The state's proposed Revenue Stabilization Act developed by legislative leaders and Gov. Asa Hutchinson would increase the general revenue budget by $175.1 million to $6.02 billion in the fiscal year starting July 1, with most of the increases going to the public schools and human service programs.
The proposed 2.9 % increase in the state's general revenue budget for fiscal 2023 unveiled in the draft Revenue Stabilization Act placed on state lawmakers' desks Thursday is smaller than Hutchinson's initial proposal made nearly two months ago.
On Jan. 11, Hutchinson proposed a $194.6 million, or a 3.3 %, increase in the state's general revenue budget to $6.04 billion in fiscal 2023, which starts July 1. The governor's proposal envisioned leaving a $174.4 million general revenue surplus at the end of fiscal 2023.
At that time, he acknowledged that the proposed increase is higher than he would prefer, but the needs of the state -- including his plans to reduce the developmentally disabled waiting list and make Arkansas State Police troopers' salaries more competitive in the South -- and state government's healthy financial position support the increase
Legislative leaders said Thursday the proposed Revenue Stabilization Act for fiscal 2023 largely tracks Hutchinson's proposed general revenue budget other than a smaller proposed increase for the state's Medicaid program and a reduction in the allocation for the state's performance fund.
"With the way everything is it is a conservative budget," said Senate President Pro Tempore Jimmy Hickey, R-Texarkana.
"We have been able to secure the state hopefully the long-term," he said, noting the state has $1.2 billion in the state's catastrophic reserve fund.
House Speaker Matthew Shepherd, R-El Dorado, said Joint Budget Committee Co-Chairmen state Sen. Jonathan Dismang, R-Searcy, and Rep. Lane Jean, R-Magnolia, "worked really hard to try to get down below 3 %."
The proposed Revenue Stabilization Act also would transfer $150 million from the general revenue allotment reserve fund to the various improvements and projects set aside in the restricted reserve fund. Last month, Hutchinson said the Department of Finance and Administration conservatively estimates a general revenue surplus of $500 million at the end of fiscal 2022 on June 30.
Shepherd and Hickey said a proposed prison expansion and a new veterans home in Northwest Arkansas are among the projects that could be financed out of these restricted reserve funds. The approval of the Legislative Council is required to tap restricted reserve funds.
Hutchinson said Thursday that the proposed general revenue budget "is sufficient enough to achieve my goal of serving everyone who is currently on the developmental disability waiting list by 2025.
"That was one of my financial priorities with this budget and it will still be achieved while trimming the expense growth down to less than 3%," he said in a written statement.
"We continue to increase Medicaid funding but the reduction in growth will not impact our delivery of services. The same is true for the Performance Fund," Hutchinson said.
The General Assembly is taking today off and plans to return Monday and Tuesday when legislative leaders hope to wrap up action in the fiscal session.
Tuesday will be the 23rd day of this year's fiscal session.
Priorities for general revenue funding of programs are set in the Revenue Stabilization Act, which is enacted every year by the Legislature and the governor and keeps the state from deficit spending. The state's two largest sources of general revenue are individual income taxes, and sales and use taxes.
The proposed Revenue Stabilization Act would create two categories for spending priorities in fiscal 2022: A and B.
Category A, the highest priority, would be allocated $5.685 billion. Category B would be allotted $338.5 million.
Hickey said the state's general revenue forecast for fiscal 2023 would fully fund both Category A and Category B in the proposed Revenue Stabilization Act.
The proposed Revenue Stabilization Act would increase the general revenue allocation for the public school fund by $69.6 million, or 3 %, to $2.32 billion in fiscal 2023, according to Bureau of Legislative Research records. The proposal also would increase the general revenue allocation by $28.5 million for the educational facilities partnership program to $70.3 million.
Both increases are in concert with the educational adequacy recommendations made by the House and Senate education committees.
The proposed Revenue Stabilization Act also would increase the general revenue allocation for the Department of Human Services by $46.3 million, or 2.5%, to $1.82 billion, according to Bureau of Legislative Research records. Hutchinson initially proposed a $66.3 million increase for the department to $1.84 billion.
The proposed Revenue Stabilization Act would increase the general revenue allocation for the Department of Human Services' grants account, including Medicaid, by $23.5 million, or 1.7%, to $1.39 billion, Bureau of Legislative Research records show. Hutchinson initially proposed a $43.5 million increase in the general revenue budget for grants to $1.41 million.
Hickey said "that was the governor's decision on how they brought that down because the Legislature wanted to see it lower."
Senate Bill 54 would set aside the first $37.6 million of funding allocated to the Department of Human Services' grant account to be used for Hutchinson's plan to reduce the developmentally disabled waiting list. The bill cleared the Senate on Thursday.
In mid-December, Hutchinson unveiled his plan to provide services by June 2025 to the 3,204 people on the state's waiting list for people with intellectual and developmental disabilities who want to stay in their homes and communities.
According to Bureau of Legislative Research records, the proposed Revenue Stabilization Act would increase the general revenue allocation for colleges and universities by $12.9 million, or 1.6%, to $775.6 million in fiscal 2023.
The proposed Revenue Stabilization Act would increase the general revenue allocation for county jail reimbursement by $6.4 million to $25.7 million. The $6.4 million increase would be for raising the rate that counties are reimbursed for holding state inmates from $32 to $40 per day for each inmate, Bureau of Legislative Research records show.
The proposal also would increase the general revenue allocation for the Division of Correction by $3.8 million, or 1%, to $378.9 million in fiscal 2023. The $3.8 million increase for the Division of Correction is the result of a $2.1 million increase for a regional jail and $1.5 million increase for medical contract payments.
The proposed Revenue Stabilization Act also would increase the general revenue allocation for the Arkansas State Police by $7.4 million or, 10.5%, to $78.1 million in fiscal 2023 to help bolster the salaries of state troopers.
The proposal also would the general revenue budget for the Economic Development Commission by $5.8 million, or 38%, to $21 million in fiscal 2o23. The $5.8 million is for Acccelerator programs that provide economic stimulus to the state and are currently financed out of one-time state funds, according to a state budget official.
The state's Performance Fund would be allocated $10 million in fiscal 2023, down from Hutchinson's proposal to allocate $16 million to the fund, Hickey said.
The Performance Fund is to be used to cover shortfalls in personnel expenses and may only be used by state agencies funded with general revenue, said Department of Finance and Administration spokesman Scott Hardin.
Hickey said the $150 million transfer from the general revenue allotment reserve fund to the various improvement and projects set aside in the restricted reserve fund would use surplus general revenues to finance several projects, including the proposed prison expansion, and construction of a new veterans home in Northwest Arkansas.
"The reason that we are doing it that way is because we have a lot of the members who want to make sure they have done their due diligence, especially with the cost of the prison and all the other projects," he said.
Last month, Hutchinson estimated the cost of a 498-bed addition at North Central Unit in Calico Rock at between $60 million and $100 million.
Rep. Denise Garner, D-Fayetteville, said Thursday night that she is concerned about the funding for prison expansion.
"I do understand we're in a crisis situation for high-security beds, but if past history is an indicator, if we have the beds we fill them without tackling the systemic changes that need to be made such as adequate staffing, including prosecutors and public defenders, rehab/education/workforce training programs and re-entry services," she said in a text message to the Arkansas Democrat-Gazette.
The total cost of a proposed 96-bed veterans home in Northwest Arkansas is projected to be $43 million to $45 million, Department of Veterans Affairs spokeswoman Sue Harper said Wednesday.
"The Veterans Administration will only consider funding its two-third match after the host state has approved its one-third match," she said. The state envisions eventually constructing the veterans home in Northwest Arkansas in 2024-2025, she said.