Beebe proposes new reduction in grocery tax


LITTLE ROCK — Gov. Beebe on Thursday proposed a $4.9 billion general-revenue budget for the next fiscal year that includes a further reduction in the state sales tax on groceries that would be contingent upon a decline in the state’s budget obligations.

Senate President Pro Tem-elect Michael Lamoureux, R-Russellville, described the governor’s proposed budget as “a good starting point.”

“There were no real surprises,” Lamoureux said. “It’s a fairly conservative budget. It’s a helpful starting point and we will get into the details of it and start talking about priorities.”

Richard Weiss, director of the state Department of Finance and Administration, said the governor’s budget proposal for the fiscal year that begins July 1 would reduce the grocery tax from 1 1/2 cents to one-eighth of a cent per dollar spent. The reduction would be triggered when certain budget obligations, including desegregation payments to three Pulaski County school districts and payments on certain bonds, decline by at least $35 million for six consecutive months.

The grocery tax was 6 percent when Beebe took office in 2007. He successfully has pushed for gradual decreases in the tax during each regular session. His new proposal would eliminate the tax except for a portion that can be changed only by amending the state constitution.

The governor told reporters at the state Capitol that one of his top priorities has been to reduce the sales tax on groceries and his proposal was the best way to make sure the grocery tax is reduced while also dealing with a $138 million shortfall to the state Medicaid budget.

“Since I can’t just do it outright, I struggled over the way to do this and then I asked our lawyers how we could do it with a trigger mechanism,” Beebe said, adding that he had to come up with a unique way to reduce the tax without hindering efforts to address the Medicaid shortfall.

“It’s consistent with what I said, and I said we’re going to attack the grocery tax and we’re going to reduce it in a responsible manner as we can afford to do it without adversely impacting state services,” he said.

Since the 1988-89 school year, the state, under a court order, has spent $1.05 billion on desegregation funding to the Little Rock, North Little Rock and Pulaski County Special school districts.

The governor said he believes the state’s desegregation payments, along with bond costs, would end within the next year or two. He said the attorney general’s office has already asked a federal judge to end the desegregation payments because there is no longer federal supervision of the Little Rock and North Little Rock districts after federal judges declared the districts substantially desegregated.

The Pulaski County Special School District remains under federal court supervision.

“We’re going to end desegregation (payments),” Beebe said. “I don’t know if it’s going to happen this year, two years from now, four years from now; it’s going to happen.”

Beebe’s $4.9 billion general revenue budget proposal would increase overall spending by $180.8 million, or 4.4 percent, over the current fiscal year.

The proposal includes an increase of $49 million, or 2.5 percent, in funding for public schools; $90 million in general revenue spending to help address a shortfall in the state Medicaid budget; a 2 percent cost-of-living adjustment for state employees other than higher education employees, costing $12 million; and $10 million for the state’s Rainy Day Fund. Some, but not all, state colleges and universities would receive funding increases.

State employees have not had a cost-of-living-adjustment, or COLA, in three years.

Weiss told the Legislative Council and the Joint Budget Committee on Thursday that the state budget surplus, previously forecast at $200 million, is now estimated at $300 million. Beebe is proposing using $70 million in surplus funds during each of the next two fiscal years to help address the Medicaid shortfall, as well cutting Medicaid spending by $130 million in the coming fiscal year and $189 million in the following year.

Rep. Bruce Westerman, R-Hot Springs, the House majority leader for the 2013 session, said Republicans still plan to push for income tax reform. Beebe said he doubted his proposed budget could withstand any more tax cuts but that he would be open to suggestion.

“There are always going to be people with other ideas and we’re open to other ideas,” the governor said. “This is the preliminary budget proposal, but as I said, we work with the Legislature. I served 20 years over there.”

Lamoureux said he appreciated the governor’s interest in wanting to give state employees a cost of living increase.

“It’s been a long time since state employees have had a raise and I don’t know how that will end up,” he said. “I know it’s been an issue that’s been important to people. Whatever ends up happening on that I don’t think we’ll treat the $20,000-a-year janitor the same way we treat the highly paid bureaucrat.”

Sen. Jonathan Dismang, R-Searcy, said the proposed budget was a good place for the Legislature to start.

“Obviously there are some executive recommendations out there that I don’t believe the legislative body is going to agree with,” Dismang said, adding that he and others were concerned about the possible elimination of coverage for the lowest tier of nursing home care.

On Wednesday, state Department of Human Services officials testified before a legislative panel about $319 million in proposed cuts to Medicaid over two years as part of a plan to address a looming shortfall in the state Medicaid budget. The proposed measures include eliminating coverage for the lowest tier of nursing home care — affecting between 10,000 and 15,000 seniors who need assistance with some daily functions — and the equivalent level of care for in-home patients.

“The third tier level nursing home cuts are problematic,” Dismang said. “I don’t think we can limit cuts to that area, or even to (the Department of Human Services),” he said.

Beebe said he would rather not make the nursing home cuts.

“We will work very hard not to have that happen,” the governor said, adding one way to avoid the cuts would be for the Legislature to support a federally funded expansion of Medicaid.

The Legislature in 2013 is to consider that proposed expansion, but Republicans have raised concerns.