The Legislature's Joint Budget Committee voted Thursday to advance a proposal that would allow taxpayers with 529 college savings plans to use withdrawals for tuition at a public, private or religious elementary or secondary school.
After 20 minutes of debate, the committee voted 34-8 to add an amendment proposed by Sen. Jason Rapert, R-Bigelow, to House Bill 1222, which is the state treasurer's appropriation bill for fiscal 2019 that starts July 1. The committee's Special Language Subcommittee recommended the amendment Wednesday.
The action came after state Department of Finance and Administration Director Larry Walther told lawmakers, "I think philosophically the governor is in support of a bill like this," when asked about Gov. Asa Hutchinson's position on Rapert's proposed amendment.
"Our concern is the budget doesn't have the $2 million that Sen. Rapert discussed or the $5 million that [assistant state revenue commissioner Paul] Gehring has mentioned, so we don't have it in the budget for [fiscal] 2019," Walther said, referring to how much the proposal is projected to reduce state tax revenue each year.
Rapert's proposal is projected to reduce revenue by up to $5.2 million a year, based on the assumption of each private-school family signing up and taking full advantage of the plan. The estimate assumes that there are 24,525 private-school students in the state based on the average of two reports, the department said in its legislative impact statement. Arkansas has about 480,000 public school students, according to the state Department of Education.
A taxpayer may take a deduction of up to $5,000 on his Arkansas income tax return for contributions to an Arkansas college savings plan or up to $3,000 for contributions to an out-of-state college savings plan, the department said. Previous federal law limited the use of plan funds to higher-education expenses. Distributions after Dec. 31, 2017, may include tuition at an elementary or secondary public, private or religious school under the federal Tax Cuts and Jobs Act signed by President Donald Trump.
But state Sen. Joyce Elliott, D-Little Rock, said Rapert's proposed amendment is a major policy change and it's "something that we ought to be doing in a regular session with a full discussion from the public.
"Just because the feds have made this change, do you know it is a good thing for Arkansas, especially when there are so many other things we haven't funded?" she said.
Rapert said, "We simply have to make Arkansas law harmonize with the federal law because I have had emails since the first of the year where Arkansas families saw that they can now use that money for K-12 and they took it out to help pay for kids' education, and our state has been positive on giving families choices on how to educate their children.
"This is not a voucher issue. This is not taking money from the state of Arkansas for a student and putting it over to a private school," he said.
Rapert said that for the finance department to estimate that his proposal would reduce revenue by $5.2 million a year, it also assumes "that every one of those students come from a home in which there is only one child," and "that their parents are not already putting money into a 529 plan and already getting that deduction in Arkansas.
"Most of us actually think it probably might be $2 [million] to $2.5 million, something like that," he said, referring to the projected cost.
"With a [state income] tax cut proposed next year and also with a surplus being projected, I think we need to make sure that Arkansas families enjoy the benefits of what was meant in that federal bill and, if somebody in the next session wants to run a bill in which you get rid of the deduction for our Arkansas families putting money into these plans, then stand up and run your bill," Rapert said.
Sen. Bruce Maloch, D-Magnolia, said, "Even though the federal law expanded the reason for which you can withdraw money from the 529 [plans], the federal law does not allow a deduction when you put it in, so there was no revenue impact to the federal government when this was expanded.
"There is a revenue impact to the state, so I'm just saying it was an easier call really at the federal level than the one that we are making today," Maloch said.
Rep. Kim Hendren, R-Gravette, said that "some of the most questionable stuff that I have ever seen here has come out" of the Joint Budget Committee's Special Language Subcommittee since 1979 and the Legislature should abolish the subcommittee.
He questioned why Rapert didn't present his proposal amendment as a separate bill for lawmakers to consider in this year's fiscal session. Under the Arkansas Constitution, a two-thirds vote in the House and Senate is required for permission to introduce a nonappropriation bill in a fiscal session.
Rapert said he presented his amendment to the subcommittee because "special language has been utilized for very weighty matters in this Legislature, including one of the biggest, which has been a discussion about every single year I've have been and that is the private option" version of Medicaid expansion. That use of Medicaid provides health insurance for low-income people.
"I asked if we should run a separate bill or if we should do this in special language. I was advised by multiple attorneys within [the Bureau of Legislative Research] that we can handle this in special language," he said.
"I did not foresee that there would be such a small but very loud opposition to letting families use their own money that they pay taxes on and put into an account and using it for kids' education, whether at a private school, a public school, a religious school or in college," Rapert said.
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A Section on 02/23/2018
Print Headline: Panel vote advances proposal on tuition; Bill lets families withdraw savings