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story.lead_photo.caption A "road closed" sign is shown in this file photo.

Legislative leaders have signed off on Gov. Asa Hutchinson's request to transfer $20.8 million out of the covid-19 rainy-day fund to the state Department of Transportation.

The governor's 2016 highway funding plan counts on 25% of general revenue surpluses beyond fully funding the general revenue budget, $20 million a year in interest earnings from the state treasury and the reallocation of several million dollars a year to raise at least $50 million a year in state money, which is used to match $200 million in federal highway funds.

In support of the Arkansas Highway Improvement Plan of 2016, Hutchinson said, the state has identified $29.2 million in funding from treasury earnings as well as the benefit of tax deductions and offsets.

"The state had also anticipated a significant revenue surplus at the conclusion of the 2020 fiscal year, one quarter of which would have helped the state meet its minimum commitment to ARDOT [Arkansas Department of Transportation]," the governor wrote in a letter to Larry Walther, secretary of the state Department of Finance and Administration.

"However, the state's economy has been affected by the ongoing COVID-19 pandemic, and projected surpluses have disappeared," Hutchinson said. "The loss of those surpluses has created an unanticipated funding need in order to meet the state's annual commitment under Act 1. Having already identified $29.2 million, the state's remaining outstanding obligation is $20.8 million."

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Act 1 of the March 26-28 special session created the covid-19 rainy-day fund. Its express purpose is to "offset general revenue reductions, funding needs and unanticipated needs created by the COVID-19 crises," the governor wrote. The law that created the rainy-day fund authorized it to receive the transfer of $173 million in state surplus funds.

Hutchinson said he requested the transfer of $20.8 million to the Department of Transportation from the covid-19 rainy-day fund, adding that "the onset of the COVID-19 pandemic, subsequent loss of projected budget surpluses, and need to support our state's system of highway transportation and infrastructure supports this request."

Walther said in a letter to lawmakers that the balance in the covid-19 rainy-day fund will be $127.9 million after the $20.8 million transfer to the Department of Transportation.

The approval of two of three leaders or their designees in both the state House of Representatives and the state Senate is required for the governor to use money in the covid-19 rainy-day fund.

Senate President Pro Tempore Jim Hendren, R-Sulphur Springs, said Friday in a text message to the Arkansas Democrat-Gazette that he and Senate Democratic leader Keith Ingram of West Memphis approved the Republican governor's request.

But Sen. Bart Hester, R-Cave Springs, said Friday in a text message to the Democrat-Gazette that "I was a no" on the governor's request.

That's an "emergency of their own making," he said, and could have been discussed at a June 19 meeting of the Legislative Council.

House Speaker Matthew Shepherd, R-El Dorado, House Democratic leader Fred Love of Little Rock and Rep. Marcus Richmond, R-Gravelly, approved the governor's request, said House spokeswoman Cecillea Pond-Mayo.

The finance department on March 23 trimmed the state's fiscal 2020 general revenue budget by $353.1 million, to $5.38 billion.

To justify the budget cut, the governor cited projected declines in general revenue collections and his extension of the individual income tax filing and payment deadline from April 15 to July 15 -- which is in fiscal 2021 -- to match a step taken by the federal government. But state tax collections instead exceeded the reduced projections through the end of May.

So far, Hutchinson hasn't announced any changes to the general revenue forecasts for fiscal 2020 or 2021. Fiscal 2020 ends Tuesday. Fiscal 2021 begins Wednesday.

In the fiscal session in April, the Legislature approved a $5.89 billion general revenue budget for fiscal 2021.

The latest general revenue forecast would provide $5.68 billion for that budget and leave $212.2 million unfunded.

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