Budget puzzle awaits price tags for education, public safety, healthcare

Closing out the first month of the regular session, legislative leaders have no clarity on Gov. Sarah Sanders administration’s price tag for education, public safety or healthcare, much less a blueprint for the state’s anticipated $6 billion balanced budget.

Sen. Jonathan Dismang, R-Beebe, chairman of the Joint Budget Committee, said he’s waiting to see first drafts of new school policy and prison and sentencing reform legislation.

“I haven’t seen the education plan, so I don’t have any ballpark figures on what that’s going to cost, what we’re going to do. We do know that there is a portion that’s going to be for increasing teacher pay. Again, that’s going to have a direct impact. But again, I have no idea, if I’m just being transparent, on what that’s going to look like, and that’s why you see me being hesitant in regards to the budget,” he said.

This week, Democrats released a plan to provide increases for teachers and non-classified personnel. It carries a roughly $400 million price tag.

Dismang said prison construction – which could range from 1,500 to 5,000 new beds – will likely come from one-time surplus funds, but operations will have to be factored into the budget. The state could be years away from rising prison expenses as it will take time to build new beds, although parole reforms could speed up those costs. The construction cost of 1,000 new prison beds has been estimated to cost as much as $100 million.

“The immediate impact on the budget – there won’t be any – because it’s going to be a five to six year process to get a new prison constructed,” Dismang said. “Where we will have an immediate budget impact is if we change the parole laws. There’s still going to have to be a space for these folks to go. And again, I haven’t seen what that plan looks like, but that would be your immediate cost.”

One of the other major factors on state budgeting centers around Medicaid and healthcare costs. Nationally, states will be unraveling their continuous enrollment of Medicaid recipients, a move that was instituted during the COVID-19 pandemic. That means some current Medicaid enrollees will leave, but it also means the state will see a reduction in a federal match rate. Both of those changes will impact the state budget.

Dismang said he’s not sure how large that universe of departing recipients will be and what their impact on the budget will be.

“Not at this point and because mainly we’ve been waiting. We’ve said for a while now that that’s about to unravel and it’s still yet to unravel. So who’s packaged up into that and what that looks like, we do not know. We do know we have good reserves in place, and so to be able to withstand some of the change on the immediate, and then as this administration works toward what is the long-term plan,” he said.

The budget leader hopes that Medicaid expansion, another area where the legislature has been embattled to secure funding, will not be as contentious as previous years. The current plan, AR Home, will require a 75% vote from both chambers to continue funding although it is likely to be rolled into the Department of Human Services budget. Right now, the feds pay 90% of Medicaid expansion costs. Under traditional Medicaid, the feds only pick up roughly 70% of the tab.

Despite no substantive conversations with the Sanders’ administration on its position related to Medicaid expansion, Dismang sees undoing it as a budget wrecker.

“I don’t think we should be hesitant. We have worked through that repeatedly over the years, and I think at this point we’ve moved past it. Of course, I haven’t had a conversation with anyone that’s looking to make major change in this session. I think it would be a mistake to [do that], just because of everything else that we’ve got going on. But again, I would be shocked if that’s something that we want to push in the midst of these other big three items that we’re trying to continue with,” he said.

Despite the uncertainty over education, prisons, and healthcare, tax reform is still on the table, Dismang contends. He wants to see any future tax reform action tied to budget triggers to ensure the state doesn’t torpedo its reserves built up over the last few years. He has several areas of focus where he plans to direct his tax cut attention.

“I think it’ll be tied to triggers, to making sure that we don’t have to tap into, for instance, our Catastrophic Reserve Fund,” he said. “I’m going to focus on individual income taxes. I do believe that we should do some more for historical-type tax credits, and so I’ll be looking at that. The film industry also. In my mind, those items are tax credits or incentives that help stimulate business in the economy, help bring people to Arkansas, and are really revenue-neutral.”

You can watch Dismang’s full interview in the video below.