From the quiet hallways of the most beautiful state Capitol in our nation, this is Senator Keith Ingram.
Arkansas has begun a new fiscal year, and because we have consistently been very conservative in how we budget, state government is in fairly good financial health.
When the coronavirus pandemic hit, state budget officials lowered the forecast because of the devastating economic impact.
So many people lost their jobs, and so many small businesses had to close, we knew that state revenue would go down dramatically.
The official forecast was reduced in late March, because state government was facing a shortfall of $353 million for the fiscal year.
Nobody wants to cut their budgets, whether it’s an individual planning a vacation, a family trying to make ends meet or a business trying to grow. Government agencies are no different.
But reducing the forecast is an indicator of the conservative budgeting that has kept the state of Arkansas fiscally healthy for so long.
When the pandemic caused an economic slowdown and a corresponding drop in tax revenue, the state immediately reduced its spending.
The good news is that on the final day of the fiscal year, it was announced that state revenue came in at a better than expected rate. We’re ahead of expectations by about $360 million.
This is not only good news for state agencies, it is good news for the entire state. That’s because tax revenue is an accurate gauge of the state’s overall economic health. Tax rates have not gone up, which means that any increase in revenue is an indicator of economic growth.
With the strong finish to the fiscal year, previous budget cuts can be restored. For example, the Public School Fund will be enhanced by $121 million.
Institutions of higher education will have $42.4 million restored from previous cuts.
The increased revenue means we can restore $72.2 million to the Medicaid Trust Fund.
As the new fiscal year begins, there will be $225 million in an important reserve fund that can used for emergencies.
Reserve funds have become more important because of the economic uncertainty created by the coronavirus pandemic.
Those funds have been used to purchase medical equipment, and to help small businesses make payroll during the pandemic.
Almost $21 million was transferred from a rainy day fund to the Transportation Department, which it will use to help Arkansas qualify for up to $200 million in federal highway funds.
In late March, an independent study commissioned by the Pew Charitable Trust reported that Arkansas had enough reserve funds to operate for about 10 days. That placed us seventh from the bottom, in a ranking of all 50 states.
A strong reserve fund boosts a state’s credit rating, and by the same token reduces interest charges on debt.
Especially in periods of financial uncertainty, it’s essential to have reserve funds for unexpected needs. It’s equally important to have a tradition of conservative budgeting, which makes it possible to build up those reserve funds.
From the Capitol, it is always my greatest honor and most sincere privilege to serve you as your state Senator. This is Keith Ingram.
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