State Capitol Week in Review – October 17, 2020

LITTLE ROCK – The legislature has begun budget hearings, in preparation for the regular session that begins in January.

Setting spending levels for state agencies is the most time-consuming duty for legislators. It also is one of the most important duties of the legislature, even though it rarely generates a lot of publicity.

The budget work that begins in mid-October will be finalized in late March and early April of 2020, when the regular legislative session is expected to end. The budgets will set spending levels for state agencies for Fiscal Year 2022, which will begin on July 1, 2021.

Legislators have discretion over how to allocate about $5.6 billion in net general revenue. Its main sources are the state sales tax, the state individual income tax and the state corporate income tax. In addition to state agencies, the legislature distributes aid to public schools and institutions of higher education.

Schools have other sources of revenue apart from state aid, chiefly the local property tax and some federal funds. Colleges and universities have revenue aside from state aid, mainly in the form of tuition, fees and donations.

Many state agencies receive federal funds in addition to the state dollars they receive in net general revenue. In total, Arkansas state agencies received about $9 billion in federal funding last fiscal year.

The bulk of that total, more than $6 billion, went to the state Human Services Department for Medicaid, a health program for senior citizens, people with disabilities and low-income families.

Also, state agencies generate special revenues, which come from taxes collected for specific purposes. The largest category is the motor fuels tax, which generates more than $870 million in special revenue for the Transportation Department to maintain and build highways.

The state earns interest from banks and financial institutions and has numerous miscellaneous sources of revenue, such as fees for hunting and fishing licenses, leases from oil and gas producers, and rentals of cabins in state parks.

In all, state government has a total operating budget of $33 billion, according to the most recent data from the Finance and Administration Department.

In order to ensure that appropriations are spent properly, legislators and a team of accountants conduct audits on a year-round basis. They audit state agencies, school districts and institutions of higher education, and the results are reported to the Legislative Joint Audit Committee.

During regular sessions and fiscal sessions, the Joint Budget Committee review agency budgets and spending requests. During the interim between sessions, the Legislative Council and its subcommittees closely monitor state government spending to make sure that tax revenue is spent for the purposes set out in legislative appropriations.

Those subcommittees include the Performance Evaluation and Expenditure Review Subcommittee, which monitors financial practices, and the Personnel Subcommittee, which oversees staff changes.

Legislative subcommittees have been created to specifically monitor Medicaid, prisons, the Transportation Department, the Game and Fish Commission, the State Police, lottery scholarships, the health insurance marketplace and the regulatory boards that license occupations.