Beebe rolls out his budget; thank goodness for Obamacare | Arkansas Blog

Tuesday, January 14, 2014

Beebe rolls out his budget; thank goodness for Obamacare

Posted By on Tue, Jan 14, 2014 at 12:55 PM

I hope to have a more detailed version before long, but Gov. Mike Beebe unveiled his budget proposal (Arkansas Business/AP) in legislative committee today, a $105 million increase in spending over current levels in a $5 billion budget. As he'd promised, most of the increase is for schools and prisons.

Here's more from Benji Hardy at Legislative Digest.

It's a good discussion of the importance of Obamacare money to the budget — $89 million and the inability to fill the hole if the money disappears and scheduled tax cuts take effect. No, nobody thinks the tax cuts will produce more money, except conservative legislators.

Sen. Joyce Elliott (D – Little Rock) asked the DFA’s John Shelnutt about the macroeconomic effects of those tax changes, and whether they were projected to buoy the state’s economy. No, said Shelnutt, because tax cuts don’t represent new money coming into the state but rather a shifting of the same expenditures from the public sector to the private sector. He described the effects of the cuts as “a blip.” Shelnutt told Elliott that “it’s a fallacy to think that if you decrease taxes, you’re going to have new money” in the economy.

Some conservative legislators objected to this response, including Rep. Mark Biviano (R – Searcy). “Do you not look at economic factors in making projections?” Biviano asked the DFA officials. Shelnutt explained that his projections do indeed closely consider the larger macroeconomic picture in forecasting economic growth — but the DFA does not take into account the possible effects of individual policies, such as the tax cuts, beyond their immediate money-in-money-out effect on the state economy.

“There are too many dynamic factors in play,” Shelnutt told me after the morning session adjourned. It’s not the DFA’s job to engage in speculation about whether a policy might have a longer-term economic impact beyond the amount of dollars being expended. 

The Obamacare money and surplus actually are providing for the tax cuts.

Overall, when the tax cuts and the private option and the economy and everything else is taken into account, the DFA expects the state to see a net decrease in available funds of 1.7% or about $82 million.

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