Panel approves Arkansas’ $5.75 billion budget for fiscal 2020, bill now heads to House, Senate

The Arkansas Legislature on Monday (April 8) took a major step toward adjourning the 2019 fiscal session after the Joint Budget Committee approved Gov. Asa Hutchinson’s $5.75 billion balanced budget for the biennium, which still must be approved by a three-fourths vote in the House and Senate.

House Bill 1876 and Senate Bill 576 were easily approved in a voice vote by the bicameral joint committee, which also rejected an amendment opposed by Hutchinson to set aside a $2.5 million allocation from the state’s Rainy Day Fund to pay for a well-liked state program for seniors.

HB 1876 and SB 576 are the official House and Senate versions of the so-called Revenue Stabilization Act (RSA), the omnibus budget prioritization legislation that traditionally marks the end of the biennial legislative session. The RSA allows lawmakers to transfer tax revenues into budget coffers to fund the state’s $5.75 billion fiscal 2020 budget, which begins July 1.

After the Joint Budget meeting ended, Rep. Joe Jett, R-Success, who chairs the influential House Revenue and Taxation Committee, said he was pleased House and Senate leaders were able to successfully negotiate the RSA, which essentially matches the budget outlined by Gov. Hutchinson ahead of the 2019 session.

“The governor was gracious enough to invite us over (his office) three or four times, and you know since there is no longer the GIF (General Improvement Fund) discussion there is not much to be argued about,” Jett said of surplus funding that allows legislators to mete out legislative dollars to local pet projects such as nonprofits, rural fire departments and libraries.

As noted by Jett, the Arkansas Supreme Court ruled in Oct. 2017 that leftover state dollars meted out to statewide planning and development districts by the Arkansas Legislature was “unconstitutional.” Since then, several lawmakers have been indicted, sentenced to prison or are now being investigated by federal prosecutors on cases related to GIF funding.

“At the end of the day, it just rolled out and it is probably the simplest RSA since I have been down here,” Jett said of the 2019 budget session.

Sen. Larry Teague, D-Nashville, co-chair of the Joint Budget Committee, said both bills will come up on the House and Senate floors on Tuesday. There, he expects lawmakers to easily get the three-fourths votes necessary for all appropriation bills, including the RSA.

“Then Wednesday, we will pass them, and we will be done,” Teague said of the 92nd General Assembly that convened Jan. 14, 2019.

Negotiations on the state’s 2020 budget began after the Arkansas House on April 2 approved the $8.1 billion appropriations for the state’s Medicaid expansion program and other state Department of Human Services priorities on a second vote of 75-18. That marginless vote on Senate Bill 99 came after the House had early rejected the DHS’ Medicaid appropriations on March 29 by of vote of 52 to 28. That vote occurred only two days after an adverse federal court ruling by U.S. District Judge James Boasberg regarding a “work requirement” approved by lawmakers during the 2017 session.

That program, known today as Arkansas Works, forced health care recipients enrolled in the state’s Medicaid expansion program to meet certain work requirements before receiving state-funded health benefits. The mandates included searching for work, getting workforce training, or qualifying for an exemption to the work requirement. In the judge’s ruling, Boasberg ruled that U.S. Department of Health and Human Services Secretary Alex Azar’s decision to grant Arkansas the work requirement waiver was “arbitrary and capricious because it did not address – despite receiving substantial comments on the matter – whether and how the project would implicate the ‘core’ objective of Medicaid: the provision of medical coverage to the needy.”

Arkansas was the first state to implement a work requirement waiver, but Boasberg said it could not stand. Likewise, the Washington, D.C.-based federal judge relied on an earlier ruling against Kentucky’s work requirement he had made in June 2018.

During the debate on the DHS budget, Joint Budget Co-chair Rep. Lane Jean, R-Magnolia, said even if the federal government’s appeal of last week’s ruling failed, the state’s fiscal officials had sufficiently budgeted enough to cover the estimated extra $20 million expense it would take to pay to provide health coverage to the thousands of Arkansans that were pushed off the program.

HUTCHINSON’S BUDGET DEMANDS
Before the 2019 session began, Gov. Hutchinson outlined a $5.75 billion budget request for the upcoming fiscal year 2020 that would reflect a 2.3% increase above the fiscal 2019 budget of $5.6 billion, which ends June 30, 2019. The 2021 fiscal budget request would rise another 2.3% to nearly $5.88 billion.

Under the state Department of Finance and Administration’s (DFA) conservative budget modeling, state priorities are established with the assigned categories generally labeled A, B, and C. Category A is composed of agency programs considered essential, such as education, health and human services, and corrections. Category B typically covers expansion of existing programs or new programs that are needed. Category C priorities, often referred to as a wish list, are new programs legislators, constituents or department directors would like to have but are not perceived as being vital, but often have little chance of being funded.

The court returned its decision as scrutiny continues to heighten around state lawmakers and their handling of so-called GIF, or General Improvement Funds. Already, former State Sen. Jon Woods, R-Springdale, and former Rep. Micah Neal, R-Springdale, were indicted on charges related to alleged kickbacks related to GIF funding. Neal has admitted guilt, while Woods is fighting the charge.

Under the RSA approved by the joint panel on Monday, DHS would get a $68.2 million boost in funding from $1.66 billion to nearly $1.74 billion in fiscal year 2020. The Public School Fund, the state’s largest budgetary expense, will see an increase of $20.7 million. The fund, which includes general education, state libraries and career education, will be funded at $2.22 billion in fiscal 2020 compared to $2.19 billion in the fiscal year thaat ends June 30.

State General Government Fund, which includes budgets for most top state agencies – including the  Departments of Corrections, Economic Development, Environmental Quality, Parks and Tourism and Labor – would also see a budget increase of $19.8 million. Appropriations for that fund will grow to $644.6 million in fiscal 2020, up from $624.7 million a year ago.

Institutions of Higher Education will also see a small budget – increase to $599.3 million, up nearly $4.2 million from $595 million in fiscal 2019. So-called “Other Funds,” which include the State Police budget and appropriations for the Departments of Health and Workforce Services, will see a small decrease to $260.9 million in fiscal 2020 compared to $262.5 million a year ago.

The proposed budget, according to the RSA schedule, would also set aside nearly $15.9 million in rainy days funds and $5.9 million for the state’s Medicaid Trust Fund. However, the Joint Budget Committee rejected an amendment by Sen. Will Bond, R-Little Rock, to set aside $2.5 million from the state’s discretionary fund for Senior Citizen Centers. Bond said after the committee adjourned its final meeting of the legislation session that taking care of Arkansas’ elderly citizens should be a priority.

In an otherwise busy day on the House and Senate calendars, some Republican senators have threatened to extract the controversial “stand your ground” bill out of committee to the Senate floor. Senate Bill 484 would allow a person to use deadly force in self-defense and not be forced to retreat if they fear their life is in danger.

Also, among other bills, the governor’s transformation omnibus legislation still needs clean-up approval in the House and an Internet sales tax bill must go back to the Senate after changes made in the lower chamber.