Thursday, February 25, 2010

Week In Review

State Capitol Week in Review

LITTLE ROCK – The first fiscal session in Arkansas history lasted three weeks and went very smoothly.

There were some disagreements between the governor and legislators over a few budget issues, but the amount of money in dispute was a small fraction of less than one percent of total state spending. As always happens during legislative sessions, the disagreements were ironed out after both sides compromised.

Only two non-budget bills were considered and both passed easily. One is the Revenue Stabilization Act, which requires state government to operate under a balanced budget. It prioritizes all spending by state agencies, and if revenue falls off then agencies must reduce spending by a corresponding amount. Even though it is the Arkansas balanced budget law, it is not technically a budget bill because it does not specifically appropriate funding for a particular state agency or program.

The legislature passed about 300 separate budget bills, each one appropriating funds to a state agency or distributing state aid to public schools, colleges or universities. They authorize general revenue spending of $4.5 billion in Fiscal Year 2011, which begins on July 1 of this year.

That would be 4 percent higher than this year's general revenue fund budget. The state budget for the current fiscal year has been cut by more than $200 million because of declining tax revenue, caused by the slowdown in the economy.

The other non-budget bill passed during the session sets the amount of lottery scholarships at $5,000 a year for students at four-year universities and $2,500 a year for students at two-year colleges. The scholarships will be available for the fall semester of 2010. An estimated 29,000 students will take advantage of the new lottery scholarship program.

There was debate in a Senate committee when one member proposed lowering the scholarships from $5,000 to $4,000. The member was concerned that lottery ticket sales may taper off in the future and there would not be enough to continue providing $5,000 scholarships. The sponsors of the lottery bill said that they used very conservative estimates in calculating scholarship amounts. The lottery bill eventually passed in the Senate by a unanimous 35-to-0 vote.

The fiscal session went smoothly, but one dark cloud appeared on the horizon - next year's Medicaid budget. Medicaid subsidizes health care for the elderly, people with disabilities and the poor. It's administered by the Department of Human Services.

Cuts of as much as $400 million may be needed, unless Medicaid can manage to lower costs. Medicaid spending is growing by 8 to 10 percent this year because more people are becoming eligible because they have lost their jobs or lost their insurance. Also, the costs of medical care continues to increase dramatically.

Even as the Senate concluded its final day of the fiscal session and lawmakers prepared to go home, individual senators warned of painful cuts they may have to make in future sessions. A reduction in services to people with disabilities would be devastating for their families.

The next regular legislative session will convene in January of 2011. At least 13 members of the Senate will be freshmen because the term limits amendment is forcing that many to retire at the end of the year.

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