Tax cuts from the two most recent legislative sessions are making for modest forecasts and eating away at state agency budgets. The joint budget committee met today to go over the new revenue forecast as well as the accompanying proposed budget in anticipation of this year’s fiscal session. During the meeting, one state official said that by not restoring the 1 percent budget cuts that state agencies took for the current fiscal year, this budget is asking those agencies to “do more with less.” The budget for fiscal year 2017 is expected to grow by 2 percent (or $106.8 million), with no cost of living increase for state employees. That growth would have more than doubled without the middle income tax cut passed in 2015, which saved the typical Arkansas worker only about $39 a year. The proposed budget under-funds things important to kids like pre-K, juvenile justice and libraries.
Some legislators were expecting to go over two budgets today: one assuming the continuation of the Medicaid expansion (what Governor Hutchinson is calling “Arkansas Works”) and a separate plan if that program falls through. They only got the first one that includes the expansion (yet still lacks the funds needed to make basic cost of living adjustments). Without expanding Medicaid, we would hemorrhage $100 million additional dollars out of the budget on top of the $242 million in tax cuts over the past two sessions. Perhaps that alternate budget was too wretched to print.
Even with the assumption of Medicaid expansion, important things like pre-K, juvenile justice, and libraries remain underfunded. Of the failure to replace the recent $1 million cut to libraries, Senator Burnett said, “If we can’t find $1 million to help people read, it’s a sad situation.” In addition to struggling libraries, the statewide hiring freeze continues. That freeze would make administrative tasks and basic functions nearly impossible for many public programs even without the 1 percent across-the-board cuts from last year. This leads to our ludicrously overloaded social workers, and causes vulnerable kids to fall through the cracks. The recommended maximum caseload for child welfare workers is 15; in Arkansas it is 29.
The anticipated surplus for fiscal year 2016 is a modest $35.9 million. That is fine this year, but could be disastrous in 2018. If we end up with a surplus that small two years from now, the governor’s highway funding plan (which depends on surplus funds starting in 2018) will have few options left. We won’t be able to start guessing at what the 2018 surplus will be until after that fiscal year starts, but historically they have ranged wildly from hundreds of millions to zero dollars. If we have a few lean years, that will knock a big hole in the highway plan, and there isn’t much room left for increased “efficiency” in public programs which have already been squeezed within an inch of their lives.
There will be a special session after the end of this fiscal session to work the kinks out of the state’s plan to fund highways. Currently, the crux of the plan uses surplus funds instead of directly taking money from general revenue (which could further devastate public programs like schools and parks). However, general revenue from a surplus and general revenue from the normal budgeting process is really all the same pot of tax dollars. On the topic of funding highways with surpluses instead of giving it a column in the regular budget like everything else, Representative Payton asked “I mean, isn’t that essentially what column B and C [of the normal budget] does?” Yes. Waiting to spend general revenue until after it has magically transformed into surplus money doesn’t change the fact that you are taking general revenue from where it should be spent (pre-K, juvenile justice, etc.) and using it for highways – it just sounds better. Stay tuned for updates on fiscal session and special highway budget meetings.