Arkansas Democrat Gazette
Tax-cut legislation was big in this year’s legislative session, and with the state’s second-ever “fiscal session” just three months away, some legislators are drawing up plans to cut more.
But Gov. Mike Beebe and most legislative leaders say they want to limit the session to appropriation matters and not get into tax cuts or nonbudget bills, with a few special exceptions.
There also was talk in this year’s session about cutting the state budget, but it wasn’t cut.
This year the Legislature enacted six tax cuts. State officials estimated that the cuts would reduce revenue by $34.5 million this fiscal year, fiscal 2012, and $44.7 million in fiscal 2013, which starts July 1.
The differing amounts for the two years are attributed to the fact that two of the measures take effect Jan. 1, 2012, halfway through fiscal 2012, but they will be in effect for all of fiscal 2013.
They are Act 753, which increases the $2,500 sales-tax exemption on a used car’s sale price to $4,000, and Act 754, which decreases the 6 percent sales tax on natural gas and electricity purchased by electric power generators to 5.125 percent, said Whitney McLaughlin, tax analyst for the state Department of Finance and Administration. Act 754 reduces the tax further in 2013 and 2014.
The fiscal session begins Feb. 13, early in an election year in which Republicans aim to wrest control of the state House of Representatives and state Senate from Democrats, and Democrats aim to hold their own and add to their numbers.
Tax cuts and budget cuts gain favor with some voters, but other voters disapprove of diminishing state services for the aged, the ailing and the needy, as well as security services, such as prisons.
The filing period for candidates for state and federal offices runs from Feb. 23-March 1, according to the secretary of state.
State law requires that the governor’s general revenue forecast and budget proposal for fiscal 2013 be released by Dec. 1 to the Legislative Council. The Legislature’s Budget Committee budget hearings run from Jan. 17-Feb. 3.
At least a few lawmakers say they haven’t ruled out proposing tax cuts in the fiscal session, although a two-thirds vote is needed to allow such legislation to be considered. Two-thirds is 67 votes in the 100-member House and 24 in the 35-member Senate.
One of the tax-cut-seeking lawmakers is Sen. Eddie Joe Williams, RCabot, a member of the Senate Revenue and Taxation Committee. He’s working on a bill aimed at stimulating job growth, he said, but he declined to provide details.
He’s having research done, he said. “We’ll see what kind of fiscal impact it has.”
If he can’t get the “supermajority” to allow the bill to be considered during the 2012 session, “then I will continue to do the research to introduce it” in 2013.
Rep. Mark Biviano, RSearcy, who is on the House Tax Committee, said the panel may discuss tax-cut proposals for the fiscal session in advance of the session.
Rep. Davy Carter, R-Cabot, chairman of the committee, said he’s opposed to opening the door to considering tax cuts during the fiscal session.
“I think it is just a can of worms,” he said. “You got 135 people up there that all have things important to them when you try to open it up to nonbudget matters. If you do it, it is a gateway to having [regular] sessions each year. I don’t think that’s what voters wanted.”
House Republican leader John Burris of Harrison, who also is on the House Tax Committee, said he prefers a fiscal session focused on the budget and allowing no other kinds of bills, including those on tax cuts.
“Once that levee is breached, everybody has got a little bill that is very important to them, so that is why I think a blanket policy of budgetbills-only is the right policy, and I would support [House Speaker Robert S. Moore Jr.] in that,” he said.
Moore, D-Arkansas City, said he doesn’t believe that the Legislature will be dealing with anything other than appropriation bills in the session.
“I don’t see right now that there is any concerted effort among any group of members” to get the two-thirds vote to consider a nonbudget bill, he said.
“Hopefully, the fact that we are in an election cycle … most members will … [want to] come up here and take care of the people’s business in an efficient and expeditious manner and go back home to our respective districts,” Moore said.
Moore and Burris said in June that they would support repealing a sales-tax exemption for trucks, which is to go into effect in July of next year, after Beebe said he would push for its repeal if a proposed diesel-tax increase for highway construction was scrapped, as it has been.
Beebe said at that time that lawmakers agreed to pass the exemption in exchange for the Arkansas Trucking Association’s support of placing a 5-cents-per-gallon tax increase on diesel fuel on the ballot, but the association said it no longer wanted the governor to place that tax increase on the ballot because a poll showed that voters would reject it.
Asked whether Moore still wants to repeal that sales-tax exemption and whether he thinks he can get a two-thirds vote to consider such legislation in the fiscal session, a spokesman, Amanda Story, said: “It’s being looked into, to incorporate a repeal into existing legislation, without requiring additional legislation to be introduced.”
Including such a repeal in the Revenue Stabilization Act is “something they’re looking at,” she said.
Considering a bill to make the annual revisions in the Revenue Stabilization Act requires a two-thirds vote in a fiscal session because it is a funding bill, rather than an appropriation bill, even though it is a core element of the budgeting process.
A spokesman for Beebe, Matt DeCample, said legislation to repeal the sales-tax exemption on trucks is “one area that we have left the door open to consider in the fiscal session.”
Another possible nonbudget bill would be to change the amounts of lottery-financed scholarships, if such legislation is needed, he said.
Sen. Johnny Key, R-Mountain Home, co-chairman of the Legislature’s Lottery Oversight Committee, said he prefers “that we not have one unless we find something that needs to be changed.”
Beebe said he hasn’t had any discussions with legislative leaders about the fiscal session.
“Frankly, I’d love some more tax-cut bills, and you know which one I love, the sales tax on food, but [considering a further cut in the 1.5 percent tax during the fiscal session] would be breaking faith with the people, in my opinion,” he said.
He said he hopes to propose a further cut in the 2013 regular session.
Since the start of the fiscal sessions in 2010, legislative leaders “have been very disciplined in trying to stay with what the people voted for and what the people were told, and that was ‘Let’s not expand government, let’s just do budgets and let’s not try to make this more than what the people wanted,’ so I expect they’ll still have the same attitude [this time],” Beebe said.
Historically, the Legislature has had regular sessions in odd-numbered years and every such session in memory has been a fiscal session in the sense that it enacted the state budget, usually for the next two years.
But voters in 2008 — to the amazement of some state lawmakers, Beebe and others — adopted what became Amendment 86. Referred to voters from the Legislature, the amendment authorizes budget-enacting sessions in even-numbered years and calls them “fiscal” sessions.
The fiscal session is limited to 30 days with one possible extension of no more than 15 days.
Amendment 86 requires the Legislature to set a budget on an annual basis. Previously, the state’s budget cycle was two years, with each being approved during the regular session, which started in January of odd-numbered years.
The first such fiscal session started Feb. 8, 2010, and lasted 18 days. It was limited to budget matters, and the only nonbudget matter was legislation to set the amounts of lotteryfunded scholarships.
That session ended with mixed reviews, with then-Senate President Pro Tempore Bob Johnson, D-Bigelow, calling it a big waste of time.
Johnson’s successor as the Senate’s leader, Sen. Paul Bookout, D-Jonesboro, said the public “wanted us to not get into having a mini-regular session and be sure we didn’t get off into a lot of other issues.”
Asked his opinion about allowing tax-cut legislation in this fiscal session, he said, “The details are always what matters. I don’t know. It depends on what they are.”
Sen. Gilbert Baker, R-Conway and co-chairman of the Legislature’s Budget Committee, added: “I think the bar has to be set very high [for nonbudget legislation]. We have to be very careful not to open this up to a full session. That goes for tax-cut legislation and also tax-increase bills.”
Despite the cuts enacted this year, the state budget stands to spend more in fiscal 2012 than in fiscal 2011. Planners anticipate an increase in revenue from expanding economic activity, and the budget relies in part on some surplus funds and fund transfers within the government.
The distribution of revenue is prioritized using two categories: A, from which the first $4.564 billion in general revenue will be sent to state agencies; and B, from which another $31.9 million, if it comes in, will be sent out. A and B together are $4.595 billion, an increase of $117 million from the previous fiscal-year budget.
Earlier this month, state officials said Arkansas’ general revenue collections rose more than had been forecast in September, offsetting August’s shortfall and giving state leaders cause for guarded optimism after two months in which revenue fell short of expectations.
The state’s gross general revenue of nearly $1.4 billion in the first quarter of fiscal 2012 is $11.5 million ahead of the forecast, or 0.8 percent. That’s an increase of $35.1 million, or 2.6 percent, from the same period last year.
Meanwhile, Beebe said, “We’ll just have to wait and see as we pursue what we do in next year’s budget. Hopefully, we will stay on forecast for this year. If we can’t, we’ll make it up.”
He said he expects the state’s budget issues to be “the same old, same old.” With 95 percent of the general revenue going to education, human services and prisons, “you don’t have a lot of wiggle room there,” he said. “The fighting is in the margins, and just barely around the edges when 95 percent of your money ends up going into those three major categories.”
Burris said, “I think we should take as long as we need to get a budget that we can agree to, but that may not be so easy.
“I think we will have some areas that we would like to see cut, but a lot of it depends on what the governor proposes for growth,” he said. “As far as policy changes on Medicaid, I don’t know that the Legislature can have a lot of effect on it at all and certainly not during the fiscal session.”
Beebe has indicated that most of the Medicaid changes can be done through rules and regulations, Burris said.
DeCample, Beebe’s spokesman, said, “We do not anticipate the initial changes to the Medicaid payment system to require legislation.”
Burris said the closer the state can get to “zero growth” in the state budget “the better it would be.
“There would be some areas that are going to have to see increased spending like Medicaid, but we want to see some action on an effort to curb that growth,” Burris said. “No matter if I end up supporting what he does or not, at least [Beebe] is talking about that.”
Rep. Kathy Webb, D-Little Rock and co-chairman of the Budget Committee, said the budget issues of “greatest concern” include providing adequate funding for Medicaid and educational adequacy in the public schools as well as for the Administrative Office of the Courts.
House Democratic leader Johnnie Roebuck of Arkadelphia said many House Democrats want “to take care of our people.
“We need to make sure that we are not cutting the services that we have,” she said. “People are very concerned about [not granting a cost-of-living adjustment] for state employees and also about the cuts made in foster care. I am hearing those concerns that we got to take care of our people. I think that’s the mood of our party.”