DALLAS - Arkansas Gov. Mike Beebe has asked state agencies to prepare three budget options for the next two fiscal years, ranging from a modest increase in their budgets to a 7% cut from fiscal 2009 spending.
The governor's call for budgetary options comes as tax revenues are meeting or exceeding earlier estimates, but Beebe spokesman Matt DeCample said planning for a downturn is the prudent thing to do.
"We just want to be ready for any direction the state's economy might take," DeCample said. "Right now we seem to be doing a little better than the trend is nationally, and we're grateful for that. But it is always better to have a plan if things don't go as well as expected."
"We hope we don't have to cut budgets by 7%," he added. "We don't think we will."
In addition to the lower budgets, Beebe also asked agencies to develop one based on an unspecified increase in revenues, and a standstill budget that kept pace with inflation.
The June revenue report from the Arkansas Bureau of Legislative Research said net general fund collections in fiscal 2008 totaled $4.53 billion, up 1.4% from $4.47 billion collected in fiscal 2007.
The agency budgets cover two years because the Arkansas Legislature meets every other year. The Legislature will convene in January 2009 to develop the budgets for fiscal 2010 and 2011.
Arkansas voters will decide on a constitutional amendment at this November's election that would require annual budgets, with regular legislative sessions in odd-numbered years and fiscal sessions in even-numbered years.
State agencies usually submit two budget proposals for the upcoming fiscal years, a standstill budget and one reflecting greater revenues. No governor has asked for agency budgets with three options, including a significant decrease, since Bill Clinton was governor in the 1980s.
"This really isn't a change for this administration, because this is the first full two-year budget we've been involved in," DeCample said. "The 2007 Legislature convened the day before we took office, so we had little input into that budget cycle."
DeCample said Beebe plans to seek elimination of the 3% state sales tax if revenues remain healthy.
"The governor has said two of his top priorities are getting the funds that are needed for education, and keep cutting at the grocery tax if we can," DeCample said.
The 2007 Legislature cut the sales tax on groceries to 3% from 6% at Beebe's urging, and DeCample said the governor wants to phase out the tax entirely.
"We are doing it incrementally," he said. "We want to provide relief without cutting revenues too much too quickly."
Beebe told state agencies in April to plan on getting a total of $122 million less than expected in fiscal 2009 as sales tax revenues dipped, but collections soon steadied.
The state collected $151 million in sales taxes in May 2008, up 1.3% from the $149 million collected in May 2007. Sales tax revenue in the first 11 months of fiscal 2008 totaled $1.63 billion, down almost 3% from the same period in fiscal 2007. The fiscal year begins July 1.
If revenues remain healthy, DeCample said, the governor could restore all or some of the $107 million in cuts.
Arkansas ended its fiscal 2008 with a surplus of $176.5 million, almost $82 million higher than the Department of Finance and Administration predicted in early May.
The state's total general fund surplus from last fiscal year totaled $259.5 million, including the surplus from fiscal 2008 and $83 million of funds left from fiscal 2007.
The state's general obligation debt is rated AA by Standard & Poor's and Aa2 by Moody's Investors Service.
