Beebe's budget UPDATE II | Arkansas Blog

Thursday, November 13, 2008

Beebe's budget UPDATE II

Posted By on Thu, Nov 13, 2008 at 11:17 AM

The Beebe administration budget proposal was presented to the legislature today. It did include another one-cent cut in the grocery tax, as predicted here yesterday. There's the rainy day fund proposed for surplus money. There's more money for child services.

Above, Gov. Beebe talked with reporters about it afterward.

Key documents: Two-year spreadsheet here. And go here for DFA Director Richard Weiss' summary of the outlook.

Before our reporter was even back from the Capitol, we'd received a response from Arkansas Advocates for Children and Families, wishing that the governor had done more for kids -- such as more health insurance coverage, substance abuse treatment and pre-K programs. We heartily endorse the AACF's idea of closing the corporate tax loophole that allows companies to use bookkeeping tricks to avoid income tax payments here. We can dream, can't we?

Gerard Matthews reports:

Finance and Administration Director Richard Weiss, presented the governor’s proposed budget to legislators.  Weiss said it was a conservative budget that reflects the national and state economy (poor).  Although Arkansas has outperformed most states, Weiss said the economic situation has caused the state to reduce economic estimates over the next few years, and that this was not “business as usual.” 

Gov.Mike Beebe told reporters later that a tax increase has never entered his mind and even though he admits using one-time surplus money to cover holes in the budget is not an ideal fiscal policy, it can be useful as a temporary solution.  Money from the state’s nearly $300 million dollar budget surplus might be used, over the next couple of years, to “plug gaps in essential services,” like Medicaid and prisons, Beebe said.  The governor reiterated that this was a conservative budget and that DFA forecasts were perhaps painting a more “doom and gloom” picture than is actually the case.  The budget includes an “unfunded appropriation” column (totaling $145,984,510) that shows, according to Beebe, “who would get the additional money if things aren’t as bad as this very conservative forecast suggests.”  

Beebe defended the proposed one-cent reduction of the state’s grocery tax and said he would work to eventually eliminate it (a step he would have taken had the economy allowed for it).  He said the reduction of that tax would help the largest number of Arkansans.  As it stands, the elimination of one cent on the state’s grocery tax will cost the state $30,100,000.  Eliminating it entirely would have created a $90 million hole in the budget.

The governor also pointed out that K-12 education was the top priority, and all other considerations were built around education. 

During the hearing, Sen. Randy Laverty expressed concerns that DHS continues to go without increases even though the department has sustained one minimum wage hike with no increase in state money.  “Are they going to have to continue to do more with less?” 

Weiss said they were giving the best scenario to account for the collapsing economy and providing state services.  “We are going to have to hunker down all the way around,” Weiss said.  “Is it going to have some ill effects?  Yes.”

Also of note, the Arkansas Department of Environmental Quality budget for fiscal year 2010 will see a 64 percent increase over 2009.  When asked about this huge jump, Weiss said the increase would cover cuts the agency has sustained over the past two years.  The department faces new demands to over see environmental costs of gas exploration.

Revenue forecasts were based on three scenarios from national forecast providers Global Insight Inc. and Moody’s Analytics, which, according to Weiss, have been used for the past several years and have served the state well.

ARKANSAS ADVOCATES RELEASE

LITTLE ROCK – Gov. Mike Beebe’s proposed budget sticks to his commitment to begin turning around the state’s broken child welfare and children’s mental health systems, Arkansas Advocates for Children and Families said today.

However, his budget doesn’t provide a strong enough safety net for children and families suffering from the economic downturn, the non-profit agency said. Access to children’s health insurance and child care is critical to helping families who are losing jobs and homes to stay out of poverty.

“Gov. Beebe said he was committed to improving the child welfare and children’s mental health systems and his budget priorities reflect his commitment on these issues,” said Rich Huddleston, AACF executive director. “His recommendations are a good first start for turning those systems around. On the flip side, we are disappointed that the budget does not address two major economic issues facing working families: the lack of health care coverage and the lack of access to subsidized child care.”

AACF also supports Gov. Beebe’s idea to invest in a state rainy-day fund in case our economy takes a bigger hit than anticipated, Huddleston said.  In the event of a long-term recession, the fund would be critical in preventing cuts to the Department of Human Services, which cares for our most vulnerable families.

Beebe’s proposal to cut another cent off the grocery sales tax is also laudable, Huddleston said, but wondered whether the cut is too large given the current economic climate. A smaller grocery tax cut would allow room in the budget for more targeted tax relief for low income families, such as a state earned-income tax credit or fixing a flaw in the state income tax that penalizes low-income single parents with two more children.

AACF urged Gov. Beebe and the legislature to examine raising money for critical programs like children’s health insurance, substance-abuse treatment programs and high-quality preschool programs by passing a combined-reporting law. It would prevent corporations from shifting taxable income to other states to avoid paying Arkansas income taxes.

For more information about AACF’s research on rainy day funds, combined reporting and the state of working families in Arkansas, visit www.aradvocates.org.

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