‘Puzzled’ by economy, Governor cautious on tax cuts, expecting more manufacturing success

by Roby Brock (roby@talkbusiness.net) 26 views 

Gov. Asa Hutchinson thinks Arkansas could be on the radar for more manufacturing jobs soon, is cautiously optimistic about additional tax cuts, and expects to hear in the very near future about federal waivers to his Arkansas Works program.

In a wide-ranging interview on Talk Business & Politics on these topics as well as War Memorial Stadium’s future and the recent developments from the FBI regarding an investigation of Democrat Hillary Clinton’s emails, Gov. Hutchinson outlined his positions.

Two weeks ago, the governor traveled to China for his second trade mission, announcing that Adidas and Armani manufacturer, Suzhou Tianyuan Garments Co., would locate a 400-worker, $20 million facility in Little Rock at a yet-to-be-determined location.

“The significance is this is the first garment company to relocate in the United States from China. So it’s like the reverse return of manufacturing back to the United States, we’re able to capture that here in Arkansas,” Hutchinson said.

The governor noted that he expects manufacturing relocation to the U.S. to continue reversing the long-term trend of low-wage countries attracting those jobs.

“That’s the dynamic change as you see China’s economy maturing, they both have higher cost of production, the logistics challenge is still there – shipping it overseas, and then thirdly, they want to look at the United States’ market and be a bigger player,” he said. “I think you’re going to see numerous opportunities for that type of manufacturing to come back to the United States. That’s why I think it’s important for me to be there in China from time to time to make our case.”

Hutchinson said other garment and apparel companies are looking at the Arkansas Delta and other regions of the country for site location.

“We’re competing for those. Those are good opportunities for the Delta,” he said, noting that existing workforce and facilities as well as the region’s apparel manufacturing past make it attractive.

Budget hearings have begun at the state capitol and Hutchinson is required by law to provide a balanced budget for consideration by the Arkansas Legislature shortly after the November 8 election.

Sen. Bart Hester, R-Cave Springs, proposed a $106 million tax cut last week that would be aimed at low-income residents. Hutchinson did not endorse the plan but said the target group is being considered.

“The next round of cuts should address those who did not receive it last time. That’s what we’re looking at,” said Hutchinson. “The big question though is: what’s the dollar amount and how do you pay for those tax cuts?

“We can absorb some because of revenue growth, but we have a lot of needs in this state from our foster care system to public safety. We’ve obviously got education adequacy that we’ve got to increase, so we’ve got a lot of needs there. We’re waiting for the final budget numbers to determine what is a reasonable amount and a conservative approach to what we can do to continue to lower that income tax rate.”

In the first three months of the state’s new fiscal year, overall tax collections have been below forecast. Hutchinson said he is concerned about the rocky start, but because economic fundamentals look good, he thinks Arkansas’ tax coffers will rebound quickly. Still, he said he will be cautious about tax cuts in the wake of unclear data.

“If we do not have good revenue numbers, you certainly have to consider that we have to slow down in our tax cut plan because of that,” said Hutchinson. “I’m not worried about our sales tax collections, but I’m a little puzzled by it because every economic growth sign is incredible in Arkansas right now – low unemployment, high GDP growth, median income is going up, so I like where we are. I think the sales tax collections will come back… I’m just not going to put the stability of the state, the integrity of the state at risk.”

Gov. Hutchinson also noted that Medicaid expansion – the private option which will soon become Arkansas Works – will be a key component of the state budget. He hopes that reform efforts underway by DHS director Cindy Gillespie will slow down Medicaid expansion growth, which recently topped 300,000 eligible or enrolled.

Hutchinson expects approval of federal waivers he’s sought for Medicaid expansion in the very near future.

“Those have been applied for, we’re getting a favorable response from CMS (Centers for Medicaid) but they haven’t been granted yet,” he said. The timing of an answer from the federal government should come close to the timeline for his balanced budget submission to legislators.

“It will probably be close. They have to give it fairly soon because we have to implement this between now and January 1 (2017), but we’re counting on that being a part of the budget for next year. So we’re assuming those waivers will be granted and that’s the basis for which we’re preparing our budget.”

Watch the governor’s full interview in the video below, including additional comments on the FBI investigation of Hillary Clinton aide Huma Abedin’s emails and his plans for War Memorial Stadium to come under the umbrella of the Arkansas Department of Parks and Tourism.