With legislative leaders aiming to wrap up the regular session today, the Arkansas House of Representatives and Senate on Thursday approved identical versions of the state's Revenue Stabilization Act, under which the state's general revenue budget would increase by $177.7 million to $6.2 billion in the next fiscal year.
Most of the increased general revenue would be allocated to education and corrections programs in fiscal 2024 that begins July 1 under Senate Bill 569 and House Bill 1833. The Revenue Stabilization Act prioritizes the distribution of state general revenue to state-supported programs.
The House on Thursday voted 99-0 to send HB1833 to the Senate for further action, and the Senate delayed action on the bill Thursday afternoon. The Senate voted 32-0 to send SB569 to the House, and then the House initially voted 96-0 to approve the bill before subsequently expunging that initial vote.
Joint Budget Committee Co-Chairman Sen. Jonathan Dismang, R-Searcy, defended the proposed Revenue Stabilization Act in response to questions from Sen. Bryan King, R-Green Forest.
With inflation at about 8%, Dismang said the proposed Revenue Stabilization Act would authorize a very conservative general revenue budget that would increase about 2.95% in fiscal 2024.
On Thursday, the House of Representatives voted 95-0 to approve Senate Bill 578 by Dismang that would authorize the transfers of $1.4 billion in unallocated and unobligated state funds, including $1.3 billion from the general revenue allotment reserve balance, and up to $380.6 million in surplus funds in fiscal 2023 largely to set-aside accounts in the restricted reserve fund for nearly 30 projects.
The bill goes to Gov. Sarah Huckabee Sanders.
It would set aside funds in the restricted reserve fund for future prison construction, the state's share of school building costs, state matching funds for federal Infrastructure Investment and Jobs Act grants, and the University of Arkansas for Medical Sciences' National Cancer Institute designation effort.
To tap the funds transferred to the set-asides created in the restricted reserve fund for state agencies, the governor would be required to submit requests to either the Legislative Council outside of a session or the Joint Budget Committee in a session for the funds and get the panel's approval.
Dismang said SB578 proposes setting aside one-time funds for statewide needs and some future expenses. The state already has $1.3 billion in its catastrophic reserve fund, he noted.
Today is the 89th day of the regular session, and legislative leaders aim to wrap up the regular session today.
In the Revenue Stabilization Act for fiscal 2024 under SB569 and HB1833, the general revenue allocation to the state's public school fund would increase by $118.7 million to $2.4 billion in fiscal 2024. General revenue totaling $31.7 million would be allocated for Educational Freedom Accounts to help pay for students to attend private, parochial or home schools.
The state Department of Education has projected Sanders' education overhaul law, Act 237 of 2023, will cost $297.5 million, including $150 million in "new money," in fiscal 2024. Act 237 will raise the state's minimum teacher salary from $36,000 to $50,000 a year, grant other teachers $2,000 salary increases, create Educational Freedom Accounts and enact many other changes in the education system.
House Bill 1688 by Rep. Brian Evans, R-Cabot, would increase per-student foundation funding by $205 to $7,618 for the 2023-2024 school year and to $7,771 for the 2024-2025 school year. The Senate on Thursday voted 33-0 to send the bill to Sanders.
Full-time classified staff, bus drivers, custodians and other school workers would receive funding for about a $2-per-hour raise, Evans said. In addition, the state would fund a 1.8% cost-of-living adjustment for teachers and school secretaries in fiscal 2024 and a 2.2% increase in fiscal 2025, he said.
Under the proposed Revenue Stabilization Act for fiscal 2024 in SB569 and HB1833, the state Division of Correction would get a $55.3 million increase in general revenue to $434.3 million, and the Arkansas State Police would get a $10.5 million increase to $88.6 million.
The state Division of Community Correction would get a $7 million increase in general revenue to $104.7 million, the Department of the Military would get a $2.2 million increase in general revenue to $9.9 million and the Department of Health would get about a $935,000 increase in general revenue to $81.8 million.
The state's colleges and universities would get a $5.6 million increase in general revenue to $781.2 million under SB569 and HB1833, with University of Arkansas for Medical Sciences getting a $5 million increase to $93 million in fiscal 2024.
The University of Arkansas, Fayetteville would receive a $3.3 million increase in general revenue to $134.1 million, Arkansas State University would get an increase in general revenue of about $422,000 to $62.5 million, and the University of Arkansas at Little Rock would receive about $180,000 more in general revenue to $60.5 million under the measures.
The general revenue allocation to the Department of Human Services would increase by $5.5 million to $1.8 billion.
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 bills would create two categories for spending priorities in fiscal 2024: A and B. Category A, the highest priority, would be allocated $6.009 billion. Category B would be allotted $192.6 million.
In November, then-Gov. Asa Hutchinson proposed a $314 million increase in the state's general revenue budget to $6.33 billion in fiscal 2024, with $200 million of the increase earmarked for the public schools.
At that time, the former Republican governor said his proposed budget for fiscal 2024 would represent a 5.2% increase over the current budget of $6.02 billion, leaving a projected general revenue surplus of $254.9 million at the end of fiscal 2024. Considering annual inflation was more than 8% at that time, limiting the growth of the state's general revenue budget to 5.2% reflected conservative budgeting, he said.
The proposed Revenue Stabilization Act for fiscal 2024 doesn't include the $70.3 million in general revenue allocated for the educational facilities partnership program in fiscal 2023, which Hutchinson recommended continuing in fiscal 2024.
Instead, SB578 would create a $500 million set-aside account in the restricted reserve fund for public school academic facilities. That could cover the state's school building costs for five or six years, Dismang said.
In his proposal for fiscal 2024, Hutchinson set aside $41 million in general revenue in fiscal year 2024 for an overhaul of the state's pay plan for executive branch employees. The proposed overhaul of the state's pay plan would cost a total of roughly $80 million after factoring the cost to other revenue sources beyond general revenue.
On March 15, Sanders announced Arkansas taxpayers should not be saddled with the $80 million total cost for a proposal that doesn't consider the strategic needs in education, public safety, health care and corrections. She asked the Department of Transformation and Shared Services to review and rework the existing classification and compensation structure. The plan covers more than 22,000 executive branch employees.
Among other things, SB578 would authorize the transfer of $12 million from the general allotment reserve fund to the University of Arkansas for Medical Sciences to be used for grants for various expenses and working capital for hospital expansion in south Arkansas.
During the House's consideration of the bill, state Rep. Aaron Pilkington, R-Knoxville, questioned why UAMS has been chosen to manage a hospital campus in south Arkansas.
"Were other hospital systems considered?" he asked.
In response, state Rep. Lane Jean, R-Magnolia, who is the other co-chairman of the Joint Budget Committee, said UAMS' presence is "wide and broad in Arkansas."
"I do think they want to be and are the premier hospital in Arkansas," he said. "This was something they felt like they could add to their client base and take on and provide a service to citizens of south Arkansas."
State Rep. Julie Mayberry, R-Hensley, questioned if the one-time funds set aside for education facilities would be immediately accessible to school districts, which she said are struggling to find funding.
Jean said the funding would be available starting July 1.
SB578 also would create an up to $370,000 set-aside in the restricted reserve fund for Rapid ID DNA at the state Crime Laboratory.
Rep. Brit McKenzie, R-Rogers, questioned why the bill set aside that money because the proposed Revenue Stabilization Act includes funding for rapid DNA testing. Jean said this additional money was to ensure enough testing kits were available.
"They're going to use the budget they have in the RSA first. If they need some more so they won't run out we have got additional funding," he said.
Among other large allocations of one-time funds, SB578 would authorize up to $330 million for the correctional facilities set-aside, and up to $200 million for the new state Crime Lab building set-aside in the restricted reserve fund.
The bill also would authorize the transfer of $200 million from the general revenue allotment reserve fund to the federal Infrastructure Investment and Jobs Act set-aside for state matching funds for the federal infrastructure grants, and $40 million from the general revenue allotment reserve fund to the Department of Parks, Heritage and Tourism for expenses to offset the cost of the income tax credits allowed under the Arkansas Major Historic Rehabilitation Income Tax Credit Act.
It also would authorize the transfer of up to $35 million to replenish the state's Economic Development Incentive Quick Action Closing Funds to retain and recruit private industry.
In addition, SB578 would establish:
An up to $100 million set-aside for various general discretionary projects.
An up to $100 million set-aside for UAMS' National Cancer Institute designation effort.
An up to $50 million set-aside for school safety.
An up to $47.1 million set-aside for the state's Employment Benefits Division or contingency.
An up to $45 million set-aside for the state Department of Education's educational adequacy fund.
An up to $40 million set-aside for food insecurity and health needs to be funded with funds deposited in the restricted reserve fund under Senate Bill 479. The bill was delivered to the governor Thursday, according to the General Assembly's website.
SB479 would require the secretary of the state Department of Finance and Administration to certify the amount distributed to the general revenue fund account from the sales and the special privilege tax on medical marijuana for the month, and the state treasurer would be required to then deduct an amount equal to the amount certified from the general revenue fund account and transfer the amount to the restricted reserve fund to be used to address food insecurity and health needs.
An up to $24 million set-aside for the Arkansas Teacher Academy Scholarship Program.
An up to $20 million motor vehicle set-aside for the Arkansas State Police and other state agencies.
An up to $15 million set-aside for the Educational Freedom Accounts.
A set-aside for law enforcement stipends funded with about $13 million left over from $50 million set aside for local and state law enforcement stipends in last year's fiscal session.
Under SB578, the Legislative Council's Personnel Subcommittee would be required to report to the council no later than Sept. 15 on a recommendation on how to distribute the law enforcement stipends as grants. The council may approve, modify, deny, pass over or re-refer the subcommittee's report and may notify the state's chief fiscal officer how to distribute the law enforcement stipend grants.
An up to $12 million set-aside for charter school facilities.
An up to $10 million set-aside for the state's performance fund, which helps pay for state employee pay raises.
An up to $10 million set-aside for state Game and Fish Commission grants.
An up to$10 million set-aside for state Department of Commerce economic stimulus programs.
An up to $8 million set-aside for the Department of Human Services' human development center master plan upgrades.
An up to $6.4 million set-aside for the Arkansas State Police troop school and recruitment.
An up to $4 million set-aside for the University of Arkansas at Pine Bluff to help match federal land-grant institution funds.
An up to $2.5 million set-aside for state drug crime enforcement and prosecution grant awards.
An up to $2.2 million set-aside for the state teacher education program.
An up $1 million set-aside for pregnancy help organizations.
An up to $240,00 set-aside in equal amounts to the state's eight economic development districts.
Rep. Lane Jean, co-chairman of the Joint Budget Committee, heads to the well of the House on Thursday to present budget bills as lawmakers moved toward wrapping up business today. (Arkansas Democrat-Gazette/Thomas Metthe)