story by Michael Tilley and Roby Brock
mtilley@thecitywire.com
Recapitalizing the Governor’s Quick Action Closing Fund, moving money into a rainy day fund and creating a state “jobs” program by directing money to short-term highway projects are just a few of the ideas on the table for distributing a real and estimated surplus in Arkansas tax revenue.
Arkansas recently ended its fiscal year (July 2014 to June 2015) with surplus of $191.6 million, with nearly $65 million of it coming from one-time funds from the Attorney General’s office and the Arkansas Insurance Department. The Arkansas Insurance Department moved $51 million to the state budget, while the state received $14.4 million from a lawsuit settlement received from the Attorney General’s office. The one-time revenue totaled $65.5 million. The surplus would have been $126.1 million without such revenue. The fiscal year is the fifth consecutive year for revenue increases. The previous fiscal year surplus (July 2013 - June 2014) was $78.7 million.
But with Arkansas’ biennium budgeting, the math is not as simple as figuring out what to do with $191 million. A working document – “90th Session Account of the GIF 2015-2017 Biennium” – indicates that $362.026 million could be available from surplus funds and “unobligated balances” in the two fiscal years.
From that there are debt obligations of $143 million, $50 million to the Arkansas Economic Development Commission (AEDC) for the Quick Action Closing Fund and Amendment 82 superprojects, more than $32 million for the state’s criminal justice system, and a plan to allocate $50 million for a rainy day fund.
At the end of the working document is an unobligated balance of $69.723 million. If all parties agree on the aforementioned items, use of the almost $70 million will be what Legislators and the Gov. Asa Hutchinson administration must decide.
Sen. Jake Files, R-Fort Smith, and chairman of the Arkansas Senate Revenue & Tax committee, said there is an effort to direct some of the almost $70 million to the Arkansas Highway & Transportation Department for a road overlay project that could create or retain jobs.
Congress has been stalled for more than a year on a new long-term plan for national highway funding. Arkansas has delayed 75 road projects – including more than 11 in the Fort Smith and Northwest Arkansas areas – valued at $335 million because of uncertain federal funds. Those delays are causing some layoffs or planned layoffs with some road construction companies.
“If we could fill just part of that gap, we could keep some of those jobs,” Files told The City Wire.
Depending on the funding, Files said between 150 and 350 miles of roads could be improved with the surplus funds. He also said such contracts take only a few months to award and begin construction, meaning it would be near-term boost for the state economy and improve the state’s underfunded highway system.
Rep. Joe Jett, D-Success, and chairman of the House Revenue & Tax Committee, is a supporter of using surplus money for highway needs. Jett has suggested directing 25% of state surplus money for highway funding. In a May interview with Talk Business & Politics, Jett said he will propose the 25% idea to the Working Group for Highway Funding.
Jett said if the state had dedicated 25% of surplus funds during the past decade for road purposes, it would have accumulated a nearly $500 million revenue stream. The 25% of surplus money to be allocated for highways would only come after all areas of the Revenue Stabilization Act (RSA) are funded, under Jett’s concept.
“This is not a fix, but it’s a start. Basically, what it is, is showing my colleagues that we don’t have to just go out and arbitrarily raise taxes to find money to help the highway program,” Jett said in a May 17 interview with Talk Business & Politics.
A year-over-year look at what 25% of the state’s surplus would provide ranges from $0 in 2009 and 2010 to as much as $102.3 million in 2007. In 2013, 25% of the surplus would have equated to $74.9 million while in 2014 it would have accumulated $19.7 million. All told, the equation would have brought in $478.4 million during the past decade.
There is precedent for directing surplus money to highways. Act 1100 of 2007, the Highway Improvement Revenue Act of 2007, provided a total of $80 million from surplus. Of that, $56 million was directed to the AHTD and the remaining $24 million was split between county and city highway projects.
It is expected that Legislative leaders will work with Hutchinson’s office in the next few months to craft a plan for consideration in the fiscal session that begins in early 2016.
Link here for a copy of the 90th Session Account of the GIF 2015-2017 Biennium document.