LITTLE ROCK — An association that lobbies for state employees is not giving up on the idea of a 1 percent pay increase in the coming fiscal year, though Gov. Mike Beebe and state finance officials say it is no longer in the cards.
“There’s people that say the money should be there,” said Danny James, executive director of the Arkansas State Employees Association. “We’re just kind of waiting to make some phone calls and get out there the first part of next week and get started and see if we can do anything we can to protect that 1 percent and help the governor or the legislators find the funds for it. … We’re cautiously optimistic.”
Legislators passed a state budget bill during the recently adjourned fiscal session that included $5.2 million for a 1 percent cost-of-living adjustment for state employees, but on the last day of the session the House and Senate overrode Beebe’s veto of a $5.1 million tax break for the oil and gas industry — a tax break that Beebe said eliminated the possibility of funding the COLA.
“Gov. Beebe is disappointed that the Legislature passed an unconstitutional bill for the benefit of out-of-state corporations at the expense of its own state employees,” Beebe spokeswoman Stacy Hall said Wednesday after the override votes.
The Legislature put the COLA in Category B1 of the state budget bill, the third highest of the four categories of spending priorities in the bill. Items in Category B1 are funded only after all items in the two higher categories, A and B, are fully funded.
The tax break, on the other had, is now state law, so unlike the COLA it is not an optional expense.
Act 300 of 2014 includes a provision declaring that sand and other granular substances used in oil and gas drilling are exempt from the state sales tax. Beebe objected to the provision being written into a budget bill in the Special Language Committee instead of being introduced as separate legislation — which under the state constitution would have required a two-thirds vote of both chambers to consider in a fiscal session.
Legislative supporters say the language merely clarifies that the state’s sales tax exemption for manufacturers’ equipment should apply to sand. The Beebe administration disagrees with that interpretation.
A lawsuit filed by Weatherford Artificial Lift Systems of Houston, a company that provides equipment and supplies to oil and gas drillers, resulted in a recent ruling by a Pulaski County circuit judge that the exemption should apply to sand, but the state Department of Finance and Administration intends to appeal the ruling.
Act 300 does not affect past collections, and finance officials say the state could have pay up to $36 million in rebates to Weatherford and other companies if the ruling is not overturned.
Sen. Jonathan Dismang, R-Beebe, who sponsored the amendment to Act 300, said he expects the money for COLA to be available.
“As history has shown, the governor is very conservative in his estimates. Just as an example, we had a $125 million surplus after we fully funded A, B and C before the last forecast,” Dismang said. “I believe that the $5.1 million, which represents a 0.1 percent variance in the forecast, will be able to be funded.”
State Department of Finance and Administration Director Richard Weiss said the COLA is “going away.”
“We have some of our revenue at risk, and that’s the place to make a reduction,” he said.
Weiss was asked if he saw a possibility for an upward revision of the forecast.
“As of right now we don’t see that,” he said. “We don’t see changing the forecast upwards at all based on what we’re looking at. I guess you never say never on anything, but that is certainly not the plan going forward.”
In the days leading up to the vote on the veto override, James said his association was at the Capitol lobbying for the COLA to be preserved.
“We were just telling the legislators — and the governor’s office talked to us, we’ve been in touch with both of them — and we just let them know we felt like state employees deserve their COLA and they should get it,” he said.
He said the way things worked out was disappointing, but “I do understand how politics works.”