Gov. Sanders outlines budget priorities; Senate ‘fragmented’ on crypto resolution

Gov. Sarah Sanders opened the 2024 fiscal session Wednesday (April 10) by telling assembled lawmakers that if they pass a budget that reflects her priorities, she will sign it.

The governor spoke at the beginning of the biennial session that is designed to focus on budgetary matters, but legislators can vote on other issues if two-thirds of both the House and Senate pass a resolution allowing them to do so.

Two such issues are at the forefront. One, a temporary pay plan increasing state employee salaries, has broad support. The other pertaining to data or crypto mining centers has attracted several resolutions, and it remains to be seen if one attracts consensus support, said Senate President Bart Hester, R-Cave Springs.

Sanders was making her first “State of the State Address” after her inaugural address last year. She noted her budget would increase spending by 1.76%, which she said is below the 3% average growth in recent years.

“If you send me a budget that funds critical services for Arkansans while slowing the growth of government, I will sign it,” she said.

Her proposed budget calls for a general revenue increase of $109.3 million. Spending for fiscal year 2025 would increase to $6.31 billion from the previous year’s $6.2 billion.

The budget is projected to result in a $376.6 million surplus if revenues meet the Department of Finance and Administration’s forecast of $6.688 billion. DFA is projecting a $240.5 million general revenue surplus this fiscal year, which ends June 30.

Sen. Jonathan Dismang, R-Searcy, Senate chair of the Joint Budget Committee, does not expect significant changes to come from the legislative process.

“There may be some small, kind of around the edge changes,” he said. “And it’ll be discussed, what do we do with the growing surplus that we have, and then also the money that we have currently sitting in reserves. But again, hopefully most of that we’ll take up more in depth when we get into the next regular session.”

Hester also does not expect many changes.

“Budget basically is what it is,” he said. “Leadership in House and Senate and other members had a lot of say and input on this budget. We feel good where we’re at.”

Sanders noted that lawmakers during her administration have cut taxes more than $300 million. She reiterated her campaign pledge to responsibly phase out the state’s income tax.

Legislators are not expected to cut taxes this session. They instead will wait until after the fiscal year ends June 30 to perhaps cut taxes in a special session.

STATE OF THE STATE
Gov. Sanders started her half-hour address by saying, “Last year, I made promises. This year, I’m reporting results.”

Those included the passage of her LEARNS Act. It increased the minimum public school teacher salary to $50,000 and created “educational freedom accounts” that allowed Arkansans to use state funds for non-public school alternatives.

A growing list of students are eligible. Applications for this upcoming year, the second one the accounts have been available, recently expanded to children of first responders, veterans and law enforcement officers, and to children attending D-rated schools. She said there were more than 1,800 new signups on the application period’s first day, with 25% being children of active duty personnel and veterans. She said 50% of the more than 5,000 students already using the accounts have learning disabilities.

In the 2025-26 school year, the accounts will be available to all students.

She also referenced the Protect Arkansas Act that increased prison sentences and will eventually build a 3,000-bed prison. Her proposed budget includes $3.8 million to replenish the Arkansas State Police ranks. She said the ranks increased by 17% in her first year, and she wants to grow the force by more than 100.

She said that the state welcomed 21,000 new Arkansans last year, while companies proposed more than $1 billion in new investments. Tourism revenues broke records each month of 2023, and 2024 will break new records, she said.

Sanders also took aim at social media companies, saying their sites leave young people anguished and depressed. She mentioned practices such as keeping smart phones from young people before high school and keeping them off social media until they reach age 16.

A federal judge last year temporarily blocked a new law requiring minors to obtain parental consent before creating new social media accounts. While she didn’t propose specific legislation for this session or next year’s regular session, she said “Big Tech” will argue that young people have a right to social media and will oppose the state in court over the issue.

BEYOND THE FISCAL SESSION
Created by voters in 2008, fiscal sessions occur every election year. They are limited to 30 days but can be extended 15 days with a three-fourths vote by the House and Senate. Lawmakers can consider nonbudgetary matters with a two-thirds vote by both chambers.

Sen. Josh Bryant, R-Rogers, filed a resolution that would require digital asset mining facilities, or crypto mining facilities, to reduce noise, allow local ordinances to govern the facilities’ noise, and prohibit certain foreign ownership.

Bryant was the lead Senate sponsor of Act 851 of 2023, which prohibited local communities from adopting noise ordinances targeting crypto mining facilities. The bill passed quickly at the end of the session with little opposition. But the noises the new facilities produce have led to complaints and a lawsuit by Faulkner County residents.

Bryant’s resolution would require digital mining businesses to apply noise-reduction techniques such as liquid or submerged cooling or “fully enclosing the envelope” with material that would reduce noise to an acceptable level. If approved by a local government, facilities could locate or relocate to an area zoned for industrial use or a site that is at least 2,000 feet from the nearest residential or commercial use structure.

The resolution would end Act 851’s prohibition on local governments enacting ordinances that limit sound decibels generated by digital asset mining more than other sound pollution restrictions. It also would end Act 851’s restrictions on local governments rezoning an area to discriminate against digital asset mining.

However, the resolution would prohibit local governments from passing ordinances prohibiting home asset digital mining.

Prohibited foreign-owned parties with a controlling interest of more than 15% would not be able to own digital asset mining businesses. Those prohibited foreign-owned parties would include citizens of countries subject to the International Traffic in Arms Regulations, as well as entities of particular concern designated by the State Department.

Prohibited foreign-party-controlled businesses operating before the act’s passage would have six months from its effective date to divest of the business.

The bill includes an emergency clause.

It remains to be seen if the bill is passed. Hester said there are too many factions wanting to do too many things, which makes it hard to get the two-thirds agreement needed to pass a resolution.

“I think we can get a very narrow bill passed,” he said. “I don’t think we’re going to get some broad crypto bill passed this fiscal session. I could be surprised. … Something very specific I suspect will get passed.”

Dismang said the Senate is committed to referring a resolution on the subject, but the body is “fragmented.” Constituents have told senators something should be done.

“The biggest adversary to getting something accomplished is there’s probably too many ideas,” he said. “We need to narrow things down, focus and really streamline what we need to get us into the next regular session.”

Crypto mining resolutions also have been filed by Sen. Missy Irvin, R-Mountain View, and Sen. Bryan King, R-Green Forest.

King has filed six resolutions. He said more local control is needed, along with regulations because of water, energy grid and national security concerns.

“These things can pop up the next day,” he said. “These are not job creators. McDonald’s creates more jobs than these things. The jobs they’re creating are actually in China.”

Also needing a resolution is the governor’s Arkansas Forward proposed temporary state employee pay plan.

It would create a one-time 3% pay increase for state employees and increase the minimum annual salary to $15 an hour. It also would offer new incentives in the form of a lump sum payment or extra hours of paid leave.

“Pay plan’s going to get through easily. … We’ve got the money. We’ve got to pay our people,” Hester said.