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State reduces agency budgets by $107 million for next fiscal year Thursday, Apr 10, 2008 By Rob Moritz Arkansas News Bureau LITTLE ROCK - An announced $107 million cut in the state's projected budget for the next fiscal year did not surprise legislators Wednesday, and an economist said many states are also tightening their belts because of a slowing economy. "Surely people realize that Arkansas is going to suffer some of the recession along with everybody else," said Sen. Dave Bisbee, R-Rogers. "Each time I pull up to the gas pump, I realize that we're participating in this." State agency and department directors were notified of the projected cuts in the 2008-2009 budget last week. State fiscal officers were to inform legislators of the new projections in May, but the information was inadvertently posted on the Department of Finance and Administration Web site this week, DF&A Director Richard Weiss said Wednesday. "We have indications that the sales tax (revenue) is decreasing and that people are spending less," Weiss said. "We think this is the prudent thing to do right now. Of course, the governor is very conservative in his budgeting and real insistent that we be as conservative as we can reasonably be." The revised forecast comes a little more than a year after the Legislature approved Gov. Mike Beebe's proposal to halve the state sales tax on groceries from 6 percent to 3 percent. The tax cut went into effect July 1 and is projected to cost the state about $121 million a year. Beebe said Wednesday he has no regrets about cutting the sales tax in half, and would try to eventually eliminate it completely when the budget allows. "Giving people money back through tax cuts is not a decision I regret at all, and I want to continue to do it if we can," Beebe told The Associated Press. The revised forecast will wipe out nearly half of the state's "Category B" spending - second-tier spending that is made only after Arkansas' highest-priority budget items in "Category A" are funded - Weiss said. About 54 percent of the appropriations in Category B will be funded, he said. The state's budget for the coming fiscal year is $4.3 billion. Weiss said state law requires full funding of public education, which is to receive a 4 percent increase in the fiscal year that begins July 1, so the cuts will be spread out among a variety of other agencies and departments, and to the state's two- and four-year colleges and universities. "Some will take a pretty good little cut," Weiss said. The state Medicaid program originally was to receive an additional $65.9 million beginning July 1 but can now expect about $38.8 million, he said. "At this point we are not really concerned (about Medicaid cuts) because we have some flexibility," said Julie Munsell, spokeswoman for the Department of Human Services. "We certainly don't feel like we are in a crisis mode." The department has about $220 million in a Medicaid Trust Fund for use when money runs short, largely made up of money from the state's soft drink tax, she said. The state's two- and four-year colleges and universities will receive about $7.4 million less next year, said Weiss. "It's our understanding that we need to be more careful budget-wise," state Higher Education Director Jim Purcell said, adding he met briefly with the governor Wednesday and was reassured of his support for higher education funding. Schools with "high growth monies" because of high growth in recent years will see the larger cuts, he said, adding the University of Central Arkansas will see a reduction of about $2.2 million. The Department of Community Corrections, under the revised budget, will receive $5.5 million less than originally projected and the state police will receive $2.3 million less. The Department of Children and Family Services will receive more than $2.3 million less under the new budget. Beebe spokesman Matt DeCample said Wednesday the budget reductions were made because of national economic trends, which show a slowdown in growth. The governor has "seen time and time again that it is much better to be conservative in your forecast and revise upward than it is to keep it where it is and hope for the best and then face mid-year budget cuts," DeCample said. "This is a move that puts us in the best position if things do turn toward the national trend," he said. Ernie Goss, an economist at Creighton University in Nebraska and publisher of the Mid-America Economic Forecast, said Wednesday the revised budget makes good sense. "Certainly the trend is downward," he said, adding that most states he has surveyed have reduced their budgets significantly. "This absolutely makes sense. You are talking about reducing a growing budget, not really cutting," he said. "Arkansas' job picture is still not that bad, but I think your leaders are looking at it and saying, 'the trend is not quite what it was when the budget was passed.' There was a positive then, but there is not a positive now." Rising fuel costs and food prices are two things most affecting Arkansas' economy, Gross said, noting the state's large trucking and farming industries. Weiss said Wednesday that the state's revenue forecast has come in above forecast, even with the cut in the sales tax. The problem, he said, is that about $65 million in individual and corporate income tax collections are expected to be one-time collections and will not show up in the next fiscal year. Legislators said Wednesday that they were not surprised that the slowing of the national economy was having an effect on the state's economy. "Everybody's disposal income, they're having to do everything they can to put gas in their car, so it's no surprise to me that the things they would normally spend it on, they've had to put it into their fuel tanks (instead), ... so that does take sales tax dollars out of the economy," said House Speaker Benny Petrus, D-Stuttgart. "It's just a forecast, and we'll have a lot better, more current projections before the '09 session convenes," said Sen. Jim Argue, D-Little Rock. "Governors always want to forecast conservatively. I'm not alarmed by it at this point, because I think we need to wait and see how the state's economy proceeds through the balance of this calendar year." ------- Reporter John Lyon contributed to this report |
