Friday, October 8, 2010

Week in Review

State Capitol Week in Review

LITTLE ROCK – Legislators have begun budget hearings in preparation for the 2011 regular session.

State government's general revenue spending is estimated to total $4.48 billion this year. The governor will submit official budget recommendations for next year on November 15. Arkansas state government traditionally adopts conservative budgets, which is one reason we are in better fiscal shape than almost every other state in the country. We will likely be even more conservative during the 2011 regular session.

Budget officers from both the legislative and executive branches predict that spending levels will be very conservative next year because of uncertainties about the national economy.

Arkansas operates under a balanced budget law. When the economy stagnates or declines, it causes a drop off in state tax revenue and forces state agencies to reduce spending from previously budgeted levels. For example, last fiscal year the state brought in less than in 2009. Net general revenue in 2009 was less than in 2008.

Last year the state cut planned spending amounts by more than $200 million in order to finish the fiscal year under budget.

During the first days of budget hearings at the Capitol, legislators examine next year's budget requests from boards and commissions that generate revenue from fees. Examples are the boards that license physicians, engineers and architects. Later in the fall the major state agencies will present their budget requests.

Those agencies include the Human Services Department, the Health Department and the Correction Department. Most of their programs are paid for with tax revenue.

Colleges and universities also receive a significant portion of state tax revenue. The largest category of state spending is the public school fund, which distributes state aid to public schools for kindergarten through grade 12.

Teacher Retirement System

Improved earnings from its investments gained about $950 million last year for the state Teacher Retirement System.

The value of the system's assets rose from $8.8 billion to $9.75 billion, mainly because of better performance by the stock market. In the previous year the market value of the system's assets went down because of poor stock market performance.

The upturn is good news for retired and active teachers, although even when the system's assets declined in value there was never any threat that benefits would be negatively affected.

There are almost 71,000 active members in the system, with an average salary of $32,804 a year. The system pays benefits to almost 29,000 retirees. Their average yearly pension is $19,605.

The system's increased value means that its officers probably will not ask the legislature to raise contribution rates of school districts, which is now at 14 percent of payroll. That comes to about $378 million a year.

The Teacher Retirement System is the largest public retirement system in Arkansas. The Public Employees Retirement System is roughly half the size of the teacher system.

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