Legislators Face Busy Session

Diverse slate of issues looms for Legislature

Last updated Saturday, January 6, 2007 10:30 PM CST in Topics

By The Morning News

Arkansas Advocates for Children and Families concluded in a recent study that creating a rainy day fund -- and setting aside 10 to 15 percent of the budget for it -- would make good fiscal sense.

"Saving money is one of the first economic lessons we teach our children," said Rich Huddleston, executive director of the nonprofit advocacy group.

Rep. Bruce Maloch, D-Magnolia, has said he would propose legislation during the coming regular session that would move $200 million of the surplus into such a fund.

Economic Development Fund

Gov.-elect Mike Beebe proposed the Quick Action Closing Fund during his campaign, calling it a means to improve economic development in the short- and long-term, according to his Web site. The fund would take between $40 million and $50 million and would be available to the governor for funding deal-closers like building sewer lines.

Northwest Arkansas would benefit directly from such a fund, local business leaders said.

"A lot of times, small companies will be waiting to come to Arkansas because of the quality of life and to be able to have that fund available would be a powerful tool that could produce a lot of benefits," said Steve Rust, president and CEO of the Fayetteville Economic Development Council.

Rust said the money would be vital in making the state more competitive in bringing large businesses, company headquarters and industries. That would have a trickle-down effect, raising the wealth of local, small businesses and residents and broadening the tax base so more services are available without raising taxes, he said.

State competition for these companies is fierce. Oklahoma and Missouri both have strong incentive packages that have lured large companies away from Arkansas, said Ed Clifford, president and CEO of the Bentonville/Bella Vista Chamber of Commerce. Northwest Arkansas has lost projects because no incentive fund was available.

Since 2001, about 20 companies looked seriously at Northwest Arkansas, but only a couple chose the region, Clifford said. Lack of incentives, such as infrastructure improvements, high-speed Internet and training for employees, were among companies' top reasons for not settling in Arkansas. The closing fund would allow Arkansas to offer last-minute rewards, Clifford said.

"It can make all the difference in the world between closing a deal and not closing a deal," said Raymond Burns, president and CEO of the Rogers-Lowell Chamber of Commerce.

The state already has the 2004 Super Projects Funding amendment that benefits large companies that invest at least $500 million and create more than 500 jobs. The Quick Action Closing Fund would help seal deals with both small and large companies. A company's decision to locate in Arkansas is influenced by pace as much as the amount of money, Clifford said.

"Speed is just as much a part of that decision as dollars," he said, adding that states usually don't know they're being considered until the company has narrowed candidates to three.

Education

At the top of most legislators' list is public education.

"Obviously, it should be the first priority," Sen. Shane Broadway, D-Bryant, said. "Our needs are for school facility improvements and renovation and new construction."

A 2002 state Supreme Court ruling directs the Legislature to adequately fund public education.

"There are some legislators that feel that basically we should use all the (surplus) money for public education," said Rep. Bobby Glover, D-Carlisle, said. "I totally disagree with that because we have other needs in this state," including Medicaid, Arkansas State Police, state prisons and higher education, among others, he said.

Feeding state departments from the surplus is a slippery slope, Glover said. Once you do it, "they're going to expect that money to be there every year," he said, adding that the surplus should be used on one-time expenditures.

General Improvement Fund

Some lawmakers want to divert part of the surplus to the General Improvement Fund, which already is expected to be more than $100 million. The fund is comprised of interest earned on taxpayer money before it is spent and money budgeted but not spent by state agencies.

Many lawmakers have suggested channeling some surplus money into this fund for distribution to local projects in their home districts. That idea has been derailed, for the time being, because of a December state Supreme Court decision that the Legislature in 2005 violated the state constitution by appropriating $400,000 for local projects in the town of Bigelow.

The court said the money for the Bigelow projects violated a constitutional prohibition on funding strictly local projects.

Legislators have been asked to hold off filing any bills appropriating general improvement money until they have a better understanding of the high court's ruling and the Legislature's options.

"We don't know if there's even going to be any available," said incoming House Speaker Benny Petrus, D-Stuttgart. "We've got a lot of issues out there we need to be talking about way before we talk about general improvement money."

A lot of the discussion will center on funding for fire departments, senior adult centers and Meals on Wheels programs -- all local entities that could have a statewide impact in some way, Broadway said.

So could irrigation projects that need funding in White River and Grand Prairie, Glover added.

"I don't see anything wrong with that because you're trying to not only help the economy in this area but the economy for the whole state of Arkansas so that farming can exist," Glover said.

Miscellaneous

During his successful gubernatorial campaign, Beebe proposed a number of other tax cuts and plans for creating or expanding state programs.

He said he supports a $40 million expansion of voluntary preschool programs to early childhood education available to all eligible children.

He also has proposed expanding the property tax homestead exemption from $300 to $350, which would cost the state about $22.4 million, and he pledged to phase out the sales tax on energy for manufacturers, estimated at $55 million.

Beebe pledged during the campaign to provide more state funding for libraries -- $1.7 million -- to make up for 2001 cuts, and raise the amount of state funding for cities and counties by $4 million each.

Petrus said he would push for some of the surplus to fund research and development for alternative fuels projects that benefit the statewide economy.

The Morning News' Rob Moritz, Scarlet Sims and Jason Wiest contributed to this report.

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