Beebe: Don’t divert gas tax from highways
Posted on Thursday, April 10, 2008
The recent severance tax increase for highways shouldn’t be diverted toward the state’s $ 107 million fiscal 2009 general revenue budget cut, Gov. Mike Beebe said Wednesday.
Legislative leaders agreed, saying that the natural gas severance tax increase likely wouldn’t have passed if it had not been designated as special revenue dedicated to roads.
The general revenue budget, which is financed mostly with revenue from sales and income taxes, pays for Medicaid, prisons and colleges among other government services. The cut was mistakenly revealed Tuesday by the Department of Finance Administration on its Web site.
The misstep made Sen. Jim Argue, D-Little Rock, scratch his head.
“They usually run their plays better than that,” he said of the finance agency.
The cut is 2. 3 percent of the state’s previous forecast of $ 4. 5 billion. Most state agency officials said they will be able to avoid major cuts in services despite the budget reduction.
NO REGRETS Beebe emphasized that the shortfall gives him no reason to either regret or consider rolling back tax cuts he supported during the 2007 legislative session, including halving the state sales tax on groceries. “I’m proud of the tax cuts,” Beebe said. “We’ll budget accordingly. State government has to live within its means like the people do, and I’ll never apologize for cutting taxes.” He said when budgeting during the 2007 session he couldn’t have “taken into consideration” the national economic downturn.
But Beebe said the slowdown will be a factor when he decides whether to push for more cuts to the grocery tax.
“We’ve said all along that we won’t make tax cuts that will cut into essential services,” he said.
He said he didn’t reveal the budget cut during the special legislative session last week because he had made no decision about how much to cut. He said that even if he had told lawmakers about it, he would have had no worries about them wanting to steer the severance tax increase — expected to yield $ 57 million next year — to the general revenue budget.
“This [the severance tax ] is a specific itemized program with a totally new and different revenue source for highways,” Beebe said. “It’s got nothing to do with general revenue. We’ve been upfront all the way around on this that we wanted it for highways. [General revenue is ] a totally different deal. We had not addressed highways at all in the last [legislative ] session. We weren’t going to be able to address highways unless we did it with the severance tax.”
CUTS EXPECTED Sen. Dave Bisbee, R-Rogers, said he heard rumors earlier in the week of a cut and that legislators expected some type of cut because of the economy. He said it’s better to go ahead and cut before fiscal 2009 starts July 1, rather than during the fiscal year, which would make cuts in services more likely.
Bisbee said the Legislature “wouldn’t have passed” the severance tax increase if it would have gone toward solving general revenue cuts.
“I wouldn’t have voted for one penny,” Bisbee said. “It doesn’t hurt us to tighten our belt.”
Rep. Daryl Pace, R-Siloam Springs, agreed. Pleas from economic developers and city officials helped push many Republicans to vote for the severance tax increase last week.
“That was the exciting thing for my district, that it was going for roads,” Pace said. Rep. Bill Abernathy, D-Mena, and Sen. Jimmy Jeffress, D-Crossett, said they also believe the new tax revenue should have gone toward highways. But they each said the general revenue budget cut gives them cause for concern about the possibility of future cuts that would slice deeper into programs.
MISTAKEN DISCLOSURE Richard Weiss, director of the state Department of Finance and Administration, explained that the revenue cut was mistakenly posted on the Web site by budget staff trying to follow a directive to inform state agencies.
Weiss said he meant to announce the cut at a legislative committee meeting May 7.
He said that Monday the state’s budget administrator, Mike Stormes, sent the figures to state agencies to start their budget analyses for fiscal 2009.
“I didn’t realize it was going to be posted,” he said. “It was posted April 7 because once Stormes got it and sent it out to the agencies they [officials in state’s budget office ] thought, ‘ Well let’s just send out the forecast [on the Web site ].”
The posting was reported by the Arkansas Democrat-Gazette on Wednesday.
Sen. John Paul Capps, DSearcy, said he’s not miffed that the forecast became public before it was presented May 7 to the Joint Committee on Economic and Tax Policy, of which he is co-chairman.
“Quite frankly, I think it is just as well it is out, so people can adjust in their thinking,” he said.
UCA BUDGET DOWN The University of Central Arkansas in Conway will receive one of the bigger percentage cuts. Under the revised forecast for fiscal 2008, the University of Central Arkansas will get $ 52. 4 million in this fiscal year, according to the state’s budget office. Under the revised forecast for fiscal year 2009, UCA will get $ 50. 1 million rather than $ 54. 4 million called for under the original forecast. UCA President Lu Hardin said he’s imposed a hiring freeze with the exception of a few key faculty positions that are necessary for accreditation and other purposes. He said school officials will review other budget cuts that could be made in the next few weeks and one option is cutting travel. “We are all budgeting today based on the very conservative forecast and then we will be hopeful that more money will flow,” he said. “I remain optimistic that the forecast is more conservative than reality. History has taught me that more than likely more money will flow.”
BEEBE OPTIMISTIC Beebe acknowledged late Wednesday on his call-in show on AETN that he’s “optimistic” the administration will raise the budget forecast later in the year. “But we’re being cautious because of the federal downturn. If that hits Arkansas like it’s hit other states, we want to be prepared,” he said. University of Arkansas at Fayetteville Chancellor John A. White said that his campus would likely receive less money from the state in fiscal 2009 than it is expected to receive in the current fiscal year, despite inflation. Department of Finance and Administration estimates show the campus would get about $ 5 million less in the coming fiscal year.
That possible shortfall may threaten programs and is likely to curb or eliminate any salary increases to faculty and staff, a UA news release said.
Prison officials said it’s too early to tell how the cut will affect prison operations.
“It appears that we’ll be able to keep everything open and won’t have to lay anyone off, but that doesn’t mean it won’t be very, very slim,” said Dina Tyler, spokesman for the Department of Correction.
The department will have to trim more than $ 13 million from its $ 288 million budget.
Despite the cut, Richard Wilson, assistant director of the Bureau of Legislative Research, predicts a surplus of $ 155 million for fiscal 2008, the current fiscal year.
Weiss said the finance department hasn’t come up with a surplus prediction yet. Information for this article was contributed by Michael R. Wickline, Laura Kellams and Charlie Frago of the Arkansas Democrat-Gazette.
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