Thread by @ForARPeople1

Good morning Arkansas!

Today is Day 1 of three days of budget meetings in advance of the spring's General Session.

These are similar to the meetings held before this year's Fiscal Session. You can read about those meetings, as well as a brief primer on how budget meetings work, here: forarpeople.org/2024-fiscal-se…

It's not quite the same, but it's worth paying attention to which executive branches are here looking for money. Today should be relatively straightforward; only the Depts. of Labor/Licensing and Health are listed on the agenda.

One nice thing about these pre-session meetings is that the dress code is slightly relaxed, so we're pleased to see one more appearance of @RepWhitaker22's famous tropical print shirts before cooler weather sets in.

@RepWhitaker22 First up: Seat selection. This is done by seniority. Some folks like to be where they've always been, some folks like to hide in the corner, some just want to be by their buds, and some like to be front and center.

(Some folks also like to avoid other certain legislators. But we couldn't speak to that, of course)

While they're doing that: worth noting that we already think higher education will be in the crosshairs. We may also hear more about Rep. Pilkington's plan to expand postpartum Medicaid coverage. What will the legislature do to clean up LEARNS' continued mess?

Will they continue to work on crypto regulation? Will money be dedicated to reducing poverty, or are more tax cuts for the rich coming down the pipeline?

This Gov. and her legislative cronies have been very proud of their austerity measures and happy to look the other way when the data aren't favorable.

Part of why we like to be here when we can is so that at the very least, they don't get to this work in the dark.

and they're done with seat selection, so we're gaveled in and the DFA administrator is here to explain the budget manual.

The manual is intended to simplify the budget for legislators; whatever they're interested in, they can drill down into that topic and get precise details on that topic - any related programs, agencies, etc.

DFA rep currently going through some phone center data (lots of state business, esp. healthcare, contracted out to phone centers). We don't have access to a lot of these docs, so hard to know exactly where he's reading from.

The budget docs divide things into funding sources, differences in funding between fiscal years, where funding is used, what the agency and exec recommendations for the next fiscal year budgets are, etc.

It's incredibly detailed work!

Remember most legislators are not experts in this kind of thing. There's pros and cons to not having professional/full time legislators, but it means the state has to maintain a robust support system for legislators when it comes to complicated stuff like state-wide budgets.

(This is not throwing shade at the legislature, to be clear. Just pointing out how tough budget meetings can be and how important they are.)

Sen. Rice calls for a five minute recess so members can skim through their pet topics.

They're gaveled back into session - apparently the recess was for technical difficulties.

Sen. Hammer: is it customary to be able to carry forward money? Some agencies can and some can't?

A: law allows them to do that. Generally, fund balances will carry forward for special revenues+cash revenues, which can only be used for a specific licensure board.

A, cont: most fund balances that automatically carryover can't be used for any other purpose.

Q: so extending out, w/ tax cuts we've been getting + forecasts, would you comment on what the horizon looks like? What we do now has direct effects.

A: era of billion dollars surpluses is probably over.

A, cont: we're about 40 million over what we projected. Your retroactive tax cuts haven't yet gone into effect. If you start growing revenue by 4-5% consistently it'll get away from you. If budget increases are too large, it'll have a profound effect.

DFA Sec. Hudson: We'll give you a revised revenue forecast in Nov. prior to Gov. presenting her balanced budget. Will contain trend factors and economic factors that we use to build budget.

Any changes recommended by Gov. for the Revenue Stabilization will be reflected.

Rep. Wooten: with current forecast + budget of 2% increase, how much pent up inflationary spiral do we have in these agencies? At what point do we reach when funding reserves are no longer satisfactory?

A: most of the money goes to Education, DHS, and Corrections. We do have some concerns with keeping those agencies' spending down. If you try to chase inflation, budget will quickly spiral out of control.

Q: I follow. Let's take prisons. They've asked for 30 mil for water purification, etc. They've been asking since 2014. We've ignored requests like this for years. Aren't we gonna run into situations where we'll simply have to address these things past the 2% budget?

A: discussions about next biennium's budget are still ongoing, and Gov. hasn't recommended a number yet.

Q: Our efforts proved to be futile last time related to the pay plan I proposed. Are our efforts on the budget equally futile if they don't conform to the Gov's desire?

A: (Sanders stooge waffling) several agencies sent back money (not nearly enough in the amounts Wooten is rightly concerned about), and not the big 3 agencies.

Q: this keeps circling back to income tax cuts. If we keep holding budgets to 2% and doing away with leading source of revenue, aren't we on a collision course with a major downturn?

A: Gov. wants to get to 0% income tax increase, but in a responsible manner as we grow our tax base.

Wooten: we gotta be clear in forecasting relative to revenue growth so we don't have to increase taxes somewhere else. If we do away w/ income tax, we hamper state govt.

Rep. Wardlaw: what does 33.1 million represent in the total budget?

A: about .5% of the budget.

Q: if you pull out Corrections, we got about 17 million back. We just signed a billion dollar contract. Walk me through what that 17 mil was meant for.

A: was for salary increases, but it came late in the fiscal year so they didn't have time. It won't be turned back next yes.

Q: so now we're paying for both salary increases and the billion dollar contract.

A: yes, that's a policy decision you made.

Q: DHS turned back 5.8 million. What for?

A: don't know specifically, but it was from general revenue. Gov. asked dept. heads to maximize money swept back.

(This conversation feels very under the radar dire?)

Rep. Eaves: When DFA scores bills that have a fiscal impact, they're scored statically. Could we change things to score them dynamically?

A: we'd have to build capacity - personnel and software systems, along with policies re: how'd we use that data. We might get pressed if we miss.

Q: isn't some of the static scoring also a best guess? Are there services that offer dynamic scoring to states?

A: we'd have to look into it, don't want to assume.

Rep. Cavenaugh: is this sweeping back of agency money required under statute?

A: generally. If it came from general revenue, it usually has to be swept back.

Q: what are the exceptions?

A: as an ex: portion of code that allows DHS to sweep extra into Medicaid after year is closed out.

Q: so DHS and Ed. generally don't get swept with other agencies?

A: DHS hasn't swept into Medicaid for last two years because they haven't had anything to sweep. Ed. keeps their funds for public school funds.

Q: is there a way to sweep those public school funds back if we see there's no need?

A: depends on the money source.

Q: so we don't have to use General Revenue to meet needs necessarily? IE, Education's adequacy fund.

A: correct. Adequacy was covered by a sales tax increase + leftover Covid monies. Education can sometimes double dip in the sales tax because we passed an internet sales tax

Cavenaugh is a noted budget hawk, and she's worried about the combination of increased budgets + continued tax cuts.

Obviously worried about what services she'll decide to come after. It's been housing, it's been Medicaid, etc.

Q: when you see a balance, are you looking for a way to use it or give it back to GR?

A: beauty of Arkansas's system - if the forecast doesn't come in right for the Revenue Stabilization Act and the budget is higher, everybody takes the same amount of cut. Education is the one exception, but they have to use the Adequacy fund to make up the difference.

A, cont: if the fund balances aren't there, Gen Revenue has to make up the difference, so we have to be careful with what we do with them.

A, cont: if an economic downturn should occur, we are actually well-reserved. But we don't use reserves to increase budget, we use them to protect us from those downturns. Trying to come up with a reasonable budget that holds down spending.

Cavenaugh is trying to equate being responsible with cutting spending and "making hard choices", but that's code for "cutting services I don't like that support people who are already down."

Rep. Ladyman: want to return to Wooten's question - agree we need to grow tax base, but when we're predicting budget/income streams, how do we project income side?

A: we subscribe to multiple analytics services. We have a detailed historical understanding of our revenue patterns under certain economic conditions.

Ladyman: you talk about these agencies algorithms. Do we look at what Arkansas's growth has been over last ten years? We can only grow so much, but to grow we have to make things.

A: Part of what our models show. We can overlay broad trends to our specific case. Really pay attention to employment.

Sen. Hammer: on turn back money, that's all state dollars? no federal?

A: correct, you can't sweep back federal.

Q: when would an agency realize they'd need to sweep back money?

A: depends on the category it's in the RSA. Everything in Cat A gets funded before anything in Cat B.

A, cont: Cat B is new money - they didn't have it the prior year. We always want agencies to have the same amount they had year prior. So if they sweep back Cat. B money, that may end up in Cat A next year.

Gov asked agencies to prioritize sweeping back money instead of trying to spend leftover money at the end of fiscal year.

Rep. Beck: if someone constantly hits the same number, I think they're probably fudging it. In terms of the line items, how many agencies actually came up short?

A: note in PEER committee people are often coming to you asking for a bit more money. Happens a decent amount.

A, cont: it's easy to get more appropriations in between fiscal sessions. It's hard to get more funding. You don't see funding moving much because it's hard by design. (think of funding as big, bottom line budget - appropriations has to be for specific purposes)

IE, appropriation is the authority to spend funding. You can't spend money you don't have. As budgets get tighter, you'll see more requests for temporary appropriations.

Wooten: I don't have anything about Cat B in my RSA. We were told 6.2 billion was all funded.

A: explains again how Cat B money turns into Cat A money.

Wooten: I think you can tell we're all a bit concerned. Balanced budgets are required by Arkansas law. $100 million has been set aside for vouchers. How are we gonna make up that $100 million?

(Wooten's vendetta against LEARNS is constantly refreshing).

A: vouchers don't come out of adequacy or public school funds.

Wooten: But it's $100 million we don't have access to. So we gave $65 million to private schools, and public only got $35.

A: You're only looking at one column, not everything they got.

Fill in your free space on the Bingo sheet! Here's Hester whining about people criticizing LEARNS.

"We're trying to create the budget, and we haven't even started that yet because members don't understand what's going on."

Cavenaugh: How do you control spending? You lower the credit limit. Appropriations have gotten tighter because we're trying to control spending and lower those limits. The way we cut spending is we cut appropriations.

Finally done with this section. BLR Fiscal and Labor and Licensing up.

What's happening now is specific boards/commissions appropriations. Few changes that can be found on Document D-1 on the legislature's website, but generally minor changes - cutting some public awareness programs, changes in employment needs, etc.

Cavenaugh: thanks for working with us to reduce spending, but don't worry, I'm still going to try and cut fund balances (the licensing boards under discussion are the folks that keep Arkansans safe by inspecting and regulating various everyday items like, say, cars and HVAC systems)

A: we're looking at the three year average threshold re: licensing fees. If they meet that, they're a candidate for reduction.

Cavenaugh: Athletic commission is spending more than they're bringing in. Are they spending that wisely?

A: wisely. They received about $350k from Hutchinson, so once they exhaust that we'll reevaluate and look at some alternatives if they keep spending at the same rate.

Wardlaw: why did Athletic commission spend at such a high rate if they were struggling? Wouldn't they want to conserve?

A: they've been encouraged to slow down. They received those funds because spending wasn't meeting revenues. Now they realize can't continue spending patterns. They've changed those patterns over the last 12 months.

Wooten: 8 board members in Athletic Comm. didn't file required financial holdings report. Why?

A: they do have holdings. I take personal responsibility for that finding that some didn't file. I didn't aggressively follow up and that's on me.

*sorry, 69 didn't file. But they've dropped that number down to 16 non-filers.

Wooten: do you have enough legal authority to oversee all these boards? Do you need more?

A: I have the tools, could always use more. We've gotten more cooperation among board members last 12 mos.

(missed Wooten's question, but something to do with interest rates)

A: interest is going straight into treasury, so being reinvested into state.

Dotson: re: bail bonds recovery line item - last three years expenditure was 68k, 38k, and 42k - why requesting 1.1 million this year?

A: situation is more like a liability account, a recovery fund. This isn't a regular operating fund.

Q: what's the biggest exposure you've every had in a year?

A: will get you that number.

Hammer: re: home inspector board - previous to consolidation of several boards, do these numbers represent funds before consolidation?

A: yes. Numbers represent after consolidation.

Q: even after consolidation, fees still haven't reduced.

A: correct, they still fall below threshold we've set.

side note while Hammer vamps - thanks for sticking with us, folks. We know this is a particularly dry one, but we want to keep this stuff on the record, for our sake and yours. Lots of folks don't have access to the livestreams, so here we are.

Cavenaugh again: asks for rep from Athletic Commission.

Q: your fund balance will run out end of next year if I'm reading this right, even w/ Hutchinson's infusion. Why are you spending more than revenue?

A: prior to transformation act, legislation removed professional wrestling from our jurisdiction which killed income. We've increased inspectors across the state to reduce overnight stays. But no getting past the fact there's not enough income.

A, cont: the projections that fund balance would get us four years are based on continuing to reduce expenses as much as possible, but we've been working on a plan internally and w/ Gov's office

This commission, FYI, regulates combat sports across the state. So lots of things like blood testing, disease testing, observing folks wrapping their hands before a fight, ensuring ambulances and law enforcement are on site, etc.

Cavenaugh: where are those expenses?

A: promoter is responsible for those contractors, but we require a bond to insure in case of cancellation. We're responsible for inspectors to ensure vendors/promoters following the law.

Commission doesn't recover mileage, meals, overnight stays, etc. They do recover the bond for inspection fee from the promoter.

Cavenaugh: in a perfect world you'd pass expenses onto promoter.

Bet y'all didn't know you'd be learning about combat sport inspections today, huh, Arkansas?

Cavenaugh says she doesn't see a reduction in spending numbers that indicate the changes they've made are working.

Sen. Love: expenditures of Athletic Commission are coming to the state? Why not billing promoters?

A: regulatory authority doesn't allow that.

Q: do you feel like we should be expensing those items? If I was a promoter, I'd feel good that I didn't have to pick up these expenses.

A: I'll defer to Secretary. We've talked about alternatives.

The issue seems to be when the commission lost pro wrestling and got limited down to MMA. Wrestling brought in tons of money that MMA just simply doesn't. Alternatives would either be change authority to charge promoters, raise fees, or try and bring back wrestling.

Hammer: where does the cash come from?

A: directly from licensing fees, gate fees based on number of ticket sales at an event.

Q: where do special funds come from?

A: licensing fees too.

Q: cash and special will still end up in the hole for next year. Their future is in question.

A: yes.

Q: could we combine this commission with another somewhere to offset those fees?

A: we're open to any possible alternatives. We have some proposed legislation as one way forward. Ex: statute doesn't allow us to collect a gate fee for PPV.

Hammer circles back to the bail bonds issue. If a business that holds a bond goes under, someone still has to pay a bond, so that's why the request is so high.

Irvin: some boards meet to review licenses before they're given out, but is there any type of shared services to help them get licenses out faster?

A: Fair question, and one we've gotten before. Would like to see boards agree on common renewal periods.

Irvin commits to getting folks in a room and working on some kind of temporary or emergency licensing scheme in between usual meetings.

Cavenaugh again: moving to manufacturing and home commission. Again, fund balance doesn't match expenditures.

It is worth asking why, if she's going to ask the same question of every board, why she didn't just send these questions offline to every board. (it's because she wants to grandstand about being a budget hawk, but could just be: we need some coffee).

The numbers are apparently not matching with what info the Dept. is giving her, and she has stated several times that the numbers do not match and everyone is aware she thinks the numbers don't match.

Apparently a disjunction between the Dept of Labor/Licensing numbers and DFA's numbers. DFA secretary up to try and explain the discrepancy.

A: may be a timing issue between what they pulled and what we pulled. We'll have to look into it and get back to you.

Sen. Chesterfield wants to make a motion. It's held for one more Q from Wooten

Q: what is the line item referring to re: investments and claims? (home inspector board)

A: aggregate of interests that go into treasury, and also used to pay claims.

Q: so interest is showing as income? Why don't other agencies show that?

Not really a clear answer on this one, but Wooten is concerned about the leg not getting a clear picture on who actually has what money if there's a difference in how interest monies show up in various agencies' budgets.

Chesterfield moves to accept budget request of Labor and Licensing, with the caveat that they work with DFA to iron out the discrepancy.

Next up: Dept. of Health.

Should be noted a ton of legislators are uh, not in the room right now. Perhaps they're getting coffee (can they share?)

To be specific, this is specifically DHS's licensing division.

Like labor and licensing, the rep is just listing which licensing boards have full time positions, are requesting increases, etc.

Wardlaw asking for the Nursing Board to be pulled because the director couldn't be here today; they'll be heard in November.

Dotson: question re: Ark Psych Board - didn't expend any funds for a scholarship.

A: it's taking a while to get the process set up, but we're moving toward it.

Cavenaugh (brace yourselves): re: pharmacy, did we start a new program to assist with student loan forgiveness?

A: board checks fund balance every year, they use some leftover to help w/ student loans.

Chesterfield motions to accept it, but Irvin has a q first.

Q: asks for insight re unfilled positions.

A: some were unfilled for several, so simple reduction in staff.

Chesterfield motions to accept the budget, excepting Nursing Board. It passes.

We are done! See you tomorrow at 9AM for round two.

Thanks for sticking with us!

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