Lobbyists: Arkansas legislators to face tight budget (Updated)

Dennis Jungmeyer summarized the obvious when asked what he thought about the top issue in the upcoming Arkansas General Assembly.

“It will all come back to money,” Jungmeyer, president of the Arkansas Automobile Dealers Association, told about 175 area business and civic leaders gathered Friday (Nov. 5) at the First Friday Breakfast of the Fort Smith Regional Chamber of Commerce.

Jungmeyer was joined by Marvin Childers, president of The Poultry Federation, and Randy Zook, president and CEO of the Arkansas State Chamber of Commerce/Associated Industries of Arkansas. The three association chiefs, who have decades of combined experience as lobbyists at the state and federal level, talked about key issues likely to be addressed during the upcoming 88th General Assembly. They also talked about the relative inexperience of the new legislators.

Childers noted that of the 43 new Republicans in the Arkansas House, 24 are new legislators. And of the 56 Democrats in the House, 19 are new. On the Senate side, Childers said, the 35-member body will have eight new Republican legislators and five new Democrat legislators. Overall, the Senate will have 20 Democrats and 15 Republicans.

“This is one of the biggest turnovers we’ve ever seen,” Childers said.

Jungmeyer added that prior to term limits, a House or Senate member would have a decade or more of experience before serving as chairs of key committees or becoming a House Speaker or Senate President.

“Now they reach that (House Speaker) in four years,” Jungmeyer explained. “This institutional knowledge that we once depended on is no longer there. That now puts more power in the hands of the bureaucrats.”

Childers said the legislative turnover increases the value of involvement from communities and chambers of commerce. He said community connections “will be more important as we educate those new members.”

The top issues during the session will focus on funding for education (public schools and higher education), prisons and criminal justice, highways and tackling what may be a $475 million debt — estimating payments through to December 2012 — to the federal government related to unemployment benefit payments.

The problem is, there is little wiggle room in what will roughly be a $4.9 billion state budget. Once the necessary funding is spent on schools, prisons and human services, there is only about 4 cents of the budget dollar remaining for other programs and projects, Childers explained.

“It’s just not as easy as it seems to move money around,” he said.

Zook said “the heavy lifting in this session” could be the consideration of proposals to repay up to $475 million in unemployment benefits the state has borrowed from the U.S. government. Not only does the $475 million have to be repaid, but a reserve of about $500 million has to be restored. (Link here for an October 2009 story on the emergence of the unemployment benefit funding problem.)

“It’s a billion-dollar deal. You have to pay that ($475 million) and put the reserve back to up around $500 million. And look, that presumes we’ll not have another recession or that conditions will improve as we build that up over the next few years,” Zook said.

Updated info: Zook called The City Wire to clarify that the unemployment compensation trust fund is “completely separate from the state budget.” It is paid by taxes on private businesses and from federal funds. The Arkansas DWS is a “hybrid” organization in that it is a state agency that collects and disburses federal money and money collected from federally-imposed unemployment taxes.

However, Zook noted, it is up to the Arkansas Legislature to consider and adopt a new plan that will alter how much Arkansas businesses pay into the federally-mandated unemployment insurance trust fund.

“If they fail to do that, then the federal government will give us the rules,” Zook reminded.

There is talk in Little Rock that the unemployment repayment is not urgent because the federal government may forgive a portion or all of the debt. There is pressure for some level of federal forgiveness, especially in states like California where the unemployment benefits bill could reach $8 billion. Zook says a plan the chamber may push tackles the debt and fund replenishment over a multi-year period, thereby allowing time to adjust if the feds forgive some of the debt. However, Zook sees only a “slim possibility” the feds will write off any of the debt.

“It’s hard for me to believe the feds are going to let a balance like this be forgiven when there is a built-in way for businesses to be assessed and the debt recovered,” Zook explained.

Zook told the audience the state chamber’s plan would raise taxes Arkansas businesses pay into the unemployment compensation fund. He acknowledged it will not be popular, but said if Arkansas businesses don’t come up with a plan, the federal government will.

“The Arkansas business community needs to be out front on this … or the federal government will decide that (increased business tax) for us,” Zook warned. “But we’re going to have some work to do to sell this to the Legislature. … Many of those guys came to Little Rock with a promise to not raise taxes, and here we are, the business community, asking them to do this.”

Jungmeyer predicted calm during the first two months of the Legislative Session, with “no real fireworks until March.”

Zook encouraged the audience to work to keep regional interests and issues in front of legislators during the session.

“The saying is, ‘If you’re not at the table, you’re going to be on the menu,’” Zook said.