State Capitol Week in Review – November 13, 2020

The governor presented a balanced budget proposal to the legislature for next fiscal year. It would authorize about $5.8 billion next year in spending from the state’s general revenue fund, about three percent more than this year.

The legislature has been working on balancing the budgets of state agencies since mid-October. The final spending plan for Arkansas state government will be set when the legislature adjourns the 2021 regular session. It begins in January.

The governor’s plan would reduce taxes by $50 million a year for people in low and middle income brackets.

Under the governor’s plan, the sales tax would go down on purchases of used cars that cost less than $10,000. Now, used cars sold for less than $4,000 are exempt from the sales tax. The new rate would reduce the state sales tax from 6.5 percent to 3.5 percent on used vehicles sold for $4,000 to $9,999.

The proposal would encourage upper income families to establish a residence in Arkansas. The top income tax bracket for new residents would be reduced from 5.9 percent to 4.9 percent for the first five years they live in Arkansas.

Legislators questioned the fairness of creating a different income bracket for new residents, when people who have always lived in Arkansas would pay a higher rate although their income is the same. Spokesmen for the governor responded by saying that limiting the top bracket at 4.9 percent for new residents would create a clear goal for future reductions for people who have always lived in Arkansas.

When the pandemic hit earlier this year, state budget officials reduced the official forecast, in anticipation of an economic slowdown. Under our balanced budget law, when the economy slows and tax revenue drops off, spending is reduced accordingly. In April the forecast was lowered by more than $200 million.

The governor’s proposed budget would restore many of the spending cuts made necessary in April. Categories that would get funding increases include higher education, health care and human services.

Law enforcement categories scheduled to see increased funding include the state Crime Lab, reimbursements to county jails and crisis stabilization units. The budget for state prisons would increase next fiscal year by 3.9 percent under the governor’s proposal, to $375 million. It has more than 16,000 in custody, with 3,658 staff positions currently filled.

Community Corrections would get an increase of 6 percent, to $97 million a year. Its officers supervise offenders on parole and probation. It operates drug courts and six residential treatment facilities. It has 1,304 staff positions now filled. More than 60,000 adult offenders are under the Department’s supervision.

Under the governor’s recommendation, the Public School Fund, from which state aid is distributed to local school districts, would increase by 1.4 percent, to $2.25 billion.

The Human Services Department would get a funding increase of 4.8 percent. It administers Medicaid, services for people with disabilities, long-term care facilities, drug treatment programs and benefits for low-income families such as food stamps.

State support of four-year universities would increase to $612 million, from $575 million this year. Support for two-year colleges would increase from $112 million to $118 million. In addition, five technical colleges would get a funding increase from $31 million to $32 million.