Beebe Budget Includes Cut In Grocery Tax
Last updated Thursday, November 13, 2008 8:17 PM CST in News
By Rob Moritz
THE MORNING NEWS
LITTLE ROCK — Gov. Mike Beebe proposed a 1-cent cut in the state’s grocery tax in the $4.5 billion balanced budget his administration presented to legislators Thursday.
Beebe also proposed carving a “rainy-day fund” from a projected $300 million surplus. Money from the fund could be used to cover about $146 million for Medicaid programs, prisons and other state services that are not included in the budget but are listed as “unfunded appropriations” if revenue does not exceed the administration’s forecast for the next fiscal year.
If revenue exceeds the forecast, funding for those appropriations could come from within the budget, administration officials said.
Richard Weiss, the director of the state Department of Finance and Administration, told legislators the economy is still struggling and things are not expected to improve for at least 18 months.
DF&A projects revenue growth of 2 percent for the fiscal year that begins July 1, down from the 3.4 percent forecast the agency had projected before the Wall Street meltdown, Weiss said. The department projects 4 percent revenue growth for the second year of the biennium.
“We’re going to have to hunker down all the way around and do everything we can to keep the state solvent,” Weiss told members of the Joint Budget Committee and Legislative Council on the last day of budget hearings in advance of the 2009 regular session that convenes in January.
Talking to reporters later, Beebe said he did not particularly like the idea of using one-time money to fund ongoing state services but that the economic forecast dictated his decision. The governor also said he was committed to keeping his 2006 campaign promise to eliminate the state sales tax on groceries. At Beebe’s behest, the Legislature reduced the tax from 6 cents to 3 cents in 2007.
“If things are as bad as our conservative forecast predicts, then we could use some of the one-time money to meet those essential services and what’s not needed for that — or if none of that is needed — then that money could be used for traditional general services,” the governor said.
The “unfunded appropriations” in the budget included $58.4 million in Medicaid costs for the state Department of Human Services, nearly $19 million for the state Department of Correction to open a new prison and medical center at Malvern, $9.4 million for Department of Community Correction programs, plus funding for more than 50 DHS caseworkers in the Division of Children and Family Services and an expansion of the agency’s mental health programs.
Beebe said the balanced budget was developed only after K-12 education was fully funded.
“It was based upon the adequacy and making that top priority,” he said.
The education funding includes an additional $44.1 million over two years for public school funding.
Early reaction from lawmakers who attended the budget presentation was positive.
“I think it’s genius,” said Rep. Keven Anderson, R-Rogers, noting that the idea of using surplus money for one-time general revenue needs, which he supported, was suggested last year. “At first pass, this looks to be a pretty conservative budget.”
Rep. Bruce Maloch, D-Magnolia, incoming co-chairman of the Joint Budget Committee, also praised the proposed budget.
“I agree with the governor that we generally should not use the surplus for ongoing needs,” he said. “But, if you’ve got a serious downturn, like we’ve got now, and the projections are that we come back out of that and the revenue kicks back up, I do think it’s appropriate to consider using that to get us through the dip.”
Sen. Gilbert Baker, R-Conway, said he applauded Beebe’s “very conservative approach to budgeting ... in these economic times.”
Maloch said addressing the rising cost of Medicaid programs is going to be one of Legislature’s most pressing issues next year.
On Wednesday, officials of the state Department of Human Services told lawmakers the agency needs about $230 million over the next two years just to maintain Medicaid services at current levels. The request included dipping into the Medicaid Trust Fund and using some of the tobacco settlement money.
Thursday, Rep. Chris Thyer, D-Jonesboro, questioned the logic of reducing the sales tax on groceries, at a cost of about $30 million a year, but not funding Medicaid increases or a new state prison.
“Help my thought process here on what sense it makes to have all of these $145 million in what the administration is calling needs, yet at the same time taking another penny off the grocery tax,” Thyer said during the budget hearing.
Beebe said later did not think his proposed budget put the sales tax cut on groceries above Medicaid costs or prisons.
“We have a method to be able to do the grocery tax (cut) and be able to address Medicaid or prisons through that mechanism I’ve suggested,” he said. “We’ve taken that into consideration. We are not placing the grocery tax over the immediate needs of Medicaid.”
The governor’s budget proposal covered two fiscal years, even though voters in the Nov. 4 general election approved a constitutional amendment that requires the Legislature to meet every year and budget on an annual rather than biennial basis.
Beebe said he hopes the Legislature can use the second year of his proposal as a guide for future sessions.
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