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After revenue report, Arkansas governor tells agencies to brace for possible cuts

By Andrew DeMillo, The Associated Press

This article was originally published February 2, 2017 at 10:36 a.m. Updated February 2, 2017 at 4:20 p.m.

Gov. Asa Hutchinson


LITTLE ROCK — Arkansas Gov. Asa Hutchinson said Thursday he's asked several agencies to come up with contingency plans for potential budget cuts after finance officials said the state had collected $57 million less in revenue than had been forecast.

The Republican governor told reporters he's not ready to call for any budget cuts, but that he'll decide by March whether any changes are needed given the new concerns about the state's finances. The Department of Finance and Administration said the state's net available revenue in January totaled $535.9 million, which was $15.9 million less than in January 2016 and $47.1 million less what had been forecast for last month. The state's net revenue for the fiscal year, which began July 1, totals $3.1 billion.

"I do want to take the step to have contingency plans in the event this pattern continues and there's a problem the next month or the following month," Hutchinson said. "I don't want to wait until the last minute to have the agency directors start preparing in the event there is a reduction."

The programs affected by any budget cuts would be in the "B'' category of the state's budget, which prioritizes funding based on expected revenue. The $127 million in that category isn't set to go toward the agencies until June, Hutchinson said. He said he didn't expect any layoffs from the potential cuts. The bulk of the money in the category goes toward the Department of Human Services, which was set to receive $88 million. Other agencies that were told to make plans include the departments of education and correction.

State officials attributed about $22 million of the revenue shortfall to a payroll timing issue, with that money expected to be recouped next month.

The revenue figures came out a day after Hutchinson signed into law his $50 million proposal to cut income taxes for poorer residents, which will take effect in 2019. The legislation also creates a 16-member legislative task force that will recommend deeper tax cuts before the 2019 session.

Top Democrats in the majority-Republican Legislature said they were worried about the numbers.

"We've sounded warnings for the past two years that we could be headed down the road of states such as Kansas, Oklahoma and Louisiana," Senate Minority Leader Keith Ingram said, referring to states that have faced large budget shortfalls after enacting large tax cuts. "These fears seem to be well founded."

Republican legislative leaders said they're watching the numbers closely, but noted that the latest tax cut won't take effect until two years from now.

"It's not time to panic, and my other point is it shows the wisdom of a tax cut that is conservative, both in the amount and the timing so we have time to adjust if we need to," Senate Majority Leader Jim Hendren said.

Hendren and other GOP leaders said the numbers also stress the need for lawmakers to look at closing existing exemptions to fund any tax cuts in the future, a method used to pay for a $13 million military veterans' tax break that was given final approval Thursday. The proposal, which Hutchinson plans to sign into law next week, also raises taxes on soda, candy, unemployment benefits and digital downloads.

Read Friday's Arkansas Democrat-Gazette for full details.

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Displaying 1 - 9 of 9 total comments

DoubleBlind says... February 2, 2017 at 11:39 a.m.

Wow. Where did the DFA geniuses obtain their finance degrees? Or do they not have degrees? This sounds like finger in the wind, light a candle kinda math to me. I completely agree the poor should get tax relief but the EITC would have been a much better solution for them than a straight up tax cut. And the numbers will never improve until we grow the AR economy. This is where the AR GOP brain bust comes up empty every time.

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Queen1976 says... February 2, 2017 at 12:29 p.m.

And seems that they will be trying to recoup this shortfall from the Medical Marijuana bill that voters approved, sticking it to the sick people! What a cluster!

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DoubleBlind says... February 2, 2017 at 12:34 p.m.

Amazon just announced they chose Kentucky, just outside the Cincinnatti, OH, airport as the site of their latest distribution center. Did AR even compete for this? If not, why not? If so, why wasn't AR chosen? Locating the center in AR would have solved the Amazon sales tax issue AND would have created almost 3000 jobs.

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BEARTRAP919 says... February 2, 2017 at 2:41 p.m.

WOW, Do Citizens really expect anything different??? More Income is needed badly because the Rich people need a big Tax Cut. You notice the Poor people got one, but now they are going to take it away, This is what is called pandering to the public, Two Years Out, This is really attempting to get good reviews and at no Cost. More Commodes must be needed in the Governors Mansion,

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dunk7474 says... February 2, 2017 at 3:10 p.m.

Denver,portland, and seattle have more people moving there than any where else. Real estate is hotter than anywhere else. More income at every level. Of coarse the 150 million in taxes doesn't hurt. But our brainless governor and his step brothers think pot is a bad thing.

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DoubleBlind says... February 2, 2017 at 3:20 p.m.

I'm no fan of Asa but he is correct to require cuts from the 3 biggest budget busters: Health, Educatin and Corrections. He at least understands that needed cuts can't come from other sources alone. Let's not just see if he follows through and hold his feet to the fire. I will be the first to shake his hand and buy him a beer if he proves he has the b***s to walk the talk.

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abonnabel says... February 2, 2017 at 9:25 p.m.

Anyone who uses the phrase "military veterans' tax break" is a bold faced liar! It is a "military retiree tax break". It is sort of like the difference between "patriot" and "mercenary". I spent 7 years in the U. S. Army, received the National Defense Service Medal for service during the Viet Nam War. That makes me a military and a veteran. I am also 67 years old and on Social Security. That makes me retired. Where is my tax break? If you have to lie, lie to the people who HAVE NOT honorably served this country. I am proud to say that I have stood my tour of guard duty to defend this country.

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TheBatt says... February 3, 2017 at 12:15 a.m.

DoubleBlind: an EITC is a wealth-transfer scheme that actually helps to trap wage earners. It heavily penalizes workers who have relatively moderate income increases.

Tax cuts are the equitable and moral means to the end.

But a better question might be to ask why revenue is not only down, but by a major amount over forecast. Is it that revenue is not down so much as the estimate/forecast was way too wishful?

From history- large revenue shortages result from larger state economic problems, and one that is plaguing our state is UNDER-employment.

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RecumbentDNA says... February 3, 2017 at 12:25 a.m.

Two years ago, the ledge gave a tax cut (payback) to the "Job Creators". Well? It's been two years... spew forth the jobs, expand the economy, and prove that "trickle down" works!

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