Beebe pushes new budget, half-cent sales tax cut

Arkansas’ Department of Finance & Administration officials presented Gov. Mike Beebe’s balanced budget for the next two fiscal years to state lawmakers and predicted a recovery from the "disaster" of the last two years’ recession.

Richard Weiss, DF&A director, said Beebe expects a 3.6% increase in revenues for the current fiscal year, according to this report from Roby Brock at Talk Business.

In the next two years, economic forecasters expect a 2.8% boost to state revenues over the current year and a much stronger 5.3% increase in the following year.

"As you know we’ve come off of 2 years of a substantial recession," Weiss told lawmakers on the Joint Budget Committee. "We think we are slowly pulling out of the recession and slowly seeing some growth come back."

In the current fiscal year, Weiss said he fully expects to see full funding of the Revenue Stabilization Act.

"The combination of effects from financial crisis and sluggish recovery in labor markets continues to dampen U.S. economic forecast expectations for the end of 2010 and 2011," Weiss said in prepared remarks. "This continuing weakness, after inventory rebuilding and initially encouraging recovery, is now fully recognized by government and private forecast groups. Even though the Arkansas economy has been performing better than most states, we are subject to the warnings of continued national economic weakness. We have provided a conservative forecast recognizing this weakness."

For the current fiscal year, finance officials expect Arkansas’ net available general revenues to reach $4.479 billion. In the 2012 fiscal year, net revenues are expected to top $4.6 billion and in the 2013 fiscal year, net revenues are projected to top $4.848 billion.

Gov. Beebe’s proposal promotes a half-cent sales tax reduction in the grocery tax, which would impact the budget by about $15.5 million annually.

Executive recommendations call for little to no increases in most state agency budgets. The general education fund for public schools would see a modest 3% rise annually during the next two fiscal years. Human services groups would see no funding increases except in behavioral health and Department of Human Services grants, which will help with rising Medicaid costs. The Department of Corrections would see less than a one percent growth in its operations budget.

As lawmakers gear up for their annual session in 2011, they will grapple with other budget concerns such as potential capital expenditures for new prison construction and an unemployment trust fund debt that is approaching $400 million, although state finance officials contend the figure is less than $250 million. Those items are not addressed in this budget.

Rep. Donna Hutchinson, R-Bentonville, asked about the state’s ability to pay back the federal government debt related to unemployment insurance. Weiss said the federal government would potentially levy a tax on Arkansas businesses and that the state budget proposal does not account for the liability.

The unemployment insurance trust fund debt could be as high as $475 million by the end of 2012, Randy Zook, president and CEO of the Arkansas State Chamber of Commerce/Associated Industries of Arkansas, said during a Nov. 5 meeting in Fort Smith.

Zook has said the state chamber’s plan would raise taxes Arkansas businesses pay into the unemployment compensation fund. He acknowledged it will not be popular, but said if Arkansas businesses don’t come up with a plan, the federal government will.

“The Arkansas business community needs to be out front on this … or the federal government will decide that (increased business tax) for us,” Zook warned. “But we’re going to have some work to do to sell this to the Legislature. … Many of those guys came to Little Rock with a promise to not raise taxes, and here we are, the business community, asking them to do this.”