State Capitol Week in Review – June 5, 2021

LITTLE ROCK – The state is on pace to have a record surplus of more than $1 billion, which is a strong indicator that the Arkansas economy is recovering from the negative effects of the pandemic.

The monthly revenue report for May shows that all categories of state taxes improved significantly over the same period last year.


With one more month remaining in the state’s fiscal year, the surplus is a record $980 million. The enormous surplus is attributable to several factors: a rebound in business activity in Arkansas and conservative budgeting by the legislature.


Also, federal relief funding helped Arkansas families maintain household spending levels, and helped Arkansas companies remain in business. More people went back to work.


At the height of the pandemic last year, the legislature and the governor reduced spending by state agencies.


The size of the surplus is impressive when compared to the overall size of the state’s general revenue fund. In the 2021 regular session, which ended in late April, the legislature approved a budget for state government that calls for spending $5.8 billion in Fiscal 2022, which will begin on July 1.


The record surplus will be a strong argument for legislators who want to reduce state income taxes. The governor has announced that he intends to call a special session in the fall to lower the top state income tax rate.


Medical Marijuana Tax Funds for Cancer Institute

During the 2021 regular session, the legislature voted to continue providing funds to the state’s medical school from a privilege tax on medical marijuana.


The tax had been scheduled to expire on July 1, but Act 434 of 2021 extends the sunset date for another two years, to July 1, 2023.


The privilege tax was first enacted in 2017. It requires businesses that cultivate and dispense medical marijuana to remit 4 percent of their sales to the state. The University of Arkansas for Medical Sciences, the state’s major medical college in Little Rock, receives much of the revenue for the goal of achieving a National Cancer Institute (NCI) designation for its Winthrop P. Rockefeller Cancer Institute.


Act 434 will generate $13.3 million next fiscal year. Of that amount, $12.4 million will be deposited to the UAMS National Cancer Designation Trust Fund.


There are 71 NCI centers in the country. The closest to Arkansas are in Memphis, Oklahoma City and Dallas.


The National Cancer Institute awards 68 percent of its grants to centers with the NCI designation, which means that UAMS and other facilities without the designation are left to compete for only 32 percent of the funding left available. For many research grants, only NCI centers are eligible.


The Rockefeller Institute also is raising money from private donations for getting its NCI designation.


The total operating budget for UAMS this year is $1.6 billion. That is projected to increase by 10 percent, or $174 million, by next year.


The hospital at UAMS expects the volume of clinical visits and surgeries to return to levels it had before the Covid-19 pandemic.


The Board of Trustees for the University of Arkansas System met recently, and the medical school did not request any tuition increases for next year.