The leaders of the two legislative chambers and Gov. Asa Hutchinson outlined expectations for the end of the 93rd Arkansas General Assembly, and it should be an unprecedented and lengthy adjournment.
Holding a joint press conference Thursday (April 22) to review the Revenue Stabilization Act (RSA), which keeps the state’s budget balanced, the trio of leaders explained their plans for completing the session business and taking care of additional matters later this year.
Next Tuesday, legislators expect to recess until the fall. Normally, they would sine die, or formally adjourn, in about one month and the regular session would end. This year, lawmakers plan to “stay in session” until September, when they will return to take up legislative and Congressional redistricting, which has been delayed due to issues with the U.S. Census Bureau. After they approve redrawn district lines, they will sine die and soon thereafter be called into a special session by the governor to discuss tax cuts and reform.
Speaker of the House Matthew Shepherd, R-El Dorado, and Senate President Jimmy Hickey, R-Texarkana, as well as Gov. Hutchinson, said all tax proposal ideas will be on the table later this year. They are expecting a $600 million budget surplus at the end of the state’s fiscal year in June.
“We’ll have more certainty to the economic picture,” Hutchinson said. “Anything is on the table.”
The governor has proposed reducing the top income tax rate from 5.9% to 5.7%, which would cost the state approximately $54 million annually. Hutchinson’s long-term goal, which he acknowledged would be unlikely, is to drop the top tax rate to 5.0% in an effort to make Arkansas more competitive with surrounding states, some of which have no income tax but higher taxes in other categories.
Beyond outlining the lengthy adjournment process and fall special session announcement, the governor and two legislative leaders touted several fiscal accomplishments during this session.
Legislators are poised to pass a $5.848 billion state budget. That’s a roughly $50 million reduction from the previous fiscal year budget, the governor said.
“This is the first decrease in spending for state revenue since 2011,” Hutchinson said, noting that the accomplishment was impressive in the wake of the pandemic that wrought havoc on the economy this past year.
In addition to having an expected $600 million surplus for future tax cuts, Hutchinson, Hickey and Shepherd noted they expect strong revenue collections for the following fiscal year, too.
Hutchinson equally touted that by the end of June – the end of Arkansas’ fiscal year – over $700 million will be built up in the state’s long-term reserve fund, a budget mechanism that is used to provide financial market certainty for lower interest rates and bond ratings. When Hutchinson took office, the state’s long-term reserves had a zero balance.
“That [$700 million] will be roughly 12% of our budget that will be in reserves,” he said. “In uncertain times, it will be a cushion we need to budget for the future.”
“It’s a credit to not just leadership, but to membership on both ends,” Speaker Shepherd said.
On an ominous note, Sen. Hickey said the legislature will have to deal in the future with a looming fiscal crisis with the state’s teacher insurance fund. There is a projected $99 million deficit in the fund presently, he said.
“We have to do some work on that,” Hickey said. “We’ll be working with all the stakeholders to get that done.”