Talk Business: 2011 top business and political stories

There was nearly as much good news as bad news in 2011. For every job announcement, there seemed to be a layoff announcement. For any improvement in a key part of the economy, it felt like a counterbalancing negative setback materialized. It had many business observers chalking 2011 up to “the forgotten” column.

• The Economy Sputters
Despite improving numbers in parts of the economy, there was close to an equal amount of negative trends. While corporate profits and bank profits rose, unemployment remained relatively high and the prospects for job gains in 2011 are likely to be erased when final data is tabulated.

Sales tax collections struggled at the state and local levels, but income tax collections showed strength, a sign of worker and wage health. Home sales started off slow, but made gains. A likely scenario suggests that residential sales will end the year fairly flat.

All in all, a look at key statistics suggest two steps forward, one-and-a-half steps backwards. As UALR economist Michael Pakko described it, 2011 will be considered by many to be “the lost year.”

• Public Firms Find Their Footing
Arkansas’ high-profile, publicly-traded companies had an exceptional 2011 in many regards. Trucking giant Arkansas Best Corp. returned to the black; Windstream Corp. completed several transformational acquisitions; Many public banks, like Home Bancshares and Bank of the Ozarks, completed out-of-state acquisitions.

In the retail sector, Dillard’s continued its hot streak of profitability and Walmart saw improvement in same-store U.S. sales for the first time in more than two years. Tyson Foods had a solid year of profitability despite volatility in its chicken segment.

At one point mid-year, the 15 largest publicly-traded firms headquartered in Arkansas all recorded positive net income for the reporting quarter — a feat that hadn’t happened since before the 2008 recession.

• Whirlpool Factory To Close
It came as no real surprise that after months of speculation Whirlpool announced it would shutter its Fort Smith factory in 2012. The move will result in layoffs of nearly 1,000 workers and close to another 500 indirect jobs from suppliers and vendors in the community.

At one time, the Whirlpool plant employed more than 4,600 workers. It also appears that another high-profile project, the Mitsubishi wind turbine factory in Fort Smith, could also be delayed in its opening.

• Yarnell’s Ice Cream Shuts Down

An iconic Arkansas brand name, Yarnell’s Ice Cream, a fourth-generation family business based in Searcy, unexpectedly closed its doors in late June. Nearly 200 workers lost their jobs.

The privately-held ice cream manufacturer initially said it would cease production indefinitely, but several weeks later it filed for Chapter 7 bankruptcy citing $15.7 million in liabilities and $8 million in assets.

There’s hope that the plant may re-open soon thanks to new buyers, but the economic challenges that led to Yarnell’s closure still remain.

• Farmers Battle Floods, Drought
Farmers in Arkansas are used to turbulent times, but weather conditions throughout 2011 certainly taxed their patience and their skills.

In the spring of 2011, flooding from heavy rains submerged more than one million acres of farmland. By some estimates, more than $500 million in crop damage was tabulated, but that didn’t account for additional damage for infrastructure repairs, totaled farm equipment, and loss of grain in storage bins. Nor did that estimate include lost income and wages for farm workers.

When the waters receded, along came devastating summer heat that baked already crippled farming operations. The pounding was so bad that Gov. Mike Beebe asked for — and received — a federal natural disaster designation that covered all 75 counties in state.

• Crystal Bridges Opens
One of the highlights of the year from a cultural and business perspective centered on the November opening of the Crystal Bridges Museum of American Art in Bentonville.

The $1.4 billion museum was funded by Walmart heiress and philanthropist Alice Walton. The 200,000-square-foot campus has 12 art galleries housing more than 450 pieces of original American artwork spanning 5 centuries.

Tourism officials, thrilled to have a new attraction to lure visitors to Arkansas, expect as many 250,000 people to travel to the region annually.

TOP POLITICAL STORIES
While there was plenty of action in state politics in 2011, many of the events simply set the stage for future political battles in 2012 and beyond.

• Tax Cuts Go Further
Gov. Mike Beebe’s (D) desire to hold the line on tax cuts to an additional half-cent reduction in the grocery tax was quickly dashed by state legislators with other ambitions.

Beebe wound up compromising on a variety of additional tax cut measures beyond the grocery tax, in large part due to the strength of a surprisingly strong Republican minority in the legislature. The General Assembly cut taxes on used cars, manufacturers, back-to-school sales, and low-income households. A capital gains tax cut bill was defeated, although it garnered strong support.

There will be more battles in the budget session of 2012 and the regular session of 2013. Rep. Davy Carter, R-Cabot, has proposed a review of sales tax exemptions and exclusions on the Arkansas books.

• The Redistricting Battle
They’ll be talking about the “Fayetteville Finger” for decades. The phrase dominated the decennial Congressional redistricting process as Democrats worked hard to shore up a stronger Fourth Congressional District for their cause.

The plan passed the House by a small majority, but couldn’t muster the votes in the Senate despite Democratic control. In the end, a more palatable map for the state’s four Congressional Districts were approved, and by most accounts, political observers see them all as potentially winnable seats for Republicans.

The Governor, Attorney General Dustin McDaniel (D) and Secretary of State Mark Martin (R) also carved up 135 new legislative districts as part of the state redistricting process. This once-a-decade undertaking means every State House and State Senate seat in Arkansas will be up for election in 2012 and with close party lines in each chamber, the new year could be a watershed year for Democrats or Republicans.

• U.S. Rep. Mike Ross, D-Prescott, Retires
Fourth District Rep. Mike Ross (D) shocked the political establishment with a July announcement that he would not seek re-election. He had served since 2001 in Congress and had easily won re-election in 2010 despite heavy Republican gains across the state and nation.

Ross’ move caught Democrats off-guard and renewed optimism among Republicans that the south Arkansas seat could change party hands in 2012. Ross will serve through next year and is expected to be laying the foundation for a run for Governor in 2014.

• Health Care Heats Up
At the beginning of 2011, it was apparent that federal health care reform’s implementation in Arkansas would be a heated issue. A large number of GOP legislators were swept into state and federal offices in late 2010 over angst on the issue.

Several attempts were made to slow down the effort in the Arkansas General Assembly, most of them unsuccessfully. However, state Insurance Commissioner Jay Bradford was stymied at nearly every turn by reluctant legislators — mostly Republican — that ultimately forced him to “quash” efforts to construct a state-sponsored adaptation of a federal health insurance exchange.

By year’s end, all eyes were pointed towards a pending U.S. Supreme Court decision expected in 2012 that may decide federal health care’s constitutionality.

• Medicaid Reform Introduced
Gov. Beebe’s efforts to reform the state’s Medicaid system had as much business reverberation as it did political. Facing a looming budget crisis, the multi-billion Medicaid program is looking to be drastically altered.

Beebe’s announcement and the initial changes being proposed turned the state’s already turbulent health care system on its head. For doctors, patients, hospitals, insurance companies and others, 2012 will be a landmark year that could reshape their business models for decades.

• West Memphis 3 Freed
Who would have ever believed that 2011 would be the year that three convicted murderers would be released from prison through quickly developing and an obscure legal maneuver?

With only about one day’s notice to the press, on Friday morning, August 19, Damien Echols, Jason Baldwin and Jessie Misskelley Jr. — the West Memphis 3 (WM3) — were released from life sentences and death row despite their convictions in the 1993 murders of three West Memphis children — Christopher Byers, Stevie Branch and Michael Moore.

Prosecutor Scott Ellington was facing a probable retrial of the case, which had weakened considerably since their first convictions. Ellington and defense lawyers for the WM3 worked out an “Alford guilty plea” to an amended charge of first degree murder and were released to time served in an agreement with the state. An “Alford guilty plea” is a no contest plea where the accused claim their innocence, but plead guilty anyway to get the deal instead of risk trial.

The WM3 release re-kindled passionate debates regarding the merits of the case and grabbed significant political and celebrity attention in the process.

• Post Office Closures
The U.S. Postal Service, which is operating with a nearly $10 billion deficit, decided that 2011 was the year to deal with its troubled finances. Among the changes the USPS proposed included raising the cost of stamps, limiting days of service, laying off workers, and slashing the number of postal outlets it has across the U.S.

For Arkansas, the cuts could close more than 200 local post offices, many in rural parts of the state. The moves riled rural legislators and Congressional officials who understood the ramifications for Arkansas, a largely rural state.

USPS officials delayed decisions well into 2012 to fade the political heat, but it is only likely to be re-kindled when the subject arises again in the new year.