Budget cutback has legislator wondering
Posted on Friday, April 11, 2008
URL: http://www.nwanews.com/adg/News/222408/
A leader of the Legislature’s budget committee wondered Thursday whether the state has reduced next year’s budget by nearly $ 107 million to make it easier to further reduce the state sales tax on groceries.
Rep. Chris Thyer said the $ 107 million reduction is about the amount the state would lose by eliminating the remaining 3 percent of state sales tax on groceries. The tax cut would reduce revenue about $ 98 million a year, said Richard Wilson, assistant director of research for the Bureau of Legislative Research.
When Gov. Mike Beebe campaigned for governor in 2006, he said he would like to trim the 6 percent state sales tax on groceries to the 0. 125 percent that voters enacted and designated for conservation.
Following Beebe’s lead, the Legislature halved the sales tax to 3 percent, starting July 1, 2007.
The finance department estimates that cutting the rate to 0. 125 percent would cut general revenue by about $ 96 million in fiscal 2010, according to Whitney McLaughlin, technical assistance manager for the department.
The state Department of Finance and Administration on Monday reduced its forecast for net general revenue that agencies would get to spend by $ 106. 7 million of the $ 4. 5 billion total budget for fiscal 2009.
Thyer, a Democrat from Jonesboro, noted the similarity between the amounts to be saved by the spending cut and lost if the grocery tax were eliminated.
“That’s pure coincidence I assume, right ?” he asked Wilson during a meeting of the Legislative Council’s Performance Evaluation and Expenditure Review Committee.
Wilson said he didn’t know.
Wilson has projected a state surplus of at least $ 155 million for the current fiscal year, 2008, which will end June 30. The finance department has yet to project a surplus for the current year.
After the committee meeting, Beebe said there’s “no connection” between his implementation of the budget cut the department recommended and “anything that has to do with grocery taxes.”
The budget reduction “is based purely on their concerns about the national economy and what national forecasters are suggesting we may be in store for,” the governor said.
“Our economy has slowed, but it has not slowed beyond what we anticipated a year and a half ago when we set the budget,” Beebe said.
He’s repeatedly said his two top priorities are funding education and further cutting the grocery tax when economic conditions would allow without cutting essential state services.
Thus far in April, tax collections “are running at or slightly above forecast, and I hope it continues in [fiscal 2009 ],” he said. “If it does, we will increase incrementally” the amount that state agencies will be allowed to spend next fiscal year.
“If it doesn’t, we won’t,” Beebe said.
Beebe spokesman Matt De-Cample said later that the governor opposes the idea of using surplus from fiscal 2008 to fill in for the projected reduction in spending in fiscal 2009. He said the state shouldn’t use one-time funds, such as surplus, to pay for needs that recur year after year.
Thyer said later that he doesn’t believe the department is “fudging the numbers” but has reduced the budget for fiscal 2009 “a little higher than it needs to be.”
Sen. Percy Malone, D-Arkadelphia, said he’s worried about how the spending cut will affect a Department of Human Services account that helps fund Medicaid.
That reduction totals $ 28 million in state funds. The state receives about $ 3 in matching federal money for every state dollar in the program.
“At least this senator would like to have an economic impact evaluation on what is going to be more important to Arkansas in fiscal year ’ 09, having the money to repair a road somewhere or take care of some sick child or a child that is burned that goes to Children’s Hospital or in a nursing home or a mental institution,” he said during the legislative committee’s meeting.
“I don’t think that this senator is going to think that roads are more important than people,” said Malone, who voted for a severance tax increase bill in last week’s special legislative session, with the revenue earmarked for roads.
He said he would like to understand the basis for the finance department reducing the budget for fiscal 2009.
“Do we really believe that we are going to have that kind of reduction in revenue in Arkansas ?” asked Malone.
Wilson said finance department officials will answer questions about the revised budget during the May 7 meeting of the Joint Committee on Economic and Tax Policy.
Beebe, who supported earmarking the severance-tax money for roads, said he would never suggest that roads are more important than people.
John Selig, director of the state Department of Human Services, said he believes the Medicaid program will be “all right.”
“We still have more funding for Medicaid coming next year than we did this year. Right now, our revenues in Medicaid are coming in a little ahead of forecast and our expenses are a little below so if that trend continues we should be OK,” he said.
“As far as Medicaid, we don’t anticipate having to cut any Medicaid services as result of this [change in the budget ],” Selig said.
But he said department officials will have to review the budgets for the department and its divisions and reallocate resources in the next fiscal year.