For a lot of readers, we offer a simple primer on General Improvement Funds, a lower-profile aspect to the budgeting process that involves a lot of internal politics in the state capitol power structure.
What are General Improvement Funds, or GIF?
A simple answer is GIF is money collected and set aside from interest accrued on state treasury funds and surpluses or unexpended balances from state agencies and offices at the end of the fiscal year (June 30).
Typically, that money is set aside and can be earmarked for use by the executive and legislative branches.
Often, GIF are used for one-time capital-related expenses such as buildings or infrastructure projects with a statewide impact. In recent years, the legislature has funded the Governor’s Quick Action Closing Fund for economic development with GIF.
"It’s often used for capital programs because we don’t have capital programs budgeted any place else in the Arkansas budget," said Joint Budget co-chair Rep. Kathy Webb (D-Little Rock).
Some critics of GIF equate them to Arkansas "pork barrel" projects and there has been litigation surrounding its distribution that requires lawmakers to be careful about how the funds are spent.
For example, rural fire departments use GIF money to buy trucks or fire protection gear. Senior centers may purchase equipment to keep up with needs for serving meals on wheels, for instance. A Boys and Girls club or a domestic violence center may receive GIF to help repair or expand a building or park area.
Webb is asking members of the House to complete a form that will serve as a guide for distributing GIF money "if there are general improvement funds" for the next fiscal year. She’s asked leaders of the Democratic and Republican caucuses in her chamber to collect those rankings in order to move the process forward.
Remember, the budget currently being developed will shape the fiscal year starting July 1, 2011. GIF plans for the fiscal year ending June 30 have already been laid in place.
Depending on revenue balances at the end of June, House members previously outlined $30 million in projects, the Senate has earmarked $30 million, and the Governor will have discretion over $113 million should revenues meet forecast.
But this session as budget plans are laid out, Webb expects much less money – perhaps no money – for GIF.
"My expectation this session would be, at the most, for both the Senate, the House and the executive perhaps $70 million. And depending what we do in the next few days in the session in terms of tax cuts, we might not have any general improvement money. I’m just trying to lower expectations," Webb said.
The budget chair adds that it is "premature" right now to speculate, but if the pool of money is too small, legislators may just recommend one worthwhile project or leaving the money to the Governor’s discretion for job creation. She also has said that the money could be earmarked in a fund to help pay down the state’s unemployment trust fund debt to the federal government, which stands at about $330 million.
UPDATE: State finance officials revealed that another potential use of GIF could be necessary to correct a once-a-decade problem related to pay for state employees. Due to accumulating days, Arkansas governmental workers could be owed the equivalent of a 27th pay period in the 2012 fiscal year.
Price tag: $23.5 million.
DF&A officials shared the possible scenario with Joint Budget Committee members on Wednesday.
You can view this video short to hear more of Webb’s comments.