Week in Review

State Capitol Week in Review
March 27, 2009
LITTLE ROCK – State government's budget forecast turned cloudier when official revenue estimates had to be lowered for next fiscal year.
The reduced forecast has complicated the legislature's main duty during the final weeks of this year's session - to set spending levels for state agencies, public schools and institutions of higher education.
The administration's new forecast is for minimal growth, or stagnation, in the Arkansas economy next year. Budget officials predict that the 2010 general revenue budget of $4.4 billion will be only 0.6 percent above this year's budget. That slight increase is due mainly to the tobacco tax increase approved earlier in the legislative session.
An overestimation of revenue from the tobacco tax caused the most recent budget forecast to come in lower than expected. When the legislature passed the tax, administration officials estimated it would generate about $86 million in annual revenue.
They have since lowered their prediction to $71 million, citing a general decrease in the number of people who smoke.
Arkansas state government does not deficit spend, and has avoided the financial problems that many other states are experiencing because we traditionally budget very conservatively.
This year the governor is proposing to use "one time" money from the state's surplus to pay for continuing costs of education, health care and prisons.
That type of budgeting is extremely rare, because "one time" money will not be available next year to help pay for the continuing costs of state services.
The governor and legislative leaders hope the economy rebounds quickly, thus allowing Arkansas to avoid cuts in services.
In spite of the revenue picture, two significant tax cuts have been passed this year. One is Act 436 to reduce the state sales tax on groceries by a penny. It will reduce state revenue by $40 million a year. The other is SB 875, which reduces the sales tax on energy use by manufacturing plants. It will lower costs for Arkansas manufacturers by $9 million, and perhaps more.
Besides the additional revenue from the tobacco tax, the state expects to get funding from the federal stimulus package. Also, Arkansas will begin a new lottery later this year, thanks to the signing of Acts 605 and 606.
Lottery revenue will pay for an expansion of the Academic Challenge Scholarship Program. Revenue estimates vary widely because it is new to Arkansas. They range from $55 million to more than $100 million a year. Scholarship amounts will go up or down, based on sales of lottery tickets.
The Senate passed SB 464, a major overhaul of the state's child welfare laws. It modernizes procedures for investigating, assessing, preventing and treating the abuse and neglect of children.
Also, the Senate passed SB 38 to lower the minimum age for operating a motor boat or personal watercraft, from 16 to 14. Under the bill, if there is a boating accident in which someone dies, the operators of the boats must submit to a blood test to check for alcohol or drugs.