Arkansas legislators remain busy in the ‘interim’

With the conclusion of the regular session of the 91st General Assembly, and a subsequent 3-day special session designed to address Medicaid issues, we are now officially in the “interim.” But, even though the legislature isn’t formally in session, it will be quite busy handling some important issues.

During the interim, the Legislative Council and its subcommittees meet monthly to review and discuss state contracts, personnel issues, claims against the state, lottery operations, just to name a few. Many of these issues will be noteworthy and covered by the media. However, there are a couple of issues that will demand much of the attention between now and January of 2019.

Perhaps the most controversial issue involves our state tax code.

Act 79 of 2017 created the Arkansas Tax Reform and Relief Legislative Task Force. The task force consists of 8 senators and 8 house members. It is charged with reviewing the tax laws in Arkansas and providing recommended legislation to the General Assembly for consideration in the 2019 regular session.

More specifically, the task force is directed to consider ways to simplify the tax code, make Arkansas tax laws competitive with other states, enable the state to create jobs and ensure fairness. It will submit a preliminary report by December 2017 and a final report by Sept. 1, 2018.

A critical part of the process will be an evaluation of existing tax exemptions. For instance, there are dozens of transactions exempt from the state 6% sales tax. Some examples include the sale of newspapers, prescription drugs, agricultural seed and machinery used for manufacturing.

Some of the exemptions are likely to be considered for modification or elimination. As a result, businesses who benefit from them will be closely following the process and doing all they can to protect them.

The lawmakers involved are fully aware the exemption debate is going to be a lively one. Indeed, Senate Co-Chair Jim Hendren stated in the first meeting of the task force on May 22 he had already been contacted by lobbyists and fully expected other members had been contacted as well. He simply encouraged all parties to be patient and keep an open mind.

Those already following the task force believe it will go beyond conducting a simple review. They expect changes to be recommended that will have an impact on business in Arkansas. As a result, this will be a very hot topic leading into, and during, the 2019 session.

Another issue to watch during the interim involves highways. Those who follow this issue closely will recall the second special session in 2016, which was known as the “highway funding” session. Due to a decline in revenues dedicated to highways, the state was facing a shortfall in funds required to obtain federal matching money for highway construction and maintenance. Without some action, Arkansas stood to lose several hundred million dollars in federal highway funding.

To address the issue, the General Assembly passed the “Arkansas Highway Improvement Plan of 2016.” The Plan is designed to direct approximately $50 million per year from general revenue and surplus dollars to highway funding in order to ensure the receipt of approximately $200 million annually in federal funding. It is in place for five years.

The Plan also created a new subcommittee of Legislative Council known as the Highway Commission Review and Advisory Subcommittee. While that subcommittee is not specifically directed to evaluate highway funding options for the future, it’s the 800-pound elephant in the room that will almost certainly be addressed in some form.

As noted, the funding plan adopted in 2016 expires after five years. The General Assembly failed to adopt a longer-term plan in the 2017 regular session, so the debate will continue.  And as noted previously by TB&P, the highway funding issue could be intertwined with the tax reform debate discussed above.

Stay tuned. Just because it is the “interim” doesn’t mean business isn’t being handled at your Capitol.
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Editor’s note: Justin Allen is a partner with the Little Rock-based law firm of Wright Lindsey Jennings. He leads the firm’s governmental relations group. Opinions, commentary and other essays posted in this space are wholly the view of the author(s). They may not represent the opinion of the owners of Talk Business & Politics.