Week In Review

State Capitol Week in Review

            LITTLE ROCK – Legislators began a lengthy and detailed review of all state agency spending requests, in preparation for the regular session that begins in January.

            Setting a balanced budget for state government every year is the most time-consuming duty of the legislature. Budget hearings begin in October, but legislative review of state spending continues through the session. The Joint Budget Committee meets more frequently than any other committee, and either Joint Budget or one of its subcommittees usually is the first committee to convene every morning.

            Budgets often don’t generate the publicity that surrounds social issues like health care and criminal justice. However, legislative veterans understand that a state’s true priorities are reflected in how it spends money. In Arkansas our top priority is public education from kindergarten through grade 12, which receives almost half of the state general revenue fund.  That is the main discretionary fund controlled by legislators.

            One reason K-12 is a priority is that the Arkansas constitution mandates that the state provide an adequate education to all children, and that their educational opportunities are equal no matter which region of the state in which they live. That constitutional mandate was the impetus for the Lake View school funding lawsuit, originally filed in 1992. 

The Supreme Court ruled in favor of the small, rural school district; as a result the legislature increased school funding by $650 million a year in a lengthy special session in 2003-2004. An increase in the state sales tax by 7/8 of a cent was the major source of the new revenue.

In 2007 the legislature dedicated $456 million to improve school facilities.  That appropriation was a key factor in the Supreme Court’s decision later that year to release the state from its jurisdiction in the Lake View case.

The litigation caused by the Lake View case, as well as the resulting tax increase for an enormous increase in state spending, will be in the background as lawmakers conduct budget hearings this fall. Lake View likely will be mentioned when legislators consider a recent report that school facilities funding is on pace to fall short by $65 million next year.

Budget discussions will be influenced by the request of Correction Department officials for close to $100 million in funding to build a new maximum security prison unit.

Tax cuts will be a factor when writing state agency budgets.  How much revenue is available will depend on the outcome of the campaign for governor because the candidates have outlined differing proposals for tax reductions.

The major sources of the state’s general revenue fund are sales taxes, personal income taxes and corporate income taxes.  The fund this year is about $5 billion.

The legislature will also appropriate more than $8 billion in federal funds, but has much less discretion in how those funds are spent. Mainly, they are matching funds for medical services, highway projects and education.

The state also collects special revenues, which are specific taxes dedicated to specific programs.  Examples are highway construction programs paid for with special revenue from motor fuels taxes collected at the gas pump. This year the state will collect about $1.47 billion in special revenue, according to the state Department of Finance and Administration.