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Budget Hearings Begin in Preparations for Next Regular Session

LITTLE ROCK – Legislators are beginning 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 October 11, and the process of reviewing government spending will continue through the session that begins in January.

The Joint Budget Committee and the Legislative Council meet jointly to hold budget hearings. During the regular session Joint Budget will consider spending requests and it will meet more frequently than any other committee. Either the full Budget Committee or one of its subcommittees usually is the first committee to convene every morning during a legislative session.

Legislators will work on budgets for state Fiscal Year 2018, which will begin on July 1, 2017. We are now in fourth month of Fiscal Year 2017.

When the current fiscal year ends on June 30, 2017, state government will have spent about $5.33 billion in general revenue, according to the most recent forecast released by the Department of Finance and Administration. That amount will be available even after the legislature last year approved about $100 million a year in income tax cuts for middle class families.

Budgeting for state government agencies may not generate the publicity that attends social issues like health care and criminal justice. However, it’s important to keep in mind that a state’s true priorities are reflected in how it spends tax revenue.

In Arkansas our top priority is public education, in the form of state aid to local school districts for kindergarten through grade 12. Funding for K-12 accounts for about half of the state general revenue fund, the main discretionary fund controlled by legislators.

One reason 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.

The possibility of more state income tax cuts will be in the background when legislators are in budget hearings.  When the state ended the previous fiscal year with a surplus of about $177 million, the governor used the occasion to say that he wanted to enact further tax cuts.

As always, the extent of tax relief will hinge on the revenue available. The major sources of the state’s general revenue fund are sales taxes, personal income taxes and corporate income taxes.

Other sources combine to swell the amount of spending by the state to more than $21 billion. Federal funding and special revenue are two of the major ones. Legislators have less discretion in how those funds are spent. With federal funding, strings are attached. Mainly, they are matching funds for medical services, highway projects and education.

Special revenues are dedicated for specific programs.  An example is highway construction paid for with special revenue from motor fuels taxes collected at the gas pump. Another example is the sale of hunting and fishing licenses, which generates special revenue for the Game and Fish Commission.

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