Gov. Mike Beebe vetoes tax break for fracking business | Arkansas Blog

Monday, March 17, 2014

Gov. Mike Beebe vetoes tax break for fracking business

Posted By on Mon, Mar 17, 2014 at 9:52 AM

Gov. Mike Beebe today exercised a line-item veto of a $5 million tax break grafted onto an appropriation bill. The next question is whether the legislature will attempt an override when it meets to adjourn Wednesday.

The tax break declares sand injected into wells in the fracking process to drill for gas and oil is "equipment" and thus exempt from the sales tax. The measure vetoed wouldn't likely withstand a court challenge. It's not a fiscal matter and it didn't get the required 60 percent vote to suspend rules for consideration in the fiscal session.

Beebe's message:

Governor Mike Beebe has invoked the line-item veto for Section 16 of House Bill 1048, the appropriation bill for the Revenue Services Division of the Department of Finance and Administration.

Section 16 adds a new category of items exempted from the State's gross receipts tax without following the constitutional steps of doing so during a fiscal session. Beebe's veto letter concludes with the following:

Substantive changes to Arkansas law that have no relation to appropriations, such as Section 16 of HB 1048, should rarely be considered during fiscal sessions. If they are to be considered at all, it should be done through the process the people established in our Constitution, and not through "special language" amendments to unrelated appropriation bills.

This is only the third line-item veto during Beebe's tenure as governor.

Republican Sen. Jonathan Dismang, from Beebe and a district in the heart of the Fayetteville shale gas play, pushed for the tax exemption. A company that receives it has challenged it in a lawsuit and won a favorable lower court ruling, but the state has wanted to appeal that decision.

I've sent a message to Dismang asking for possible override efforts.

UPDATE: He said he hasn't had a chance yet to discuss a veto override with other members.

UPDATE II: Dismang told AP he'd "likely" seek an override. Other Republicans have spoken up for that course. 

The Arkansas Citizens First Congress has urged legislators to uphold Beebe.

Dear Legislators:

Please vote against any attempt to override Governor Beebe’s line-item veto of Section 16 of HB 1048.

We appreciate the Governor’s veto and ask you to uphold it for a variety of reasons.

First, we believe the very inclusion of Section 16 into HB1048 was unconstitutional. Section 16 adds a new category of items exempted from the State’s gross receipts tax without following the constitutional steps for doing so during a fiscal session. It did not get the required 60 percent vote to suspend rules for consideration in the fiscal session, it was not heard through a normal legislative committee with proper public notice and it did not have an opportunity for debate on its merits. We believe this legislation invites a legal challenge to the unusual and improper manner in which it was passed.

The $5 million price tag on this tax cut is also the wrong priority for our state budget. The legislature just rejected a $5 million appropriation for after-school and summer programs despite a proven record of helping children learn. The legislature also rejected a $2 million increase for Arkansas’ award winning pre-k program, another proven education enhancer. There are many better uses of $5 million to improve the lives of the vast majority of Arkansans instead of giving a favor to a big industry.

Finally, we urge you to uphold this veto because frac sand mining is controversial with a poor record of protecting our state’s water quality from pollution. We encourage legislative hearings on the frac sand mining industry so you may develop a full view of the challenges and problems created by the industry as well as the benefits.

Providing incentives to increase a controversial practice, without proper process or time to consider the impacts, and while denying funds for more worthy projects does not agree with the Arkansas values we know you strive to uphold.

Please support the Governor’s well-reasoned veto of section 16 of HB1048. 


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