The Legislature's Joint Budget Committee on Wednesday advanced identical bills setting the state's general-revenue budget for the next fiscal year and learned that uncertainty remains about whether this year's tax collections will fall short.
The proposed budget for fiscal 2018, which starts July 1, is $5.49 billion, an increase of $163 million over this year's budget.
A state finance official told the committee that he doesn't know whether general-revenue tax collections will meet the forecast for fiscal 2017, and that it appears the collections for this month will be below the forecast.
In voice votes, the committee recommended House and Senate approval of Senate Bill 295 and House Bill 1548 -- identical versions of the proposed Revenue Stabilization Act for fiscal 2018. The Revenue Stabilization Act distributes general revenue to state agencies and programs and prioritizes spending when collections fall short.
Most of the increased revenue in fiscal 2018 would be targeted for the state Department of Human Services under the bills, which resulted from negotiations among legislative leaders and Gov. Asa Hutchinson. These measures would increase the Human Services Department's general-revenue funding in fiscal 2018 to $1.55 billion -- an increase of $112.8 million over the fiscal -2017 budget.
The committee also endorsed identical bills that would allow for the distribution of $225 million of surplus funds accumulated from previous years. Senate Bill 552 and House Bill 1830 would allow, among other things, for the use of up to $90 million for the Medicaid program and up to $60 million for public school facilities.
Rep. Stephen Meeks, R-Greenbrier, pressed Paul Louthian, deputy director for the state Department of Finance and Administration, "to give us an idea of where you thought we might end up for March and for the rest of the fiscal year."
Net general revenue available to state agencies fell $15 million short of forecast through the first eight months of fiscal 2017, and Hutchinson said Tuesday that he expects a "dip" in general-revenue collections this month.
Louthian told lawmakers: "At this time, I can't give you an estimate as to where we'll be at the end of the year. It appears that the revenues for March will be below forecast.
"It is a timing difference in the extension tax payments and tax-due returns for the corporations. The IRS changed the filing deadline from March 15 until April 15, and the state passed Act 48 in the current General Assembly to match that filing date, and that shifted those tax-due returns from March to April. We had forecasted that revenue to come in in March, back when we made that forecast," Louthian said.
"We haven't finished March out, so processing for this month is not finalized," he said. Friday is the last day of March.
"We had the issue with the income tax processing also in February, again where the IRS changed the processing due dates for the earned income tax credit refunds, so we are still working through that anomaly also. At the end of the day, there still too many balls in the air to make a definitive comment about forecast," Louthian said.
Asked whether the governor is confident that the state will make its forecast for fiscal 2017 or whether he is considering cutting budgets for the rest of the year, Hutchinson spokesman Kendall Marr said it's premature for the governor to comment about that.
The state's revenue report for March will be released Tuesday.
"Most people think we are going to be OK" by the end of fiscal 2017, a Joint Budget Committee co-chairman, Sen. Larry Teague, D-Nashville, said in an interview.
But he added, "I am sure that the governor is thinking about whether he needs to back off on spending some or not. I haven't discussed it [with him]."
During the first week of February, the Republican governor said he asked certain department heads to prepare "contingency plans in the event this pattern [of lagging general-revenue collections] continues and there is a problem next month or the following month."
SB295 and HB1548 would divide the total general-revenue budget into Category A of $5.364 billion -- up from the current $5.333 billion -- and Category B of $131.5 million. The budgeting act, passed near the end of every legislative session, prioritizes spending. Programs in Category A are funded before those in Category B. The bills would set aside $15.8 million for the so-called rainy-day fund, used by the governor for emergencies, special needs and priorities that aren't included in the general-revenue budget.
In recent years, the Legislature has approved income-tax cuts. In 2015, the Legislature enacted Hutchinson's rate cuts for Arkansans with taxable incomes between $21,000 and $75,000. The cuts were projected to reduce state revenue by about $100 million in fiscal 2017. This year, another cut was enacted for Arkansans making less than $21,000 in taxable income; it's projected to reduce revenue by $25 million in fiscal 2019 and then $50 million every year after.
Under the proposed budget, the largest amounts would go to the Department of Human Services and the public school fund.
The Human Services Department' s general-revenue budget regarding grants, including Medicaid, would increase by $75 million to $1.14 billion. The state's share of the cost of its version of Medicaid expansion -- called Arkansas Works -- is estimated to be about $100 million in fiscal 2018.
The public school fund -- which provides money to public schools -- would increase by $6 million over the current general-revenue budget to $2.194 billion. Like the Human Services Department's budget, the public school fund gets money from other sources.
The funding recommendation for the public schools meets the adequacy recommendation from the Legislature, said Jake Bleed, a spokesman for the Department of Finance and Administration. The total appropriation for the public school fund will increase by $55.9 million in fiscal 2018 with the additional funding provided by the educational adequacy trust fund, which is funded by the 0.875 percent portion of the state's sales tax, he said.
SB552 and HB1830, the bills that would authorize the use of accumulated surplus funds, would provide:
• Up to $90 million to Medicaid.
• Up to $60 million to the state Department of Education's Public School Facilities and Transportation Division for the state's share of costs for public school facilities.
• Up to $30 million to the Arkansas Economic Development Commission for the Quick Action Closing Fund for incentives to attract new business and economic development.
"If all of AEDC's current commitments from the Governor's Quick Action Closing Fund come to fruition, there would be no money left in this fund," said commission spokesman Scott Hardin. The fund has been replenished to varying degrees every two years since it was launched in 2007, he said.
• Up to $20 million to ensure that the state has about $47.5 million in matching funds to obtain $200 million in federal highway dollars available this fall under a new federal highway law. Earlier this month, Hutchinson announced that the state Highway and Transportation Department would contribute about $20 million to ensure the state has enough matching funds.
Last year, the Legislature enacted a highway plan by Hutchinson that, starting in fiscal 2018, will use a combination of surplus funds, interest earnings from the state treasury and reallocated funds to meet the match.
• $12.9 million to the state's rainy-day fund. This allocation could reach up to $20 million, depending on general-revenue tax collections, state officials said.
• Up to $10.5 million for state Department of Correction lease payments tied to debt service for prisons in Malvern and Newport.
• Up $2 million to the Arkansas Economic Development Commission's business-technology accelerator program.
Neither measure would allocate new discretionary funds for lawmakers or the governor to steer to their favored projects.
Earlier in this year's session, the Legislature authorized a supplemental budget request of $14 million in one-time funds for the Department of Human Services' Children and Family Services Division to help shore up its foster-care program.
A Section on 03/30/2017