Arkansas governor tapping into ‘rainy day’ fund to plug $41 million in budget holes

Ark. gov. taps rainy day fund to plug budget holes

LITTLE ROCK, Ark. — Arkansas finance officials reduced the state’s budget forecast for the year by $41 million on Tuesday, prompting Gov. Mike Beebe to tap into one-time funds to make up the difference.

The Arkansas Department of Finance and Administration recommended the cuts after reporting a sharp decrease in the state’s individual income tax collections in April. Net available revenues for the month were $32 million below the Department’s forecast.

“We did not think we would have a hit this big,” said Richard Weiss, director of the Department of Finance and Administration.

This marks the third time Arkansas’ budget has been reduced over the past year. A total of $247 million has been cut from the forecast since the fiscal year began July 1.

Weiss said he did not expect any layoffs from the latest forecast, and Beebe announced he would release some money from a $40 million “rainy day fund” that had been set up to avoid cuts in state services if revenues fell. Agencies would also be able to tap into other one-time reserve money, Beebe said.

“Our overall economic trend remains positive, and if this anomaly had hit a few months ago, we might have been able to make up for it over time,” Beebe said in a statement. “However, with only two months left in the current fiscal year, we are going to move other money, including rainy day funds, to prevent any potential cuts in state services. We set aside rainy day money for this exact type of scenario.”

Beebe said $17.3 million will be used from money for school facilities to make up for cuts that would have been made to public schools, while $6.3 million in federal reimbursements will be reallocated to prevent any reduction in Medicaid services. There will also be $17.4 million from the rainy day fund available to other state agencies and to colleges and universities to prevent the loss of any services, Beebe said.

The governor, however, said that not all agencies requesting the money would get it.

“We’re taking care of higher ed so they will not suffer any of the cuts, we’re taking care of Medicaid, we’re taking care of prisons and we’re taking care of (public schools),” Beebe told reporters at the state Capitol. “The others, we will look at what their fund balances are and see not just what they tell us, but what DF&A tells us, and act accordingly. Some may indeed have cuts.”

Individual income tax collections fell by $50 million compared to last year, and were $39.4 million below forecast in April. The state’s sales tax collections, however, were above last year’s level by $700,000 and were above forecast by $1.1 million.

Beebe pointed to the jump in sales tax collections, as well as an increase in individual income tax withholding, as reasons why he didn’t see a need to change the state’s budget forecast for the coming fiscal year.

“At the end of the day, we’re being very conservative and safe,” Beebe said. “We don’t want to wake up in the middle of June and say ‘Oh, my goodness, let’s cut it all with two weeks left in the year.’”