Fort Smith business leaders heard Friday morning (Dec. 7) that the four Ts —- teachers, taxes, transportation and transformation — will be the main focus when the Arkansas General Assembly begins its new session in January, according to Randy Zook, president and CEO of the Arkansas State Chamber of Commerce and the Associated Industries of Arkansas.
Zook was the guest speaker at the Fort Smith Chamber of Commerce First Friday breakfast at the University of Arkansas at Fort Smith.
“As far as the economy goes, things are very healthy,” Zook told the gathering. “We have 3.5% unemployment statewide. … That’s the good news. It’s going to be a successful session.”
On the flip side, Arkansas’ workforce is declining with a steady number of people retiring, Zook said.
In order to replenish that workforce, Arkansas needs to recruit more people to the state by making it more compelling and attractive to business and workers, he added.
“Teachers’ pay is a lay-down. It’s just something we’ve got to do. (Gov. Asa Hutchinson’s) goal is to raise the minimum starting salary for K-12 teachers in Arkansas to $36,000 a year. It’s at about ($31,000) now. It’s a pretty dramatic increase. It will give us the highest starting pay for teachers in the touch-state region. That’s a big deal. It’s expensive obviously, but it’s going to be phased in over several years,” Zook said.
Taxes are more challenging, according to Zook, who said that when the state starts to reduce taxes it can have a short-term effect of reducing revenue in an already tight budget.
“His (the governor’s) goal is to reduce the highest marginal tax rate from the current 6.9% down to something with a five, hopefully, at least 5.9, but again over several years,” Zook said. “We are a high tax state at this point. We have the highest marginal tax rate on income tax in the touch-state region. So we are out of step. We are not competitive.”
Zook then moved on to transportation and highway funding, noting that while no one wants to see higher taxes at the gas pumps, something has to happen in order to pay for the 16,000 miles of state highways in Arkansas.
“We have one of the largest highway systems in the country. We have more state highway mileage than the State of California does,” Zook said. “Here we are, the State of Arkansas, with only 3 million people trying to maintain and support more than 16,000 miles of state highways. It’s bloody costly.”
Zook said the highway department is expected to ask for $475 million of additional highway money in order to take care of the state’s highway needs.
“Here’s the catch: Every time the highway department get 70 cents from taxes by law, the cities get 15 cents and the counties get 15 cents. So to get the highway department $475 million dollars, we’re going to have to raise something crowding $600 million in additional taxes,” Zook said.
The final step in the “four T’s” Zook discussed Friday was transformation, which will be a reorganization of state government.
The governor has 42 direct reports from state agencies and boards that answer to him. He wants to shrink that number to 15 direct reports.
“If he were to spend just one hour a week with each one, that’s a full-time job,” Zook said. “That’s just ridiculous.”
Zook said the idea would be to carve those direct reports to the governor down to about 15 with a lot of agencies being “shuffled around.”
“There are enormous opportunities to reduce operation costs on many of these state agencies,” he said. “It’s time. It’s overdue. He’s got a great team helping him put that together. It’s going to take a lot of legislation, as you can imagine, to change.”
The 92nd Arkansas General Assembly begins on Monday, January 14, 2019.