LITTLE ROCK — Gov. Asa Hutchinson on Wednesday outlined a proposed $5.5 billion budget for the next fiscal year and said he will ask lawmakers to approve a $50 million tax cut that would not take effect until fiscal 2019.
“This budget meets the needs of our state, maximizes the opportunity for economic growth and continues to emphasize efficiencies, reform and savings,” Hutchinson said in a speech to the Legislative Council and the Joint Budget Committee.
Also Wednesday, state finance officials released a revenue forecast that predicts state revenues will reach $5.5 billion in the fiscal year that begins July 1, an increase of 2.8 percent from the current fiscal year’s projected revenue of $5.3 billion, and that revenues for the fiscal year after that will reach $5.75 billion, an increase of 4.9 percent from fiscal 2018.
Hutchinson said he will reveal details of his proposed tax cut before the Legislature convenes in January. He told reporters later that having won approval of a middle-class tax cut in 2015, he intends for his next tax cut to focus on Arkansans in lower and higher income brackets.
“The budget reflects a necessary and cautious, conservative approach to tax cuts. A $50 million tax cut is included, but it will begin in the second year of the biennium and have a minimal $25 million impact in FY 19,” Hutchinson told lawmakers.
State revenues for the current fiscal year to date are $23.2 million below forecast.
“The state budget has fully absorbed the landmark $100 million tax cut from the last session, and individual income tax collections continue to be strong, but we continue to monitor the sales tax collections to try to determine why they are not as robust,” Hutchinson said.
Some legislators have said the state could afford more ambitious tax cuts. Hutchinson told reporters Wednesday he would oppose anything larger than his proposed $50 million tax cut unless it is offset by reductions in tax exemptions and loopholes.
The governor’s proposed budget would increase spending by 2.9 percent from the current fiscal year.
Talking to lawmakers Wednesday, Hutchinson said efficiency measures, including a hiring freeze, several mergers of agencies and the sale of the state’s home health program to the private sector have reduced filled positions at state agencies by more than 1,000, or 4 percent of the total number of state employees, and will help the state afford an overall spending increase.
He said his budget proposal includes further efficiency measures, including a plan to put War Memorial Stadium in Little Rock under the control of the Department of Parks and Tourism.
Hutchinson said a $50 million savings at the Department of Human Services will offset a portion of $110 million in growth of the normal delivery of health care.
The governor said he will propose a $5.7 billion budget for fiscal 2019 that will include a previously announced $10 million increase for higher education, conditioned on passage of a new funding formula for higher education based on outcomes instead of enrollment.
He said his budget plan for the biennium includes funding for three crisis stabilization centers where police can take mentally ill people as an alternative to jail.
Hutchinson also said he will propose a new pay plan for state employees that will reward high performers.
The governor’s plan would increase funding to the Department of Human Services’ Division of Children and Family Services by $26.7 million in fiscal 2018 and $11.9 million in fiscal 2019.
“Those additional funds will translate into more workers who are better trained and more children finding a safe home where they have the care they deserve,” he said.
Other items in the governor’s proposal include a $3 million increase for early childhood education, a $100 million increase over the biennium for school facilities, a $5 million increase over the biennium for the governor’s computer science initiative in public schools, and $1 million each for libraries and senior centers to replace 2015 funding cuts.
One thing the budget does not include is a surplus fund for the governor and legislators to use for various projects.
“That is the result of priorities and the many different funding needs from foster care to education to public safety,” Hutchinson said.