With Gov. Asa Hutchinson publicly pushing for an Aug. 9th special session to accelerate tax cuts, but not to provide teacher salary increases, political dynamics at the state capitol have gotten a new monkey wrench.
You may recall that Hutchinson wants legislators to fast-forward lowering the highest tax rate from 5.5% to 4.9%, which was originally a multi-year phase-down plan. While the call for this came on the heels of the state’s $1.6 billion budget surplus at the end of June, it led to calls to raise the minimum salaries for teachers. The governor and Democrats seem united on teacher pay increases, but GOP legislative leadership contend an adequacy study needs to finish its course first. These two arguments – tax cuts and teacher pay – have been the brunt of the public debate on the special session for the last two weeks.
Enter a new wrinkle: Lawmakers have recently learned the federal government may clawback a significant amount of federal stimulus dollars from the state, if they are used for tax cut purposes. The question of clawbacks used for tax cut purposes has been on the front burner for more than a year. One can argue whether or not Arkansas (and other states) are directly using federal stimulus funds for tax cuts – they’re not, but the fed funds have propped up the state through the COVID-19 pandemic and have contributed to the state’s healthy financial condition. Consumer spending and income tax collections have been the big drivers of surplus growth.
For months, lawmakers have been under the assumption that the feds may clawback a little under $100 million. Recently, they were told by DFA officials the number could be as high as $800 million, based on the feds’ calculation. Arkansas and other states are in litigation over the matter. Lower courts have ruled in favor of the states to not take back big chunks of the COVID stimulus funds, but the cases are now on appeal. This could take several months for a resolution.
This new development has lawmakers asking each other: Is this clawback risk a reason not to move forward with the special session?
TB&P sources say that leadership in both chambers is seeking input from members on their thoughts, which are now three-fold: accelerate tax cuts, worry/don’t worry about the federal clawback, and what to do on teacher pay. Several legislators contacted about this development say they’d like a clear-cut answer on the feds’ clawback issue before moving forward on accelerated tax cuts.
A plausible solution might be to stick with the previously-agreed-upon tax cut schedule and avoid acceleration. That would punt further tax cuts, teacher pay, and a resolution of the clawback federal funds appeal to the regular session that starts in January. Under this scenario, however, the governor would have to explain calling off a special session. Expect a lot of movement on all three fronts over the next week.
EARLY AG POLL
It’s early yet, but that hasn’t stopped groups from polling for the near-term and the long-term. Attorney General candidate Tim Griffin and Common Ground Arkansas have been sharing some polling data in limited circles.
While Talk Business & Politics typically reports on its poll results done in conjunction with Hendrix College, we do find internal polling from candidates and causes newsworthy. Our caveats are always that these polls, while scientifically conducted with accuracy in mind, are not in our control for methodology. That said, the results are of interest.
Lt. Gov. Griffin, the Republican AG nominee, has a decisive lead over his Democratic challenger, Jesse Gibson. The poll was conducted July 18-20 by Remington Research Group and included 1,008 likely voters.
65% – Tim Griffin
29% – Jesse Gibson
6% – Undecided
This poll result isn’t unexpected given the GOP tilt in Arkansas, the fact that Griffin is a current officeholder with some name ID, and he fended off a challenge in the GOP primary, which allowed him to put some money up on TV. Gibson was unopposed in the Democratic primary. Countdown: We’re roughly three months to November.
Common Ground, the nonprofit launched by independent State Sen. Jim Hendren, formerly a Republican, has released some older poll results from a June survey. The questions do not strike one as subject to change dramatically in a short amount of time.
One of the more interesting questions released by the group centered on political party control for candidate nominations. While the question was asked before last Saturday’s GOP state convention – where a motion was passed to close party primaries – it seems that might be against voter preferences.
Q: Which of these do you most agree with about political parties in Arkansas?
58.1% – Political parties have too much control over the process of selecting candidates for office
20.7% – Political parties have just the right amount of control over the process of selecting candidates for office
6.1% – Political parties do not have enough control over the process of selecting candidates for office
15% – Don’t know
The poll was conducted by Citizen Data among 618 registered Arkansas voters from June 9-12.