Again with the 'special language': Dismang wins frackers a tax break | Arkansas Blog

Wednesday, March 5, 2014

Again with the 'special language': Dismang wins frackers a tax break

Posted By on Wed, Mar 5, 2014 at 10:20 AM

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Despite a warning from state finance officials that the proposal is unconstitutional, Sen. Jonathan Dismang won approval on a revote today of his proposal to give a $5 million-a-year tax break to the fracking industry by exempting materials injected in wells from the sales tax. The proposal failed on a roll call vote yesterday.

Perhaps this is more work for a public spirited person to challenge in court.

A circuit court has held that fracking sand is exempt from the sales tax as "machinery or equipment" used in manufacturing. The state wants to appeal that decision for obvious reasons. Dismang's proposal would likely moot the issue. But there's a significant legal question of whether Dismang can change the law on definitions of machinery and equipment in a legislative session devoted only to budget issues, unless a supermajority approves a non-germane law.

Policy note: The severance tax on natural gas, crippled by industry amendents, isn't producing nearly what was hoped from Fayetteville shale exploration, perhaps not enough to offset the road and environmental impact. This adds to the givebacks to an industry already well-favored.

Dismang's maneuver was in the special language subcommittee of Joint Budget, where non-codified wording of sometimes significant import is grafted onto legislation without the customary full legislative debate. Sen. Johnny Key used it in 2013, for example, to boost from 500 to a whopping 3,000 (at a cost of $15 million a year) the number of people who could received some $6,000 a year each in state tax money to pay to a private company that provides support to home schoolers. This "virtual school" has  none of the embedded facilities, teachers and other costs faced by school districts reimbursed at the same rate per student.

Key was at it again yesterday with special language to designate future winnings from a pending Medicaid fraud lawsuit against a pharmaceutical company to a trust fund for future Medicaid expansion expenses. My expert says Key's move yesterday was mostly for show. You can't legally obligate future revenues and a simple majority vote could re-direct the money in a future session. It's hard to imagine a state with manifest needs sitting on a $1 billion trust fund for three years or more, should Attorney General Dustin McDaniel ultimately prevail in appeals of the case. But in these changing times, you never know.

Special language artistry will continue. Just saying, but old-timers will remember that it was special language hijinks that enabled  a corrupt state legal services program that wound up with the indictment of several legislators and some prison sentences.

PS — This year, Key has helped the Education Department in special language to try to clean up the gaping wound he tore with his virtual academy special language last year. Documentation is going to be required before home schoolers can get money as transfers from existing public school districts. The Key windfall for the home schoolers is going to eventually transfer as much as $7.8 million to the proft-making homeschool service outfit this year alone. Where there were 498 home schoolers getting a state subsidy last year, there are 1,800 looking for it this year. About 300 of those are up in the air for lack of documentation as transfers from conventional skills, the Education Department tells me.

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