is a slap in the face to state employees," King said in an email.

Gray said he's also frustrated that state employees wouldn't get a cost-of-living raise, considering they have extra workloads with Hutchinson's policy requiring his office's approval to fill vacant positions in state agencies under his control.

State employees who don't work at education institutions received a 1 percent cost-of-living raise in fiscal 2016.

In addition, Hutchinson has authorized merit bonuses for state employees of up to 4.5 percent to be paid in their June 24 paychecks, finance department Director Larry Walther said in a memo to agency directors Wednesday.

Hutchinson has ordered the finance department's Office of Personnel Management to conduct a comprehensive review of current state employee pay plans and personnel policies, Walther said.

"This review will result in the development of new, more-competitive pay plans and streamlined policies, which will be implemented by July 2017 for the 2018 fiscal year," Walther wrote in his memo. "More competitive and efficient pay plans will lead to better compensation for state employees, while also improving overall efficiency of operations and the quality of service provided to the citizens of Arkansas."

Gillam said cost-of-living increases for state employees and increased funding for the state's pre-kindergarten program aren't in the proposed Revenue Stabilization Act because "a lot of that came down to a finite amount of money.

"You reach the point where you deplete the available resources," he said.

A Section on 05/03/2016

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