From the historic hallways of the most beautiful state Capitol in our great nation, this is Senator Keith Ingram.
If we learned anything in 2020, it has been that long-term reserve funds can be a life-saver.
The state has a rainy-day fund that stands at about $185 million. The legislature will consider budget proposals to raise that amount to $420 million by the end of the biennium.
The economic downturn caused by the Coronavirus pandemic proved just how important it is for states to maintain healthy balances in their rainy-day funds.
When the pandemic hit and many businesses were forced to shut down, the state reacted quickly. Revenue forecasts were reduced, which meant that state agencies had to cut back spending, just as Arkansas families have to cut spending when times get tough.
However, we maintained vital health services by using moneys from reserve funds.
Lawmakers knew that the impact of the pandemic would be severe, we convened in a special session to create a Covid-19 reserve fund.
Reserve funds also helped maintain budgets for law enforcement and public education. After the spending reductions began to take effect during the first months of the new fiscal year, we were able to restore budget cuts made earlier in the year.
Even though Arkansas was able to weather a tough economic crisis through prudent use of our reserve funds, we can do better.
For example, in March the Pew Charitable Trusts, a national think tank, issued a report on the financial security of all 50 states, based on the size of their reserve accounts.
They ranked Arkansas seventh from the bottom, because we only had sufficient reserve funds to maintain vital services for about 10 days.
We’ve improved since then, in spite of the negative impacts of the pandemic.
Still, we cannot rest on our laurels. During the 2021 regular session, legislators will give serious consideration to the governor’s proposal to increase the state long-term reserve fund to about $420 million.
Not only would this provide stability if we are hit with another economic downturn, it would improve the state’s bond rating. That’s similar to improving your personal credit score.
When it comes to your household budget, it’s an easy decision to save as much as you can for a rainy day.
But for the legislature these are difficult political decisions.
Legislators always keep in mind that the goal is not for state government to simply stockpile money in reserve.
That is not the most productive use of that money, especially if it is needed for law enforcement, health or education.
On the other hand, many elected officials believe that if we accumulate too much in reserve funds, it means that taxes are too high.
It’s a delicate balance, but if we have learned one thing in 2020 it is the wisdom of maintaining sufficient reserve funds.
From the Capitol, it is always my great honor and sincere privilege to serve you as your state Senator. This is Keith Ingram.