Democrat Gazette Press Services

A bill to extend jobless benefits for three months was defeated in the House on Thursday, threatening to cut off aid to thousands of the nation’s long-term unemployed.

Republicans, in a replay of a dispute earlier this year, blocked the legislation because its $12 billion cost would be added to the government’s deficit. They demanded offsetting savings elsewhere in the budget.

The 258-154 vote fell short of the two-thirds needed under an expedited approval process. Voting against the bill were 11 Democrats – including Marion Berry of Arkansas – and 143 Republicans.

Democratic Reps. Vic Snyder and Mike Ross backed the bill. Republican Rep. John Boozman was listed as “not voting.”

Aid is set to expire Nov. 30 for some unemployed, and with Congress out of session next week for the Thanksgiving holiday, lawmakers will have little time to find agreement before then.

“This bill is like deja vu all over again, and not in a good way,” said Rep. Charles Boustany, R-La. “We all want to help those in need, but the American people also know someone has to pay when government spends money, and it shouldn’t be our children and grandchildren.”

Rep. Chris Van Hollen , DMd., said, “Ending unemployment assistance will not only be devastating for these individuals and their families, but it will also hurt the economy as a whole by undermining consumer confidence and demand.”

About 8,400 Americans will see their unemployment checks cut off by the end of the first week of December, according to Labor Department estimates. By the end of the third week of December, 1.36 million Americans will be affected if Congress doesn’t act, the agency said.

The unemployment rate last month was 9.6 percent. Jobless benefits were cut off earlier this year for some unemployed people after a similar dispute in the Senate led by Republican Jim Bunning of Kentucky.

House Speaker Nancy Pelosi, D-Calif., promised to bring the measure back to the floor after Thanksgiving to try to enact an emergency measure to extend benefits at least through Christmas. But Senate Democrats don’t have time;instead, they hope the jobless benefits issue gets addressed in year-end negotiations over taxes and other important legislation.

Rep. Mike Pence, the No. 3 Republican in the House, said, “We’re facing a fiscal crisis in this country. If we’re going to choose to extend unemployment again, we’ve got to find a way to pay for it.”

House Education and Labor Committee Chairman George Miller, D-Calif., said: “It’s just inconceivable that in the last gasp of this Congress you would turn all your attention to the top 2 percent of wage earners in the country at the same time that middle class families are struggling to hold their families together because of prolonged unemployment.”

The additional jobless benefits programs began in 2008 under President George W.Bush but were made more generous under last year’s economic recovery act. Jobless people are now eligible for up to 99 weeks of benefits in most states. The first 26 weeks of benefits are paid for by states. About 3.8 million are now drawing those state-paid benefits.

Democrats argue that the extended benefits should be paid for with deficit spending because it injects money into the economy. Jobless people immediately spend the cash, they explain.

$1.1 TRILLION BILL

The top Republican in the Senate on Thursday came out against Democratic-led efforts to pass a $1 trillion-plus spending bill to mop up Washington’s unfinished budget work before the current session of Congress ends.

“If this election showed us anything, it’s that Americans don’t want Congress passing massive trillion dollar bills that have been thrown together behind closed doors,” said Sen. Mitch McConnell, R-Ky. “They want us to do business differently.”

Democrats don’t have the votes to advance the idea inthe lame-duck session without Republican help.

House Democrats and a bipartisan group of Senate staff aides have been working to assemble a $1.1 trillion “omnibus” measure to fund the government’s day-to-day operations, at least in part because they were given tacit approval by McConnell to do so. But the results of the Nov. 2 election and opposition to an omnibus by House GOP leaders made the idea unpalatable.

The Senate hasn’t passed a single spending bill for the budget year that began almost two months ago and ends in September. Ten of 12 House bills haven’t even been made public.

Congress needs to pass a stopgap spending bill by Dec. 3 to avoid a shutdown of most of the government. A leading idea is to fund the government at current budget levels through February and let the next Congress sort it out.

Starting from scratch next year would set the stage for a pitched battle in the new Congress between the GOP dominated House and a Senate and White House still under Democratic control.

Senate Republicans on Tuesday endorsed a resolution rolling spending back to pre-Obama levels that duplicates the position of the likely next speaker, Rep. John Boehner, R-Ohio.

Another option, backed by the White House, is to simply pass a catchall bill funding most programs at current levels through the Sept. 30 end of the budget year. House Republicans could then try to pass legislation cutting spending below those levels, though they would run into roadblocks with Democrats.

WORK FROM HOME

The bureaucratic halls of Washington could get a little quieter under legislation that encourages federal agencies to let more employees work from home.

The bill, passed by the House on Thursday and sent to President Barack Obama for his signature, instructs each federal agency to come up with policies to promote telecommuting. The goal is to significantly increase the 5 percent of the federal work force now engaged in some level of teleworking. The vote was 254-152. Among Arkansas’ delegation, Democrats Snyder and Ross backed the bill, while Berry opposed it. Republican Boozman was listed as “not voting.”

“It creates a nimbleness on the part of the federal government with respect to how the work force operates,” said Rep. John Sarbanes, D-Md., the lead sponsor. He and other supporters said it would increase productivity, improve morale, help the government recruit the best people, reduce traffic congestion and make the environment cleaner.

The legislation directs the Office of Personnel Management to come up with teleworking guidelines and requires agencies to establish policies within six months under which employees may be authorized to telework.

Agencies must designate a telework managing officer and must seek to better integrate teleworking into Continuity of Operations Planning, procedures for keeping the government operating during emergencies.

Republicans, who overwhelmingly voted against the measure, cited the $28 million implementation cost over five years. Rep. Virginia Foxx, RN.C., said it would “make it easier for federal employees who already had it much better than the rest of the country to avoid the office.”

But supporters said it would save the government millions by reducing needed office space and improving productivity. They cited estimates that telecommuting saved the government $30 million a day last winter when the capital region was paralyzed by a snowstorm.

Information for this article was contributed by Brian Faler of Bloomberg News and by Andrew Taylor and Jim Abrams of The Associated Press.

Arkansas News Bureau

Lewis Delavan

The Fayetteville Express Pipeline holds long-term benefits beyond an estimated $9 million in annual tax revenue for communities along its path, a spokesman for the pipeline’s developer said Thursday.

Marketing natural gas from the Fayetteville Shale play makes the state a stronger economic competitor nationally, Kinder Morgan Energy Partners spokesman Allen Fore said during a speech to the North Little Rock Kiwanis Club.

The 185-mile pipeline extends from Conway County to Panola County, Miss. It connects near Bald Knob with Natural Gas Pipeline of America and with three transcontinental pipelines in Mississippi.

Fayetteville Express was built simultaneously in four segments. The Federal Energy Regulatory Commission application was filed in June 2009. Construction began in March of this year.

The pipeline is expected to be operational Dec. 1, ahead of the initial forecast for early 2011, at a cost of $1.01 billion, some $290 million below projections, Fore said. Good weather played a major role in the savings, he said.

Eight counties will share property tax revenue from the pipeline. White County will gain the most, Fore said, because it has the most miles of Fayetteville Express and also the $170 million Russell Compressor Station near Bald Knob.

The length of two football fields, the compressor station will provide 10 to 15 news jobs, he said.

The pipeline allows customers such as Chesapeake Energy and Southwestern Energy to market gas anywhere in the country.

“They actually own the gas in the pipeline,” Fore said. “We just transport it.”

The pipeline’s capacity of 2 million cubic feet daily is enough to heat four million homes, Fore said.

Kinder Morgan’s partner in the joint venture, Energy Transfer Partners, will operate the pipeline.

Arkansas Democrat Gazette

Seth Blomeley

Gov. Mike Beebe on Wednesday proposed a $4.59 billion general-revenue budget that holds most agencies’ spending flat, gives a small increase to colleges and universities, and cuts the state sales tax on groceries by one-half of a percentage point.

Re-elected Nov. 2 to a second four-year term, Beebe said he’s following through with a campaign pledge to do what he can to reduce the grocery tax.

“I told you during the campaign it’s important to keep the momentum going,” Beebe said in an interview. “I think this is as much as we can afford [to cut]. I wish we could afford more right now.”

The governor’s proposed budget for fiscal 2012 is 2.5 percent higher than the $4.48 billion in the current fiscal year, fiscal 2011.

The 2012 proposal will be debated by the Legislature during the 2011 regular session, which starts Jan. 10.

The biggest increases would be $55.1 million for the Public School Fund and $23.3 million to cover state employee cost-of-living raises of 1.86 percent across the board. Most state employees received no raises for fiscal 2011.

Agencies that would receive no increases include the state police, Health Department, the Higher Education Department, the Arkansas Crime Information Center, the Parks and Tourism Department and the state’s Medicaid program.

The state’s higher-education institutions would receive a combined increase of 1 percent in state general revenue funding, with each institution’s share to be determined under a formula developed in the past.

Beebe said he’s proposing small or no increases for some programs because of his desire to continue to cut the grocery tax.

The governor said those agencies are still doing better compared with their counterparts in other states.

“All they have to do is look at everybody else in the country to see how bad they are getting cut,” Beebe said.

Beebe said he’s confident his budget addresses the state’s “top priority,” which is public schools.

The biggest increase for the Public School Fund is for foundation funding, which is the per-student state aid for public schools that is necessary to reach the “adequate education” standard required by the state Supreme Court.

State foundation funding would increase from $1.81 billion in 2011 to $1.86 billion in 2012.

Beebe said he’s also glad he’s able to give a raise to state employees because “they deserve it.”

The Department of Correction budget would increase 5.6 percent from $358.4 million to $378.6 million, including a 2.1 percent increase in general revenue from $297.8 million to $304.2 million.

The recommended budget includes more money to pay counties for housing prisoners awaiting transfer to state prisons, but it does not include money to staff and operate prison space now under construction or planned that would hold hundreds of inmates. Beebe wants to watch the state’s tax collections “a few more quarters” before deciding whether to allocate money to staff and operate the space.

The Department of Community Correction’s funding from general revenue would increase 6 percent from $68.3 million to $72.4 million under Beebe’s budget. The money will allow the department to hire 41 probation and parole officers, restoring positions that were frozen because of budget cuts, and add staff at the minimum-security lockups for nonviolent offenders.

The governor cited two areas as potential budgetary problems: prisons and Medicaid.

He said his agenda during the legislative session will include ways to punish nonviolent offenders without increasing prison costs.

“I think we have more flexibility to deal with prisons than with Medicaid,” Beebe said. “That’s an area I still worry about a lot.”

Some Republicans have talked about cutting more taxes than the grocery tax.

“It’s like I told a lot of them during the course of the election: You’ve got to balance your budget,” Beebe said. “If you’re going to cut taxes, you better have a proposal on what you’re going to cut in spending. The actual ramifications of those tax cuts have to be presented. What part of higher ed, prisons, are you going to cut?”

The general-revenue budget is funded mostly by income and sales taxes. Its included in the total state budget of about $24 billion, which also includes federal funds, special revenue for particular programs, and fees and tuition.

Department of Finance and Administration Director Richard Weiss presented Beebe’s proposed budget to the budget committee.

Asked later whether Beebe had identified specific budget cuts to allow for his own tax cut proposal, Weiss said, “No, the cut proposal came from new growth in the [revenue] forecast.”

Although the proposal is made in November, the budget isn’t usually enacted until the final days of the legislative session, likely late March or April, as legislators and the governor watch the economy and state revenue reports, and figure out where they think the budget needs to be expanded or reduced.

“It’s a very, very tight budget, no question about it,” Weiss said.

Sen. Gilbert Baker, R-Conway, co-chairman of the budget committee, said he hasn’t had a chance to fully digest the governor’s proposal.

He said that as more information about the economy is revealed during the legislative session, it will be clearer whether the state can afford additional tax cuts beyond the grocery tax.

“I’ve been a proponent since my first days here of getting rid of the grocery tax,” Baker said. “Part of that is political reality. I don’t want to talk about tax relief. I want to do it. And, sometimes you have to find where there is a consensus to cut taxes to get it done. Obviously, you’ve got the governor, who leads here and starts the debate, being in favor of tax relief. I support that.”

Beebe’s proposed grocery tax cut of one-half of a percentage point is projected to reduce state revenue in 2012 by $20.8 million, including special revenue. The general revenue loss would be $15.5 million.

Baker said Beebe’s proposed 1 percent increase for higher-education institutions “seems to be on the low side. I know Gov. Beebe is a friend of higher education and knows how important that is for economic development. That is one area that will require some discussion.”

Sen. Percy Malone, DArkadelphia, called Beebe’s proposal “very conservative.” He said he expects the economy will improve more than the Beebe administration predicts, meaning the budget could also grow.

Malone said it’s “way too early” to cut taxes beyond the grocery tax.

He said he’ll support the governor’s grocery-tax cut.

“He made the commitment four years ago and got elected,” Malone said. “If there is a [revenue] shortfall, it’ll be his job to tell us what to cut.”

Sen. Tracy Steele, D-North Little Rock, asked Weiss why the governor decided on a one-half percentage point cut rather than three-fourths of a point or one point.

“It became apparent if [Beebe] really sat on state agencies and really sat on expenditures and was ultraconservative, he could afford this amount of a cut, but no more,” Weiss said.

Weiss said federal stimulus dollars have helped the state weather the bad economy, especially by providing about $300 million more for Medicaid. That money will run out at the end of December. And the state’s $300 million Medicaid Trust Fund will be depleted at the end of fiscal 2012, Human Services officials have said.

Rep. Donna Hutchinson, R-Bella Vista, wondered if plans for further increases to unemployment taxes on business to fund unemployment benefit payments will hurt business profits and possibly lead to declines in income-tax revenue.

Beebe said he doesn’t want to raise taxes. But he said that the Arkansas State Chamber of Commerce and labor unions were negotiating on legislation for the state to fund unemployment payments.

Beebe said if the state doesn’t figure out how to pay the unemployment benefits, the federal government will figure it out for Arkansas and he doesn’t want that.

“I am not pushing a tax increase,” Beebe said. “What I am doing is telling the management and labor to get together to see how they want to resolve the problem either in the forms of increased contributions and/or cuts to the services or both, and I expect both sides to sit down. They have been sitting down. I think they’ll resolve it.”

Associated Press

A state economist says Arkansas is in position to be ahead of the pace as the nation recovers from the worst economic recession since the 1930s.

Chief Economist for the Institute for Economic Advancement Michael Pakko said Wednesday that Arkansas personal income, housing prices, taxable sales and employment have been stronger than in the nation as a whole. And the state has not seen the foreclosures that has plagued areas in the rest of the country.

Pakko says that the state is on track to regain the 50,000 jobs it lost by the middle of 2012. But, he says that the peak in unemployment in Arkansas is likely still ahead and should top out at 8 percent. That’s still 2 percentage points lower than the projection for the national unemployment rate.

Arkansas Business

Mark Carter

The addition of former Tyson Foods International chief Greg Lee to the board at Fayetteville’s Virtual Incubation Co. illustrates the firm’s plans to expand its portfolio of companies.

Virtual Incubation is a technology-venture development firm – an incubator for high-tech Arkansas startups – located in the Arkansas Research & Technology Park. VIC pairs its clients with investors and essentially serves as senior management until they are ready to hire their own full-time team.

While it has numerous ties to the University of Arkansas – founder and President Calvin Goforth is a former UA mechanical engineering professor – VIC is a privately held company. Goforth believes Lee’s expertise can help VIC grow its portfolio of companies from 12 to 20.

“We’re thrilled to have Greg join the board,” said VIC founder and President Calvin Goforth. “He’ll help us accelerate our vision of taking this to the next level.”

Lee is the former president and chief administrative officer of Tyson’s international division and spent 27 years there. He served on the boards of Tyson subsidiaries including Tyson de Mexico, Cobb Vantress and Specialty Brands, on various trade association boards and chaired the National Chicken Council and the International Foodservice Manufacturer Association board. But his time with the Springdale chicken giant was R&R compared to his “retirement.”

Since stepping down at Tyson (where he still serves as a consultant) in 2007, Lee has not lacked for things to do. He is active with the Northwest Arkansas Business Council, chairs the Technology Development Foundation of the University of Arkansas, serves on the UA’s Board of Advisors, the Dean’s Advisory Board for the UA’s Walton College of Business and the UA’s 2010 Commission.

He was named Northwest Arkansas Outstanding Philanthropist of the Year in 2008 and has received numerous other civic accolades. He is a member of the boards at Washington Regional Medical System and Signature Bank of Arkansas. His tenure on the Research & Technology Park board made him aware of VIC.

“Through my participation on the research park board, I had knowledge of VIC and its efforts,” Lee said. “As my business career wound down, it seemed like a natural. The model they’ve developed is a great model. I thought that I’d love to be a part of this.”

That model entails using private investments and federal grants, mostly in the form of Small Business Innovation Research grants, to nurture its companies to the brink of commercialization. Since its founding in 2003, VIC has brought in more than $25 million in grants for its client companies. It has benefited as well from the state’s R&D tax credits, passed by the state Legislature in 2003, that enable businesses to receive a tax credit of 33 percent of what they spent in a given year on R&D.

“The tax credits are a very important element in making this work,” Goforth said. “The income the grants don’t cover has been a really important element to how we make this work.”

Lee was drawn as well to that model and especially to the potential represented in VIC’s companies, which range from very early stage to almost fully developed. VIC helps bridge that gap by bringing in federal grants, hooking up clients with investors, providing managerial direction and market research, and sometimes by just plain offering advice.

‘Instant Management’

It’s that “instant management” aspect of VIC’s guidance that is so valuable, said NanoMech CEO Keith Blakely. NanoMech is a VIC client that is poised to hire its own full-time managerial staff. It could be considered one of VIC’s bigger success stories, having won multiple military contracts for its nanoparticle coatings and additives.

“It’s a very rare circumstance to find an inventor who has the full set of background and skills to build a company from scratch – not to mention access to capital – and who is truly prepared to risk it all to see his technology dream realized,” Blakely said. “VIC offers them an opportunity to advance their idea and product to a point where a better assessment of the commercial viability, technical uniqueness, market interest and manufacturability can be made.”

Lee understands what it takes to make a company successful and appreciates the risks involved in evaluating opportunities.

“I was very impressed with the rigor Calvin and the management team used in evaluating opportunities,” he said. “I was impressed with their ability to actually execute a cadre of services that you have to bring to bear in a very discerning manner. There’s a lot of rigor applied to trying to determine the viability of technology: Is it commercially viable; is it financially viable?”

He thinks VIC has some winners in its stable. SFC Fluidics, which develops laboratories-on-a-chip technology for use in the life science fields, is another client ready to realize its own full-time management team.

“Theirs is a very interesting portfolio with companies at different stages of development. Each, in its own right, has an interesting future,” Lee said. “Because of my long business career, I’ve touched a lot of things these companies are going to have to touch. Maybe my experience could make a difference for them.”

Economic Impact

VIC has licensed technologies from research institutions around the world, such as Japan and India, but remains very much rooted in Arkansas. Originally, all the technology originated out of the UA, and now 10 of 12 VIC clients have Arkansas tech associated with them.

All VIC firms are headquartered in northwest Arkansas. While not all its firms will make it big or perhaps even stay in Arkansas, those that do are expected to have a big impact on the state.

“The economic impact could be big, with very high-quality R&D jobs on the Ph.D. and Master’s levels – scientists and engineers,” Goforth said. “That’s just the tip of the iceberg. Hiring goes up significantly as you emerge out of R&D and into sales.”

Goforth said the companies had the potential to hire hundreds, if not thousands, of people in the not-too-distant future.

“A significant number should stay in Arkansas,” he said. “Even if a company is sold and moves out of state, the economic impact is there because people here will make money from the sale. It’s a cycle that builds on itself. It could become a thriving part of the economy.”

Carol Reeves, assistant professor of entrepreneurship at the UA’s Walton Business College and mentor to its renowned student business-plan teams, credits Virtual Incubation Co. with helping launch entrepreneurship in northwest Arkansas.

“I think the main benefit VIC has provided over the years is to open up many people’s eyes regarding the possibilities of science- and engineering-based firms,” she said. ”It’s hard for me to imagine what the environment for knowledge-based firms in northwest Arkansas would be without VIC. As is clear from their record, they are experts at leveraging federal research dollars into startup companies. Much of the foundation for the entrepreneurial successes in northwest Arkansas can be laid squarely at VIC’s doorstep.”

Goforth said VIC had established a “great pipeline” to new technology – which he’s keeping under wraps for now – that he hopes to bring on board soon. He envisions a northwest Arkansas that could become a high-tech hotbed.

“I think the pieces are coming together,” he said. “You look at the products, the facilities … it’s a compelling story. Things are starting to crystallize here. We’ve not been a hotbed of technological development to date, and Arkansas is not ahead of the curve in terms of overall progress, but folks are impressed by our rate of progress. Our accelerated progress is impressive. There are some very strong groups working together.”