State lawmakers say they were already planning to change how local projects are funded when the Arkansas Supreme Court struck down their previous method of individual legislators distributing millions in grants to pet programs.
"I'm not sure if it changes the direction we were already headed in," House Speaker Jeremy Gillam, R-Judsonia, said about the high court's Thursday ruling.
In a 5-2 decision, the state Supreme Court said lawmakers' 2015 appropriations acts for General Improvement Fund, or GIF, grants to a central Arkansas development nonprofit violated the Arkansas Constitution. Those appropriations did not explicitly state how the money would be spent, the court ruled.
The appropriations acts sent $2.9 million for "grants" to the development district, records show. The nonprofit then distributed the money to local projects, almost always at the direction of individual lawmakers.
The Central Arkansas Planning and Development District in Lonoke is one of eight regional agencies that have received at least $50 million total since 2013 from the state's General Improvement Fund, an analysis by the Arkansas Democrat-Gazette found this year.
The money financed more than 4,200 local grants directed by individual lawmakers to assistance agencies, local governments and others, including churches and faith-based groups.
Early this year, a few of those grants drew allegations of corruption by federal authorities.
In January, former state Rep. Micah Neal, R-Springdale, pleaded guilty to a federal fraud charge alleging he received kickbacks for directing grants to a local Christian college and an addiction treatment center. Former state Sen. Jon Woods, R-Springdale; Ecclesia College President Oren Paris III; and consultant Randell Shelton Jr. face similar charges and have pleaded innocent.
Thursday's Supreme Court decision came in a lawsuit brought by former Rep. Mike Wilson, D-Jacksonville. Twice before, in 2006 and 2007, the high court sided with Wilson in striking down the practice of individual lawmakers directly awarding General Improvement Fund grants toward local projects.
Starting in 2007, lawmakers continued General Improvement Fund grants by channeling the money through regional planning and development districts.
They argue that surplus spending does have merit in funding many needs in Arkansas, such as rural fire departments, libraries and roads.
The practice continued through the 2015 legislative session.
Facing a tighter budget this year, and after news of the federal investigation, lawmakers and Gov. Asa Hutchinson chose not to direct General Improvement Fund grant money to the eight regional districts.
If the grant program continues, "there will have to be major changes," said state Sen. Larry Teague, D-Nashville, chairman of the Joint Budget Committee.
He noted that the General Assembly will not likely have to decide how it uses General Improvement Funds until it meets for its next general session in 2019. Between now and then, all the House seats and half the Senate seats will be up for election in 2018.
Senate President Pro Tempore Jonathan Dismang, R-Searcy, said the Legislature is already moving toward a more transparent system.
In an interview Friday, Dismang said he would like to see both the legislative and executive portions of the General Improvement Fund moved into a single pot of rainy-day funds. Spending money from that fund requires a request by the governor and approval from Legislative Council.
"That's a transparent process, the public is made aware through the governor's letter ... and there can be discussion" in the Legislature, Dismang said.
Asked about Dismang's proposal, Wilson said he thought it could be one way to ease his concerns.
"There are all kinds of things that any excess revenue could be dedicated to, but that will have to be thought out well in advance," Wilson said.
Teague, the budget committee leader, said shrinking surpluses were already affecting lawmakers' attitudes about spending from the General Improvement Fund.
"As we continue to work to make our taxes fairer, that seems to be leaning out the budget," said Teague. "I think there will always be money available, but whether we use it for that or not is uncertain."
Rep. David Whitaker, D-Fayetteville, an attorney who leads the House Democratic Caucus, said the court was clear that it did not want individual lawmakers divvying up pots of money to be spent as they saw fit.
"As we know it, the concept of GIF funding is done," Whitaker said. "I don't know how you get around the court's [majority] opinion on this one. I don't know why you'd want to."
Whitaker said he felt "uneasy" about directing General Improvement Fund grants when he did so in 2013 and 2015. He said he made his own rule that he would only give his approval to capital grants -- such as fixing a building or buying equipment -- and not paying salaries.
Arkansas cities and towns still have needs that are worthy of surplus funds, Whitaker said, though he said it was too early to tell how the General Assembly would be able to fund them in a transparent way.
Because the court focused on the appropriation acts' lack of a "distinctly stated" purpose, that makes it harder for lawmakers to decide how to comply with the court's ruling, Dismang said, and also could affect how they write all other appropriations bills.
"I think the question is how do we move forward with the question of specific," Dismang said.
While lawmakers discussed the future of surplus spending Friday, recipients of grants in central Arkansas tried to learn whether they would receive any more General Improvement Fund dollars promised for local projects that aren't yet complete.
"We have at least 22 projects" totaling more than $675,000 in grants that are already promised, said Central Arkansas Planning and Development District Executive Director Rodney Larsen. "We've already been called by two or three saying, 'What are we going to do?'"
Former state Rep. Mike Wilson of Jacksonville is shown in this file photo.
The central Arkansas district has $923,086 in unspent General Improvement Fund grant money from the 2015 session, he said. But Wilson's lawsuit asked for unspent grant money to be returned to the state treasury. The Supreme Court sent the lawsuit back to Pulaski County Circuit Judge Chris Piazza for that determination.
A Section on 10/07/2017
Print Headline: Grants ruling draws reaction; Planned to change pet-projects funding, legislators say