Gov. Hutchinson outlines $87 million bond deal, agency mergers

Gov. Asa Hutchinson outlined an $87 million, 25-year bond issue that he will present to lawmakers at next week’s special session, but also took the time before heading into the long Memorial Day weekend to announce a corporate-style plan to downsize state government that he said will save Arkansas taxpayers $10 million to $12 million over the next five years.

Hutchinson offered details of both plans on Thursday before a gaggle of news reporters at the State Capitol, where he called the state’s efforts to help defense giant Lockheed Martin win a $30 billion Pentagon award “the most important issue” for the May 26 special session that will bring lawmakers back to Little Rock. The bonds would be issued under Amendment 82 which allows such incentives for large economic development projects. (See the video below of Hutchinson's Thursday press conference.)

“This is the fundamental reason that we are calling the legislature back into session,” Hutchinson said. “We are trying to put Lockheed Martin, as the state’s partner, in the most competitive position to win this contract from the (U.S.) Department of Defense."

Grant Tennille, who served under Gov. Mike Beebe as executive director of the Arkansas Economic Development Commission, said ancillary effects of a new state-of-the-art military vehicle being built in Camden will be greater than the 600 or more new jobs from the production.

In addition to the workforce will be that Lockheed will build and operate for several decades one of the most advanced manufacturing facilities in the country. All of that gives Arkansas a “huge advantage” in the recruitment of other auto assembly plants and advanced manufacturing operations, Tennille said in a recent interview with The City Wire.

Hutchinson said Arkansas must help Lockheed “win” the deal.

“It is a competitive marketplace as to which company is going to produce the 55,000 vehicles …, and we want to do (our) part to make sure Lockheed Martin and South Arkansas is in a position to win this,” the governor said.

Once lawmakers are back at the capitol next week, they will vote on $87 million in bond financing to help Lockheed Martin build the so-called Joint Light Tactical Vehicle (JLTV) tactical vehicles in Highland Industrial Park in East Camden.

The DOD is expected to decide later this summer on the award of the final contract for the $30 billion JLTV project, which will replace the currently military version of the all-terrain armored vehicle used by the U.S. Army and Marines.

If Lockheed Martin wins the contract against rivals Oshkosh and AM General, the Maryland based defense giant has said it will perform final assembly of JLTV at its operations facility in Camden.

According to Hutchinson, $83 million from the bond financing will be handed over to Lockheed Martin for assistance in retraining its current 530-person workforce. Those funds will also be used to assist the company in expanding its facility, and it will allow the Maryland-based defense giant to double its labor pool to handle the Pentagon’s award that will last through 2040.

The remaining funds will be used for bond financing expenses and to set up a training center for the JLTV project at Southern Arkansas University (SAU) Technical school in East Camden.

If Amendment 82 incentives are approved, it will be the second time in less than three years the law will be used. Legislators in early 2013 approved a $125 million bond issue to support a $1.3 billion investment by Big River Steel to build a steel mill near Osceola in east Arkansas.

PROPOSAL TO MERGE FOUR STATE AGENCIES
While taking only three-minutes to explain the bond issue for the Camden superproject, Hutchinson spent the rest of the 20-minutes during the media briefing to highlight what he called his “efficiency initiative” to streamline state government. He said both of his approaches to aid companies like Lockheed Martin in bringing jobs to Arkansas as well as trimming the size of government are part of his overall economic development strategy.

“I want to stress that in managing government, small things also matter and can add up,” the governor said. “We are not just concentrating on big items, but we are looking at small items as well.”

Under his plan to scale back state payrolls, Hutchinson said he intends to merge the Arkansas Department of Rural Services and the Arkansas Science and Technology Authority (ASTA) into the larger Arkansas Economic Development Commission, or AEDC.

The transfer of the entire Rural Services department, along with “all of its powers, duties, functions, budgets, records and savings” into AEDC, would save the state more than $175,000 through the immediate elimination of two jobs, the governor said. Additional savings would be realized through an 8.4% reduction in agency operating costs and a 33% reduction in staff, he said.

Likewise, the transfer of the entire ASTA office into the state’s Economic Development division would save more than $450,000 in state general revenue funds with the elimination of six jobs. An additional $272,000 could be saved through attrition, Hutchinson said.

The governor’s plan also calls for the Division of Land Survey to be rolled into the larger Arkansas Geographic Information Office. That merger would eliminate two positions and save the state nearly $167,000 in general revenue funds.

The largest of the agency mergers would include putting the Arkansas Building Authority (ABA) under the umbrella of the Department of Finance & Administration’s management services division. That union will eliminate nine vacant positions and represents a 2.4% reduction in agency operation costs, and a 9.7% cut in the number of ABA jobs. Total savings for the changes would amount to over $1.1 million in attrition and personnel reduction costs.

“If you combine all four of these efficiency matters that we will present to the legislature, there are potential or approximate savings of $10 million over five years,” the governor said. “A small amount year by year, but it adds up both to a better delivery of state services, better coordination of economic development, as well as savings to the taxpayers.”

Hutchinson stressed that most of the millions of dollars in projected savings could be achieved through staff attributions and efficiencies that come through smaller government. He also said he was sensitive to the “human side” of possibly eliminating or reassigning some state positions, but said he has worked hard to make sure that job cuts were minimal.

At the end of his media briefing, Hutchinson also discussed his decision to ask lawmakers to move Arkansas’ primary elections from May to March to participate in the so-called “SEC primary” involving other Southern states.

In response to questions from reporters that some critics say the decision to move up the entire 2016 primary was solely to accommodate former Arkansas governor and presidential candidate Mike Huckabee, Hutchinson stressed his move was not political in nature but was put in motion to give Arkansas voters a chance to have a say in the presidential election.

“There is one compelling reason for me to want to move the primary from May 20 to March 1 …, and that is for the people of Arkansas to have a meaningful vote in deciding who is the next president of the United States,” Hutchinson said, adding that he has not had any conversations with Huckabee since the Hope native announced plans to run for president earlier this month.

Hutchinson also said he is asking lawmakers during the session to make a minor correction to the state’s DWI law simply to protect federal highway funding after the Arkansas Supreme Court ruled last month that state law requires a person who knowingly drives while intoxicated to be guilty of the crime.