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Beebe proposes $163M increase in Arkansas budget

By Andrew DeMillo
Associated Press / January 17, 2012
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LITTLE ROCK, Ark.—Medicaid and public schools would receive the bulk of a $163 million funding increase in a $4.7 billion budget Arkansas Gov. Mike Beebe presented on Tuesday, but lawmakers questioned his decision to not propose granting state employees a pay raise in the coming year.

Beebe called for $117 million in new money for the state's Human Services Department to pay for growth in Medicaid and wants $56 million in additional funding for Arkansas' public schools for the coming year.

Some of the increased funding is offset by reductions the governor is proposing for other agencies, including $15 million from a fund for merit-based pay raises. Many of the reductions come from one-time items from this year's budget that weren't continuing the following year.

"This is a very conservative budget and a very conservative forecast," Department of Finance and Administration Director Richard Weiss told members of the Joint Budget Committee.

Finance officials on Tuesday detailed Beebe's proposed budget for the year that begins July 1. The proposal would increase the state's budget by $163 million. Lawmakers convene for the fiscal session Feb. 13.

Most of the Human Services increase will go toward the state's Medicaid program, an amount that would have been higher had an expected shortfall for the coming year materialized. Beebe called for a $114 million boost for Medicaid, with another $2.9 million for the state hospital.

The $56 million boost for public schools stems from a 2 percent increase lawmakers had recommended to adequately fund education.

Beebe also proposed $2.1 million in increased funding for prisons and $3.6 million for some higher education institutions. The higher education money is targeted at some four-year and two-year schools and aimed at addressing funding inequities, finance officials said.

The amount is far lower than the $63 million increase the state's Higher Education Coordinating Board recommended, but officials said they hadn't expected as much of a boost after Beebe warned them of a tight budget.

"Basically we know money is tight and times are certainly difficult in terms of our overall state budget," interim Higher Education Director Shane Broadway told lawmakers.

Several lawmakers said they were worried about Beebe's decision to not propose a pay raise for state workers. To help pay for more tax cuts pushed by lawmakers, Beebe last year agreed to drop a 1.86 percent cost-of-living pay raise he had proposed for all state employees. The pay raise would have cost about $10 million.

"We simply do not have the money, in the governor's opinion, to be able to do that this year," Weiss said.

Weiss agreed to provide the Legislature estimates about how much the raises would cost if included in the budget.

"I've had quite a number of members come to me over the past couple of weeks and say they certainly would like to fight for a (cost of living adjustment) for state employees," said Rep. Kathy Webb, D-Little Rock, the budget panel's co-chairman.

Another lawmaker said he believed state employees suffered from the push for tax cuts during last year's session. Beebe signed into law a $35 million package of tax cuts, including reductions to the grocery and used car taxes.

"We had it available last session, and I think we could have done it easily if we maybe hadn't jumped on the political expediency of tax cut, tax cut, tax cut," said Rep. Bubba Powers, D-Hope.

Rep. Ann Clemmer suggested that the Legislature look at a more restrictive pay raise that would only go toward state employees making a certain amount.

"We've got some state employees who are barely scraping by and then we've got state employees who are two to three times the income of the average Arkansan," said Clemmer, R-Benton. "It's nice to talk about a COLA, but I want to make sure we're differentiating."

Beebe's office said the governor was open to considering proposals on how to fund a pay raise for state workers.

"The governor feels that state workers deserve a COLA, but it's not something we saw money for in the budget," Beebe spokesman Matt DeCample said.

The Joint Budget Committee also announced Tuesday that a Democratic representative from Marked Tree and a Republican senator from Mountain View would chair a subcommittee looking at the financially troubled Arkansas Forestry Commission.

Rep. Buddy Lovell and Sen. Missy Irvin were named Tuesday as co-chairs of the Joint Budget Committee's subcommittee focusing on the agency. The panel is the only budget subcommittee expected to meet during budget hearings.

The commission announced in December that it would lay off 36 workers because of a $4 million shortfall. Beebe has requested $2.7 million from the state's surplus, some of which will repay federal grants the agency had been improperly borrowing to operate. Legislative auditors also are looking into the commission's finances.

Some lawmakers have called for the resignation or firing of state Forester John Shannon over the shortfall and the improper use of the federal funds. Beebe has said he still has confidence in Shannon, but said that could change depending on what auditors find in their review. Irvin said she's waiting for the audit, but said some lawmakers are worried about sending additional money to the commission without a change in leadership.

"There's a lot of my colleagues who have a lot of heartburn and little confidence putting money into the same hands," Irvin said.

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Andrew DeMillo can be reached at www.twitter.com/ademillo

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