Revenue stabilization act passes both chambers, session end draws near

Both chambers of the Arkansas Legislature endorsed Gov. Asa Hutchinson’s $5.75 billion budget on Tuesday (April 9) with the overwhelming approval of the state’s Revenue Stabilization Act, one of the final bills to be considered as the 2019 regular session speeds toward adjournment likely on Wednesday.

Both House Bill 1876 and Senate Bill 595, respectively, are the duplicate versions of the omnibus budget prioritization legislation that allows lawmakers to transfer tax revenues into budget coffers to fund the state’s fiscal 2020 budget, which begins July 1.

In a brief session in the House, HB 1876 was easily approved by a vote of 90-5. Later in the Senate, SB 595 was unanimously backed by the entire upper chamber in a 35-0 vote.

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 RSA’s complex budget-balancing forecasting model, legislators must prioritize all state agency spending requests during both the fiscal and regular legislative session. The legislature usually divides state general revenues into “A”, “B”, and “C” categories under the RSA. Allocations in the “A” category have top priority and normally are 100% funded. If there is money left over after funding the “A” category, the “B” category is also funded, and eventually “C” category is funded if revenues allow.

If the economy is healthy and general revenue is collected at projected levels, state agencies receive what they are budgeted to receive. However, if there is a downturn and revenues decline and tax collections fall below estimates, state agencies must then cut back on spending in the low-priority categories, under the state’s unique balanced budget law.

In the budget approved on Tuesday, 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 that ends June 30.

The 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 includes 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 $54.6 million in a rainy-day fund for several specific projects, including $30 million for Gov. Hutchinson’s Quick Action Closing Fund and up to $10 million to be designated to the University of Arkansas and Medical Sciences’ National Cancer Institute Trust Fund.

The first RSA was passed by the legislature in 1945 by a unanimous vote in the House of Representatives and a 30-to-1 vote in the Senate. A legal challenge of the act occurred in 1961, but the state Supreme Court unanimously upheld its constitutionality a year later.

In 2017, after Gov. Hutchinson and the legislature approved a $5.5 billion general revenue budget, state officials slashed the fiscal 2018 budget by $43 million a month later because tax collections came in well below the state’s forecast. Later, revenue collections sufficiently rebounded before the state had to cut agency budgets or jobs and services.

Legislators are expected to “sine die,” or officially adjourn, the 92nd General Assembly on Wednesday, which will mark the 94th day since the session began on Jan. 14.