Gov. Sanders proposes 3% spending increase to state budget

Gov. Sarah Sanders proposed Wednesday (March 4) a $6.6 billion balanced budget for lawmakers to consider in the upcoming April fiscal session.

The budget includes a 3% spending increase and $192 million more for her Education Freedom Account program, but no definitive number for a state income tax cut. Overall, Sanders has proposed about $194 million in new spending.

“Our top priority leading into [the] fiscal session is to limit the growth of government while still investing in our top priorities, allowing us to continue to responsibly phase out the state income tax. Achieving all three objectives is not easy, but this budget moves us toward those goals,” Sanders said in a letter to the co-chairs of the Joint Budget Committee.

Other highlights of Sanders’ budget proposal includes:

• $53.4 million for the new state employee pay plan;
• $6 million to higher education;
• $7 million to drug task forces;
• $5 million to improve Arkansas’ SNAP error rate; and
• $6 million to the 10:33 Initiative, a faith-based solution aimed at moving people off welfare.

“My team has worked hard to build a budget that limits growth, invests in priority areas, and allows us to make additional cuts to Arkansas’ income tax once the fiscal session concludes,” she said in reference to the timing of proposed tax cuts.

The state’s fiscal year begins on July 1, 2026. In the revised revenue forecast released earlier this week, Arkansas will have a projected fiscal year surplus of $334.4 million, more than double the previous estimate of $160.3 million. Tax revenue in the first eight months of the fiscal year (July 2025-February 2026) is up almost 2%.

Tax revenue at the end of February was $5.362 billion, up 1.7% compared with the same eight-month period in the previous fiscal year, according to the Arkansas Department of Finance and Administration.