Week In Review

State Capitol Week in Review

        LITTLE ROCK  –  Arkansas state government ended its fiscal year with a budget surplus of about $145 million.
        The governor proposed spending the surplus in three main categories - Medicaid, economic development and capital projects at colleges and universities.
        When combined with money left over from last year's surplus, the state now has about $191 million that has not been budgeted for any specific purpose.
        In recent years the state has accumulated a surplus at the end of its fiscal year in large part because of very conservative budgeting by the legislature. Last year the legislature cut sales taxes on groceries, used car purchases and energy use by manufacturing companies.  Even after the tax cuts, state government ran a surplus because the legislature imposed tight spending controls on state agencies.
        Legislative leaders said the size of this year's surplus indicates that further tax cuts are possible.
        One reason for optimism in the revenue report was the increase in individual income tax collections, an indication that more people are working. However, state budget forecasters cautioned that the Arkansas economy was not back on firm ground.  Another slowdown in economic activity could force state agencies to tighten the reins on spending.
        Arkansas does not deficit spend.  If the economy slows, state spending is reduced accordingly under our balanced budget law, known as the Revenue Stabilization Act.
        In proposing to spend the surplus on Medicaid, industrial recruitment and higher education, the governor was careful to note that the legislature has the final say in how to spend state tax dollars.
        State Fiscal Year 2012 ended on June 30.  Net general revenue from sales taxes and income taxes on businesses and individuals was $4.75 billion, which was about 3.9 percent higher than the previous fiscal year.
        The Medicaid program is the major budget concern of the administration and legislators, because of rising costs and looming increases in the number of people eligible for services.  Medicaid officials have predicted a possible budget shortfall of $250 million to $400 million next year.  Medicaid funding will be a major issue for the legislature in the next regular session, which convenes in January of 2013.
        The Quick Action Closing Fund, which the governor proposes to increase with some of the budget surplus, is available for economic recruiters at the Arkansas Economic Development Commission to attract industry.  The fund pays for site preparation, improvements to streets, rail lines for better access to a plant, facility renovation and equipment purchases.
        Projects at state colleges and universities would be one-time capital improvements, such as building construction.

Waiver Granted from No Child Left Behind

        The U.S. Education Department has granted Arkansas flexibility in complying with the federal No Child Left Behind law.
        Arkansas education officials had to submit a detailed plan to the federal agency to show that the state did not intend to abandon its ongoing efforts to hold schools accountable if students fail to learn.