Tuesday, August 03, 2010

EDITORIAL >>Revenues on the rise

If you can disregard 106-degree temperatures, there are some blessings to living in Arkansas in the sweltering summer of 2010. Here is one: Our state government is in better shape, by far, than almost any other state in the nation.

Yes, the recovery from the great recession that began in December 2007 is still painfully slow in Arkansas as well as everywhere else, and tens of thousands of families are still in pain, but our unemployment rate runs a couple of points behind the nation.

And while the state treasury and all the agencies that provide services to people are not flush with money, they are not in crisis.

That differentiates Arkansas from nearly every other state from California to Maine.

Joblessness and the reluctance of people who do work to spend on anything but necessities has reduced federal, state and local government revenues to a relative pittance. Most states have laid off thousands of state employees and withdrawn services because they are required (all but Vermont) to balance their spending with their tax receipts. The chairman of the Federal Reserve expressed alarm this week that the states’ and local governments’ fiscal distress and layoffs would plunge the country back into recession from the gentle growth of the past nine or ten months.

He doesn’t have to worry about Arkansas. The state has not had to lay off many workers, and although tax collections have been down for more than a year, the decline has not been enough to force either layoffs or a reduction in services. State employees just didn’t get the accustomed yearly raises. Monday, the state Finance and Administration Department reported that while state tax collections in July were still below pre-recession levels, they were a little higher than the receipts of July 2009 and considerably above what fiscal experts had expected. Income and sales-tax receipts indicate that a few more Arkansans have returned to work and are spending a little more freely. Corporations are doing great, as reflected by the tax receipts from corporations that have not used loopholes to escape their state income taxes.

Why is Arkansas doing so well or, stated better, why is it not doing as badly as the rest? One reason is that we were worse off to begin with. Arkansas had fewer manufacturing and processing jobs and other employment that were sensitive to an economic downturn. Laid-off workers in California made a lot more money than those laid off in Arkansas. We didn’t have as far to fall.

Governor Beebe might claim that he and the legislature deserve some credit for tight budgeting in 2007 and 2009, but as of Tuesday he had not. Beebe doesn’t do much boasting and he shouldn’t in this case.

Here is the elephant in the room: Federal stimulus money is a big reason that the Arkansas ship of state has found such relatively smooth sailing. Arkansas has been allocated some $2.6 billion the past year under the American Recovery and Reinvestment Act, which has shored up state and local budgets. Early this year, the governor was alarmed about the prospect of having to slash medical services because the state Medicaid fund was about exhausted. He didn’t have to do that. Medicaid, thanks to the Reinvestment Act aid, is in good shape. The stimulus-funded 116 highway and bridge projects across the state, including the enlargement of the Interstate 430-630 interchange in Pulaski County, sent relief to every school district in the state, spent more than $100 million on weatherization and conservation projects to conserve energy, and funded health and human services, sanitation and water projects in nearly every county in the state. By the end of this year, some $1.3 billion will have been pumped into Pulaski County alone, mostly for education.

In Arkansas, the stimulus was just about enough to keep the wolf from the door. Maybe we can make it on our own from here on. In other states it helped but was not nearly enough. Here is the problem: In this integrated economy, California’s and New Jersey’s problems eventually become ours, too. We should be all right without another stimulus infusion (we still have about a billion dollars allocated but as yet unspent) but we shouldn’t object too strenuously if other states cry for more help. We may not be in the same boat, but we’re on the same choppy sea.