Arkansas Agencies Asked to Cut Budgets by $107 Million

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DALLAS - Arkansas state agencies are being asked to cut their fiscal 2009 budgets by almost $107 million after the Department of Finance and Administration said tax revenues next year would be lower than expected.

The department reduced its forecast for gross general revenues in fiscal 2009, which begins July 1, to $5.53 billion from $5.61 billion and reduced the estimated net general revenues by $106.7 million to $4.4 billion.

Under provisions of the state's budget stabilization act, the state budget is divided into three categories. The top priority A and A1 categories are funded first, with remaining revenues allocated to the B category.

The two-year state general revenue budget adopted by the Legislature in 2007 was based on an estimate developed in April 2007 that category B, which totaled $244.5 million, would receive 97.4% of its funding. The latest revision predicts a funding rate of only 53.9%, providing a total of $137.8 million for the state's B budget.

State agencies were notified last week that the B budget for fiscal 2009 would be cut, with the finance department intending to publicly release details of the revised estimates to lawmakers at a meeting with the Legislature's Joint Committee on Economic and Tax Policy on May 7. However, the revisions were inadvertently posted on the department's Web site earlier this week.

Richard Weiss, director of the Department of Finance and Administration, said the revenue numbers began weakening in late 2007.

"We had a strong economy going into the fall, until retail sales began weakening in November and December," he said. "We've seen actual declines in sales tax collections from the same period last year. We're experiencing the same thing in Arkansas as is being felt across the country."

Weiss said the cuts in the category B funding will bring expenditures close to those in fiscal 2008.

"It's not really a drop in spending, just a reduction in the growth," he said. "We just want to be very conservative in our estimates."

Matt DeCample, spokesman for Gov. Mike Beebe, said the lowered estimate is a prudent reaction to signs of a slowing economy.

"This spring we started looking at the estimates because of what is going on in the world," he said. "Right now we're doing well, but the finance department said that a significant amount of the money coming in is due to one-time factors.

"Hopefully we can raise the estimates later, but it is always easier to increase the budget than it is to cut it," DeCample said. "You have to keep in mind that we are required to have a balanced budget."

The biggest single appropriation in the B category is $65.9 million for the Department of Human Services that is dedicated to the state's Medicaid program. The latest estimate will cut that to $38.8 million. The department said it would keep services at the current level by drawing upon its $220 million Medicaid trust fund, which receives revenues from the state's soft-drink tax.

John White, chancellor of the University of Arkansas at Fayetteville, said the school now expects to receive $6.9 million from the B budget in fiscal 2009 rather than the $11.6 million in the original budget. He said the cut poses a potential threat to some university programs and could eliminate the university's ability to raise faculty and staff wages.

"To put this cut in perspective, the Fayetteville campus will receive less money from the state next year than it did this year, despite the fact that normal inflationary pressures and cost increases specific to higher education have continued to rise," White said.

"Some difficult decisions will have to be made."

Other allocations in the original fiscal 2009 B budget include $30 million for the Department of Corrections, $15 million for the state police, $14.9 million for the Department of Community Corrections, and $9.8 million for the University of Central Arkansas. The cuts will be applied across the board, Weiss said.

 

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