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story.lead_photo.caption Parliamentarian Barrett Dudley works in the House Chamber at the state Capitol on Friday during preparations for Monday’s opening of the 92nd General Assembly. - Photo by Staton Breidenthal

Arkansas' 92nd General Assembly will wrestle with how deeply to cut individual and corporate income taxes, while trying to develop a plan to raise more money for highways, reorganize state government and raise starting salaries for teachers during the regular session starting Monday.

Also, the Republican-controlled Legislature will enact a general-revenue budget; decide how much money to give public schools, human services and other programs; and consider reauthorizing the use of federal and state funds to provide health insurance for about 230,000 low-income Arkansans.

Other items predicted for the legislative agenda include authorizing sales-tax collection on Internet sales; new stand-your-ground and "red flag" gun laws; ethics laws; and further restrictions on abortion. Regular sessions also are when lawmakers pick proposed constitutional amendments to refer to voters in the 2020 general election.

The House of Representatives will have 76 Republicans and 24 Democrats, and the Senate will have 26 Republicans and nine Democrats -- the same number as the chambers had in the 2017 regular session.

"I think it will be one of the most historic sessions in my lifetime, the most historic session in my lifetime because we are tackling so many big issues from the highways and long-term funding of that to transformation [of state government] and on and on down the list, tax cuts included," said Gov. Asa Hutchinson, who will be sworn in on Tuesday to his second four-year term.

The Republican governor's plan to reduce the number of agencies that report directly to him from 42 to 15 would be the most sweeping overhaul of state government since Gov. Dale Bumpers, a Democrat, led an effort to consolidate 60 agencies into 13 under Act 38 of 1971.

[RELATED: Complete Democrat-Gazette coverage of the Arkansas Legislature]

But House Democratic leader Charles Blake of Little Rock said it's hard for him to get a good read on the coming regular session in the House because "the process has been slowed down." That's because, he said, representatives and interest groups won't know who serves on what committees until Speaker Matt Shepherd, R-El Dorado, announces his committee appointments on Monday.

In the 2017 session, the House changed its rules to grant the speaker the authority for committee assignments. Previously, the assignments were based on seniority and determined two months before the start of the regular session. Shepherd is the first speaker to make committee assignments under the new rules.

TAX CUTS

Hutchinson has proposed cutting the number of state individual income-tax tables from three to one and gradually reducing the top individual income-tax rate from 6.9 percent to 5.9 percent.

His plan is projected by state officials to reduce revenue by nearly $192 million a year after it's fully implemented. He originally proposed phasing in the cut over four years but agreed to seek a three-year phase-in because that was the preference of the Legislature's tax overhaul task force.

The plan would raise rates for some taxpayers. It would increase the standard deduction from $2,200 to $6,800 for single taxpayers and from $4,400 to $13,600 for married taxpayers.

A snag emerged in the plan last week after state officials concluded that roughly 200,000 taxpayers would pay more than $30 million in additional income taxes under the governor's plan. Hutchinson and key lawmakers said they're trying to figure out how to change his plan to guarantee that no filer will be hit with a tax increase.

Hutchinson and state officials refer to his plan as the "2-4-5.9" plan because of the rates that ultimately would be charged at different income levels. People with taxable income up to $8,000 would pay a 2 percent rate; those with between $8,001 and $18,000 in taxable income would pay 4 percent; and those making $18,001 and up would pay 5.9 percent.

Since Hutchinson's plan would boost individual income-tax rates on some, it would require a three-fourths vote of the 100-member House and 35-member Senate for approval.

"The governor has his plan and we are looking to him for leadership on that," Shepherd said. "He just won re-election. He campaigned largely on that plan. I think we are going to cut taxes. I think the real question is how exactly do we do it and what other reforms might be involved in that process."

Sen. Jim Hendren, R-Sulphur Springs, said, "The goal of getting the top rate below 6 [percent] so we don't stand out in the region as the highest-taxed state in the South still has a very good chance of passing." Hendren is a co-chairman of the legislative tax task force and also is set to become the next Senate president pro tempore.

The tax-overhaul task force also developed a tax-cut plan that it called Option A, which would reduce the top rate to 6.5 percent and cut the number of individual income-tax tables from three to one. Option A would require a simple majority vote -- not a three-fourths vote -- for approval. State officials projected Option A would reduce revenue by $264 million a year.

Hendren said he expects a separate bill to be introduced, based on recommendations of the tax-overhaul task force, for corporate income-tax cuts that would be phased after the state meets certain tax-collection thresholds. Those cuts would follow the implementation of a plan to cut the individual income taxes.

"We are talking about over $400 million in phase one and phase two in tax relief," Hendren said. "We have averaged about $50 million a year in tax cuts the last six years, so you're talking about a plan that if we use the same rate of tax reduction, seven, eight years long. It is still important to map out that plan so businesses and [the Arkansas Economic Development Commission] -- the folks that are trying to recruit businesses now -- know where Arkansas is going.

"But it is also important for us to anticipate that between now and then, there might be an economic downturn, and the last thing we want to do is to have an economic downturn and then trigger tax cuts that make the state go into fiscal distress."

Democrats also are thinking about taxes in their legislative plans.

"From our perspective, we are geared up to fight for the families of the state of Arkansas" by creating an earned income tax credit for low-income Arkansas and authorizing sales-tax collections on Internet sales, Blake, the party's House leader, said. He also said legislative plans include expanding health coverage for Arkansans.

STATE BUDGET

Hutchinson proposes a state general-revenue budget totaling $5.75 billion for fiscal 2020, which starts July 1.

That budget is $125.2 million more than fiscal 2019's budget. Most of the increase would go to human services and education programs, including a boost in starting pay for teachers. The proposal factors in a $47.4 million reduction in general revenue from phased-in implementation of his "2-4-5.9" income-tax plan.

Hutchinson proposes to raise the starting teacher salary from $31,800 to $36,000 over the next four years He also wants lawmakers to transfer $60 million from the educational adequacy fund to the public school fund for implementing teacher pay raises.

The state general-revenue budget for the Department of Human Services would increase by $68.2 million to $1.73 billion, including a $61.6 million increase for its grants budget for Medicaid to $1.3 billion. The department obtains other funding from the federal government.

The state pays 7 percent of the cost of the Medicaid expansion program that provides health insurance coverage to about 230,000 low-income Arkansans. The program is called Arkansas Works under Hutchinson. The state's share will increase to 10 percent in 2020 under existing federal law.

In fiscal 2019, the state's share of the cost of the program has been projected at $135 million and the federal government's share at $1.95 billion, according to Scott Hardin, a spokesman for the state Department of Finance and Administration. In fiscal 2020, the state's share is projected at $177 million and the federal government's share at $1.91 billion.

"I don't see a lot of tension on the budget like we have had in some years," said Hendren. "Part of that is going to depend on how aggressively we decide to implement tax cuts and that's why tax cuts really have to be one of the first issues we deal with."

ARKANSAS WORKS

Hutchinson said he met in recent weeks with federal government attorneys who are fighting a lawsuit challenging the work requirement for many of Arkansas Works' 230,000 participants.

"I believe that we'll win," the governor said. "As to whether this particular [federal] district judge rules in our favor is a little bit closer question because he's the same judge that knocked down Kentucky's first round." He was referring to Kentucky having a similar requirement.

"But in the end, hopefully, he will approve it," Hutchinson said. "But regardless, I do believe that the work requirement will be able to stay in place until it is finally heard and upheld."

Hutchinson said he was confident that the Legislature would muster the three-fourths vote needed to approve state and federal funding for the program.

"If the judge [overturns the work requirement] for various reasons, we'll see if there is a way we can adjust and satisfy the courts working with the federal government," Hendren said. "But I don't think a federal judge's decision is going to immediately allow Arkansas to throw our budget into turmoil and to terminate Arkansas Works."

MONEY FOR HIGHWAYS

Hutchinson, Hendren and Shepherd said there is no consensus in the Legislature about a long-term plan for boosting funding for highways, including whether to refer a plan to voters.

Senate Republican leader Bart Hester of Cave Springs said there is "zero" chance that the Legislature will approve a tax increase to fund highways. He also said it's a "coin flip" whether lawmakers would refer a highway funding plan to voters.

Hutchinson said, "I am committed to a highway plan and the Legislature wants time to work on a plan themselves, so we are seeing what they come up with."

He said he considers a permanent extension of the 10-year half-percent sales-tax increase for highways approved by voters in 2012 to be "foundational" for a ballot measure that's referred to voters.

"There has to be something that surrounds that to have money that flows more quickly to our highways and maintenance needs, that's probably the biggest part of the debate, so that is still a work in progress and that's one of the undefined items as we go into the Legislature. It is going to be a real challenge because none of that is easy," he said.

Shepherd said, "My feeling is that we have to first look at what resources are available currently that we need to show that we have done our due diligence with resources that are available right now or that might could be moved towards highways before we try to go back to the people with some further proposal.

"My feeling has been all options should be on the table," he said, adding that he supports using some undetermined amount of general tax revenue for highways.

REORGANIZATION

Hutchinson said his proposal to reduce the number of state agencies reporting to him from 42 to 15 will require a two-thirds vote for approval in the House and the Senate because the legislation will change some provisions of initiated acts.

"I would like that to go early in the session because once you pass transformation, and hopefully that will go through, that impacts subsequent legislation just in terms of terminologies and how things work," he said.

He said he anticipates his reorganization wouldn't save money until fiscal 2021, which starts July 1, 2020. He said he conservatively estimates the savings at about $15 million a year and "everybody hopes it will be more."

Thus far, Rep. Andy Davis, R-Little Rock, has pre-filed seven bills that would implement parts of Hutchinson's reorganization proposal.

Davis said he plans to file the other nine soon in order to get feedback from the public and lawmakers on them. Then, he said, he will withdraw the bills from consideration and consolidate them into one bill that is estimated to be 1,500 pages.

"I think generally the response has been positive," Shepherd said. "But we are in that phase of members are reviewing, finalizing the drafting [of the bills], really looking at the details of it, and we'll evaluate if there is any significant issues or concerns or push-back. ... But I am optimistic that we are going to be able to get something down on that."

Photo by Democrat-Gazette file photo
House Democratic leader Charles Blake of Little Rock is shown in this file photo.
Photo by AP file photo
House Speaker Matthew J. Shepherd, R-El Dorado, is shown in this file photo.
Photo by Staton Breidenthal
Sen. Jim Hendren (left), R-Sulphur Springs, is shown with Senate President Pro Tempore Jonathan Dismang, R-Searcy, in this file photo.
Photo by Charlie Kaijo
Governor Asa Hutchinson speaks during a ribbon cutting, January 4, 2019 at the Jones Center in Springdale.

SundayMonday on 01/13/2019

Print Headline: Tax cuts, teacher pay on to-do list for Arkansas Legislature

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Archived Comments

  • Knuckleball1
    January 13, 2019 at 7:31 a.m.

    Hide your piggy banks, your wives and daughters with this group in Little Rock anything is likely to happen and probably will. The Thieves are back in town to see how much money they can get for their buddies.
    ……………………………….

    I don't like paying taxes any more than the next person but am old enough to realize that money does not come from thin air in Arkansas. There are to many things that the State needs to repair or raise teacher salaries (Bridges, Roads, Water Systems, Sewer Systems, High Speed Internet for the Rural parts of the state, etc.).

    ………………………………………………………..

    All my life (and that is several years) I have heard Thank God for Mississippi and my Mississippi Relatives have said Thank God for Arkansas, since one or the other has ranked as the 49th or 50th State in the Union for decades. Now the Possum Grinning Gov wants to make Arkansas more like Kansas by cutting taxes that the State will not have the money to fund what is necessary. He keeps taking money from DHS and that pot is running empty and more people that need the help keep getting cut from the program. The Gov and his crew of goons act like they want to sweep the state of the poor and sick as not to be bothered with them. Yet these so called Christians will sit in Church this morning and claim to be the best Christians in the state and many will toot their own horn like the guy from Bigelow. A few years ago people were wearing wrist bands with the inscription or initials of WHAT WOULD JESUS DO.!!!! Maybe they need to think about that starting tomorrow.

    …………………………………………

    Bring the Infrastructure up to 21st Century Standards or even think out of the box and start thinking about the 22nd Century so that our Grandkids will not have to worry about it until they have Grandkids of their own. THEN CUT TAXES...

  • RBear
    January 13, 2019 at 7:43 a.m.

    Cut revenues and raise expenses. Oh, and then there's that pesky road infrastructure that's falling apart and has no money allocated. Yea, sounds like our state leaders slept through business classes in school. But of course, those on the right have no clue on the issues this presents. Ever wonder why I call them the Trump demographic, a segment of the electorate that is the least educated of all in the 2016 election and proven to be issue illiterate?

  • wolfman
    January 13, 2019 at 8:41 a.m.

    so he wants to CUT taxes..BUT extend the sales tax to fix highways. asa youre just putting the tax somewhere else. STOP with sales taxes!

  • NoUserName
    January 13, 2019 at 9:15 a.m.

    Last I looked, Arkansas teacher salary - and school funding as a percentage of income - was in line or better with other states on a per capita basis. Teacher salary has also been shown NOT to correlate with student performance. So there will likely be little benefit to raising teacher salaries.

  • Skeptic1
    January 13, 2019 at 9:52 a.m.

    Parents are fleeing our public schools in droves and Charter schools have huge waiting lists. The teachers union has destroyed our schools, bad teachers cannot be fired and mediocre teachers are given awards. If they want a raise they can take it from the interest they are earning from the 17 billion dollars they have in their retirement fund.

  • RBear
    January 13, 2019 at 10:07 a.m.

    Raising teacher salary, which one poster didn't provide all the details about, is to help retain good teachers in our schools at a time when the labor market is shrinking. Currently, AR rankings 22nd nationwide when COL is factored in. Good teachers in schools HAVE been correlated to improved student performance, another point left out of one comment. According to the Rand Corporate,
    - Teachers matter more to student achievement than any other aspect of schooling.
    - Nonschool factors do influence student achievement, but they are largely outside a school's control.
    - Effective teachers are best identified by their performance, not by their background or experience.
    - Effective teachers tend to stay effective even when they change schools.
    ...
    Facts supported by evidence.

  • NoUserName
    January 13, 2019 at 10:51 a.m.

    Your facts are basically head slappers that do nothing to add or subtract to what I've said. Although I do appreciate you doing the math in showing we're currently middle of the pack in teacher salaries based on COL. And 49th in performance. Or is it 48? I also appreciate you driving home my point.
    .
    As for your facts...teachers matter more in schooling than anything else? Really? No, I thought buildings - or maybe administrators - were the #1 thing. Non-school factors influence student achievement? Holy crap. Phone the governor. Effective teachers are identified by performance and NOT experience? Mind blown. Why do we do step raise again? Effective teachers are effective regardless of where they teach? I am dumbfounded. I thought buildings absorbed good teachers - well, buildings clearly ARE the #1 important thing in education. Let me re-think what I've said. Ok. I did. Changes nothing.
    .
    These facts are nothing but an attempt to fool others that you think you know what you're talking about. Anyone with half a brain could have guessed those 'facts.' You had to look them up, didn't you?
    .
    Hutchinson got caught with his pants down over Henderson running on raising teacher salaries. You know, Jared Henderson who worked for TfA. The TfA that received a grant that little Hutch was bribed to give. So Asa whipped his out fully and now has to keep his promise. Or at least look like he is.
    .
    As for you, Bear, I have little interest in engaging in a mental midget whose opinion of facts change when the facts support or disprove whatever it is you think. I do appreciate the concession in the last debate, though. When you have nothing left in the tank, try and link the person to Trump. That always works.

  • RBear
    January 13, 2019 at 11:16 a.m.

    NUN actually you are the midget here. As proven in the last bout, you attempt to deceive by withholding all the facts. I just brought out real details from a reputable source. Your statements are your own without evidence. Oh well, when you’re full of yourself there’s not much room for the opinion of others.
    ...
    A lot of ad hominems but very little fact. BTW, how often do you mentor in schools? How often do you give back or is that too degrading for you?

  • NoUserName
    January 13, 2019 at 11:52 a.m.

    bear - "As proven in the last bout, you attempt to deceive by withholding all the facts."
    .
    Bear - they are working without pay
    me - they will get back pay
    Bear - you're stupid and insensitive
    me - it's just a fact
    Bear - you lie by omission
    me - it's just a fact
    Bear - it's a lie by omission. Also, the workers don't get unemployment
    me - they do, here are the articles.
    bear - oh, just the furloughed workers. You lie by omission. I'm just pointing out your omission
    me - not unlike saying they are working unpaid and not mentioning they will get back pay
    Bear - you're Trump
    .
    ww w.arkansasonline.co m/news/2019/jan/12/trump-says-no-rush-to-declare-wall-emer/?page=1#story-comments
    .
    bear - "BTW, how often do you mentor in schools? How often do you give back or is that too degrading for you?"
    .
    What is your purpose in asking? Do you think what I'm sure you expect my answer will be will somehow validate your argument because you think it'll make you look like a better person? That's what one does when there is nothing left in the argument tank.
    .
    Anyway, this has been amusing, but I'm sure others no longer wish to see you climb out of the spacious hole you've dug yourself. So, last word is yours. Make it a good one.

  • PopMom
    January 13, 2019 at 12:09 p.m.

    RBear and NoUserName,

    Bad teachers and administrators need to be fired, and principals need to be given the authority to fire subject to administrative review. Unfortunately, when education is behind in a state, many people running things do not know the difference between a good and bad teacher. People need to stop hiring cousin Betty for the teaching position and hire the Wang kid instead. Many teachers and administrators need to be trained at great school systems. Absenteeism and passing kids to the next grade when they are not ready are major problems. Each child needs more time and attention reading and performing math problems. Make the kids go to school and fine the parents if they are not in school. Lengthen the school year. Cut back on busing and spend the money on neighborhood schools. Hire master teachers (with increased pay) and administrators to train other teachers. Hire more teaching assistants. Reward teachers for increases in test scores (just make sure that they don't cheat.) There are things being done across the world and the country in education. Some improvements will cost money, but you will save on the costs of crimes and prisons if money is spent on improving the schools.

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