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House, Senate approve $5.84B annual budget

Increase from $5.68B comes in spite of pandemic hurt by Michael R. Wickline | April 27, 2021 at 7:33 a.m.
The Arkansas flag is shown in this file photo.

The Arkansas House and Senate on Monday approved identical bills that would distribute $5.84 billion in general revenue to state-supported programs in the coming fiscal year, an increase over the current funded budget of $5.68 billion.

Most of the increased revenue in fiscal 2022, which starts July 1, would be distributed under the state's Revenue Stabilization Act to human services programs, public schools, colleges and universities, and correctional programs under Senate Bill 702 and House Bill 1949.

The Senate voted 35-0 to approve SB702 , sending the measure to the House.

The House voted 94-2 to approve HB1949, sending the measure to the Senate. Reps. Josh Miller, R-Heber Springs, and John Payton, R-Wilburn, dissented.

The fiscal 2021 budget totaled $5.89 billion, but the budget was not fully funded because a forecast issued April 2, 2020, anticipated the covid-19 pandemic fallout would reduce general revenue to $5.68 billion.

But net general revenue has exceeded that forecast by more than $500 million so far and at least part of the unfunded budget is expected to be covered in this fiscal year.

The proposed Revenue Stabilization Act would prioritize the distribution of revenue in Categories A, B, C and D, with A having the highest priority and funded first under the two bills.

The bills would distribute $5.65 billion to programs in Category A, $73.7 million in Category B, $99.7 million in Category C, and $17.1 million in Category D. The revenue forecast for fiscal 2022 would fully fund all four categories, lawmakers and state officials said.

The $5.84 billion budget for fiscal 2022 is based on an estimated net general revenue forecast of $6.06 billion before the Legislature's tax cut measures collectively reduce projected net general revenue by $203.1 million. The budget also projects a surplus of $17 million next fiscal year.

The tax cuts include $179 million from Act 248, which is covid-19 relief program tax deductions and loan forgiveness, in the amount of $179 million; $3.1 million from Act 154, which exempted unemployment benefits from income taxes; and other tax cuts the legislators have approved this year, said state Department of Finance and Administration spokesman Scott Hardin.

The Department of Human Services' budget would increase by $67 million to $1.78 billion in fiscal 2022 under the proposed Revenue Stabilization Act.

Colleges and universities would see their current budget of $717.4 million rise to $762.7 million in fiscal 2022.

The allocation to the public school fund would increase from $2.23 billion to $2.25 billion. Coupled with other funds, the budget will help cover a $99.7 million increase in public school funding in fiscal 2022 recommended by the House and Senate education committees last year to provide an adequate education to public school students.

SURPLUS FUNDS

The Senate on Monday also voted 35-0 to approve Senate Bill 375, a proposal to allocate surplus state funds, sending the measure to the House.

Gov. Asa Hutchinson said last week that state officials expect a general revenue surplus of about $600 million at the end of fiscal 2021 and expect similarly strong growth in tax collections in fiscal 2022 as a result of the federal covid-19 stimulus package.

Officials estimate the state's long-term reserve fund that now has a balance of $209.9 million could increase to $711.1 million, with the help of $448.3 million of the general revenue surplus in fiscal 2021 and $92 million of the surplus accumulated before fiscal 2021. Hutchinson has described the reserve fund as a long-term savings account.

Lawmakers and state officials also plan on restricted reserve fund set-asides totaling $171.4 million, carrying over money for the Quick Action Closing Fund to retrain and recruit private industry, and a state rainy-day fund of $18.5 million.

Under SB375, the restricted reserve set fund could be tapped to fund up to $30 million for the Quick Action Closing Fund, $14.1 million to cover Department of Corrections debt service payments, up to $5.8 million for the Arkansas Economic Development Commission's economic stimulus programs, and up to $3 million for state police vehicles.

This plan factors in a $50 million transfer to the state Department of Transportation to help match federal highway funds, plus another $35 million transfer to the Department of Transportation.

Information for this article was contributed by Rachel Herzog of the Arkansas Democrat-Gazette.

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