Arkansas Legislative Session Update
A total of 46 constitution amendments were filed before the Feb. 13 deadline. Under Arkansas law, legislators may refer up to three amendments to place on the general election ballot in 2020. The most likely amendments to be referred include those addressing highway funding, term limits and reforming the ballot initiative process. There appears to be tort reform fatigue, and it doesn’t seem like members can obtain consensus around eliminating the fiscal session.
Gov. Hutchinson signed Act 182 of 2019 (SB211) – enacting a near $100 million tax cut. Originally, the governor’s proposed $192 million tax cut was part of a “2-4-5.9” tax cut package, but Act 182 instead cuts the top individual income tax rate from 6.9 percent to 5.9 percent over a two-year period. State officials project this income tax plan will reduce revenue by about $97 million a year after it’s fully implemented.
Highway funding has been a major focus during this legislative session. The state has $9.2 billion in highway funding needs but only $4.4 billion in available funds. Officials have said the state highway system needs $478 million in additional funding a year just to meet its current maintenance and improvement needs. A 2017 proposal to put a bond issuance on the ballot was rejected and the State Highway Commission didn’t put a funding plan on the 2018 ballot.
SB336 – which would levy a new wholesale sales tax on gasoline and diesel and dedicate casino revenue for highway funding – would raise approximately $95 million. It passed the Senate and the House is expected to take it up this week.
HJR1018, a proposed constitutional amendment, would raise $205 million for highways and approximately $44 million each for cities and counties. It would permanently establish a constitutional half-percent sales tax, replacing a temporary sales tax set to end in 2022.
Currently, there are 42 direct reports from state agencies and boards that answer to the governor, and the plan is to reduce it to 15. This is the first comprehensive effort to trim state government since 1972. It is anticipated that an over 2,000-page bill will be filed by March 8 with the goal of improving delivery of services to Arkansas taxpayers by breaking down silos within state government. While the concept is popular, there has been some pushback from various internal groups. However, the legislation is ultimately expected to pass.
Governor’s Balanced Budget Proposal
Gov. Hutchinson’s balanced budget proposal is progressing with minimal changes. For fiscal year 2020 starting July 1, Gov. Hutchinson has proposed a general-revenue budget of $5.75 billion – an increase of $125 million over the current general-revenue budget – with most of the increase going to human services and education programs, including a boost in starting teacher pay.
Legislative Tax Reform and Relief Task Force
In December 2018, the Arkansas Tax Reform and Relief legislative task force sent 22 recommendations to the General Assembly to improve the state’s tax code. The proposals have largely not been considered yet. However, now that the Governor’s major tax cuts have passed and the highway plan is being considered, these should be on the agenda in the near future.
For more information on the happenings during the Arkansas Legislative Session, contact our GR team.