Gov. Hutchinson proposes $5.6 billion budget for fiscal 2019, asks Arkansas colleges to freeze tuition rates

Gov. Asa Hutchinson on Tuesday (Jan. 9) asked top education officials to freeze tuition rates at the state’s four-year colleges as part of a $5.6 billion budget plan for fiscal 2019 that will increase year-over-year state government spending by nearly $173 million.

In a surprise statement that brought applause from dozens of lawmakers attending legislative meetings for the upcoming 2018 fiscal session, Hutchinson told members of the Joint Budget Committee it was time to pause several years of tuition rate hikes at Arkansas colleges and universities.

“It’s time to give our students a break. It is time to make college more affordable, so I’ve asked our chancellors and presidents to freeze tuition for in-state residents next year,” Hutchinson said in his prepared remarks to the joint legislative panel.

Overall, the governor’s budget calls for a modest 2.8% increase in general revenues in fiscal year 2019. DFA official staff now forecasts fiscal 2018, which closes on June 30, will end with around $5.45 billion in state budget coffers. General revenues are primarily driven by individual and corporate income tax collections, sales taxes and other tax collections by the state.

In speaking with reporters after his brief budget outline for the fiscal session that begins on Feb. 12, Hutchison said he sent a letter to university presidents earlier in the week challenging them to freeze in-state tuition rates at current levels for the 2018-2019 academic year. In addition, the governor asked the state’s two-year colleges to hold tuition increases at the same level as the consumer price index, which has risen 2.2% in the past 12 months.

“To further the higher education goal of student affordability, I am requesting all of our public universities to hold flat their tuition rates for the coming academic year,” Hutchinson said in his letter. “Controlling costs for students sends a strong message to students, taxpayers and legislators that we are serious about making a college education obtainable for everyone and that our institutions of higher education can be trust with their investment.”

As part of his fiscal session, Hutchinson is proposing a budget of $5.6 billion with a surplus of $64 million to pay for future highway upgrades, possible tax cuts and other priorities. He is also requesting that lawmakers approve a $10 million increase in higher education funding based on the productivity funding model he championed during the 2017 regular session.

Under that model enacted into law during the 2017 session, the legislature adopted a “productivity-based funding model” for the state’s higher education institution values a college’s success in advancing students towards degrees and certificates rather than simple numerical enrollment.

In his letter to university officials, Hutchinson expressed concern about rising tuition rates at the state’s four-year institutions over the past 10 years, with increases ranging from a low of around 3% to a high of more than 6% in the past decade. The governor said he hopes his tuition freeze request will increase the leverage state government has to control costs and improve efficiencies in higher education spending.

UNIVERSITY RESPONSES
Meanwhile, the response to the governor’s challenge was met with some concerns, but largely accepted by top university officials across the state. Under the governor’s new productivity funding model, the University of Arkansas is expected to receive the lion’s share of the $10 million in new funding.

University of Arkansas Chancellor Joe Steinmetz said his goal has always been to keep college costs affordable.

“Since I became chancellor of the state’s flagship land-grant institution in 2016, I’ve been actively working to eliminate barriers of affordability and access to Arkansans’ ability to obtain a college degree,” the chancellor noted in a statement. “That’s why I’ve consistently recommended only modest tuition increases for the past two years for in-state students, aiming as Gov. Hutchinson suggests to not exceed the Consumer Price Index of around 3 percent. We welcome and accept the governor’s challenge of holding tuition for in-state students flat for the 2018-19 academic year and will continue to seek ways to improve our efficiency and contain costs. Student success, access and affordability remain among our chief priorities.”

Dr. Chuck Welch, president of the Arkansas State University System, said the Jonesboro-based higher educational institution was already looking at ways to cut expenses in other areas to keep tuition costs down.

“We respect, understand and share the governor’s concerns about keeping in-state tuition affordable. One of the top ASU System strategic planning goals is to use the CPI as the guide for tuition requests from our campuses,” said the president of the state’s second-largest higher education system.

Welch said ASU’s board of trustees and campus administrators will enter budget planning this spring with every intention of answering Hutchinson’s challenge. He said university officials there have engaged in a systemwide efficiency study to help identify ways to increase revenue, reduce expenses and reallocate resources with the primary purpose of reducing financial reliance on student tuition.

“In the absence of dedicated state funding for capital improvements, deferred maintenance, health insurance costs, and faculty and staff salaries, it’s going to take continued creative thinking and changes in how we operate to meet the short-term and long-term needs of our students,” Welch said.

REDUCED RELIANCE ON SURPLUS MONEY
In explaining his new budget to lawmakers at the State Capitol, Hutchinson said the state’s revenue collections have benefitted from an expanding economy, rising wages, low unemployment and cuts to Medicaid and other social programs. In addition to his tuition rate request, Hutchinson cut $100 million from his revised budget for the upcoming fiscal year that begins on July 1, 2018.

“This budget reflects real spending cuts in a number of agencies that we achieved through efficiencies without cutting services,” Hutchinson said. “This budget shows a slower growth in Medicaid spending. It meets the requirements of education adequacy. It increases funding for public safety. And of great significance, the budget reduces our historic reliance on surpluses to fund ongoing budget needs.”

For example, Hutchinson said the Education Adequacy Fund is now sufficient to meet the legislative mandate for education spending to achieve adequacy without relying on general-revenue transfers. This will eliminate the need to transfer $50 million from the fund general revenues in fiscal 2019, he said.

Hutchinson also highlighted a new report from the state Department of Human Services that the state’s Medicaid program now has 117,620 fewer enrollees than a year ago. Last week, the governor and DHS Director Cindy Gillespie first announced that news during a pen-and-pad event with Capitol reporters. The new tally of 931,00 Arkansans on Medicaid includes 285,564 people who receive expanded healthcare coverage through the state’s highly-touted Arkansas Works program under the Affordable Care Act, also known as Obamacare. Hutchinson’s new budget calls for an increase in Medicaid spending of only 2.17%, compared to the nation’s average and earlier budget recommendation of 5.6%.

MEDICAID COSTS REMAIN A CONCERN
After Hutchinson left the legislative meeting, lawmakers spent more than an hour peppering the Department of Finance & Administration (DFA) staff with dozens of questions concerning the governor’s budget numbers.

Sen. Bryan King, R-Green Forrest, was not happy with Hutchinson’s financial projections, calling the governor’s 2019 plan opposite of his prior budget request that led to increased Medicaid spending in 2015 and 2017. He told DFA Director Larry Walther and Hutchinson’s budget director Duncan Baird the governor’s new financial plan was not good fiscal policy.

“You guys use to say all the time that if we took people off Medicaid there will be a hole in the budget. Now, (the governor) is saying we are saving money and spending less by taking people off. That is a total flip-flop,” King told Baird.

Despite some wariness about the continued rise in Medicaid spending, most lawmakers were pleased with the governor’s budget recommendations. Rep. Lean Jean, R-Magnolia, chair of the joint legislative panel, said he believes most lawmakers will get behind Hutchinson’s proposal as they get more details ahead of the fiscal session.

“It’s not one hundred percent, but by and large I think there is solid support for his (budget),” said the Republican lawmaker.