State budget-making is policymaking
Late in the 2024 fiscal session, on May 1 to be precise, State Representative Wayne Long from Bradford took to the House floor to argue against funding Arkansas Public Broadcasting. Rep. Long stated, “To cut taxes much further, we must start by cutting spending.” After more than a decade of tax cuts, it appears that some in our legislature are ready to cut programs and services in response to the resulting lost revenue.
It’s understandable if you missed this discussion. After all, the legislative fiscal session and the Arkansas budget process are hardly thrilling or spellbinding. Any number of idioms, such as, “watching paint dry,” or “how the sausage is made,” come to mind. However, the process of creating, reviewing, amending, and approving the budget reveals much, as it indicates the state priorities and goals of our governor and legislators. In other words, budget-making is policymaking. And if our state budget is to reveal the vision and priorities of all citizens, our elected officials need to hear from us.
We know the upcoming budget process will prove challenging. In August, the Department of Finance and Administration released its new projections for the current, 2024-25, fiscal year. DFA revised down the projected surplus for the year to about $280 million. This may sound like a lot of money, but it is only 3.3% of the overall projected total general revenue. Most families would be understandably nervous if the money coming into their household was only 3% more than their expected expenses.
To be fair, this tight budget cycle is one of our own making. We know that over the past 10 years, repeated cuts to the individual and corporate tax rates have removed more than $2 billion in general revenue annually. The latest tax cuts, which reduced the state’s top individual income tax rate from 4.4% to 3.9% and the state’s top corporate income tax rate from 4.8% to 4.3%, also reduced general revenue by at least $450 million every year. We still don’t know how much Education Freedom Accounts will cost in 2025 and beyond, when the LEARNS vouchers for private and home schooling become universal. The cost of the governor’s correction plan, which includes building a new prison, is also unknown. It is unclear at this point whether we can afford these two initiatives, given current finances.
On October 8, the Arkansas Legislative Council together with the Joint Budget Committee (ALC-JBC) begins budget hearings for the next Biennium (fiscal years 2025-26 and 2026-27). This is the process during which Department of Finance and Administration officials, Bureau of Legislative Research experts, and representatives of state boards, commissions, and agencies present and explain their budget requests. The hearings begin with the smaller budgets, usually the boards and commissions, and then move to the larger agencies. The governor typically releases the comprehensive Biennial budget by the middle of November.
The ALC-JBC currently consists of 30 senators and 49 representatives; therefore, nearly 60% of the legislature participates in the hearings, listening to the presentations and asking questions. During this important time, when these discussions and decisions are happening, it is critical for our elected officials to hear from citizens. The hearings provide important opportunities to influence the budget, and therefore policy, before the ALC-JBC makes budget recommendations to the full General Assembly when it convenes in January.
Many individuals will be chiming in; you should be too. Take the time to write, email, and call your representative and senator, or any member of the ALC-JBC, including the chairs. Let them know what programs are important to you, such as public services in early childhood and public education, after school programs, infant and maternal health, affordable housing, and infrastructure development.
We were promised we wouldn’t miss the lost income tax because more businesses and people would move to Arkansas. Now with the tight budget we have, it appears that additional budget cuts are on the horizon. Tell our representatives that they should invest in our future, not shortchange it. After all, regnat populus.
Editor’s note: Pete Gess is the economic policy director for Arkansas Advocates for Children and Families. The opinions expressed are those of the author.