Legislative leaders and the governor’s office made progress toward a balanced budget agreement.
By the end of the second week of the fiscal session, opposing sides were no longer disputing a difference of how to spend $21 million within an overall budget of $4.7 billion. They had narrowed their differences and were working for compromise on a dispute over a few million dollars in state agency spending.
One factor that made the negotiations difficult were differences of opinion over a basic premise of budgeting, a premise that is observed not only by government agencies but also by private sector businesses. That is the philosophy — that it is unwise to use “one time” money to pay for ongoing operating expenses.
In the 2012 fiscal session, the issue came up when it was time to adopt the Medicaid budget for next year. Medicaid officials, who work for the Department of Human Services, predict a budget shortfall of more than $200 million in coming years. Medicaid’s long-term financial problems is a specter looming over this week’s budget negotiations between the governor and the legislature.
There is a group of legislators in favor of putting as much as $40 million of this year’s state surplus into Medicaid. It may not be enough to prevent a budget shortfall within the next couple of years, but it would be a strong step toward solving the problem.
On the other hand, there are elected officials who say that approach is only a band-aid because it allocates “one time” money from the surplus to pay continuing expenses in the Medicaid program.
Another thing to keep in mind, the issue of how to allocate “one time” money is not as clearly defined as it appears on the surface. In spite of the troubled economy, and unlike many other states that are in financial trouble, Arkansas state government has had a surplus at the end of past fiscal years. That is because of our tradition of conservative budgeting and because state agencies must cut spending proportionately if revenue declines because of a slowdown in the economy.
It raises the question: if the state consistently enjoys a surplus, should we consider the surplus “one time” money? There are some legislators who believe consistent surpluses are proof that taxes are too high. Others believe that surpluses should be set aside as a financial cushion to ensure that essential services are not cut during tough times. Still others believe that surpluses should be spent to shore up Medicaid, prisons and education.
The majority of appropriation bills approved during the fiscal session authorize state spending for Fiscal Year 2013, which begins June 30 of this year. A few appropriations have been filed to fund agencies from now until the end of the current fiscal year. They include measures to pay $9 million to staff of state prisons for overtime and holiday pay that they have accumulated this year.
Also, the appropriations would reimburse county jails about $2 million for housing inmates who should have been transferred to state prisons, but there was not sufficient space. A $1.4 million appropriation would expand a residential facility in Little Rock for inmates assigned to work crews in the capital.
A $3.4 million supplemental appropriation would use surplus to help the State Hospital comply with federal regulations. It is a facility in Little Rock for people with mental illness.
