LITTLE ROCK — State government spending growth would be capped and the amount of general revenue outgo tied to gross income under legislation filed Thursday.
Under House Bill 1041, expenditures from the state’s general treasury could not exceed the lesser of an increase of 3 percent over the previous fiscal year and the average gross domestic product for the preceding three fiscal years. The cap would be effective July 1.
The bill’s emergency clause states that the measure would be “in the best interest of the state to control spending and prepare for variations in the health of the economy” and that spending growth could be capped at 3 percent annually “to prevent the overgrowth of government.”
“This is just an attempt to stop growing the state government faster than the state economy is growing,” said Rep. Bruce Westerman, R-Hot Springs, the bill’s lead House sponsor. “I’m not saying we shouldn’t grow state government — as the population grows we need additional services — but we don’t need to outgrow the economy. That’s something state government has been doing.”
Westerman said according to historical data he has reviewed, if provisions of his bill had been in place since 2003, the state would have saved about $250 million a year on average while growing by about 3 percent annually.
The goal of the measure, he said, is to build a general revenue surplus that would go into a rainy-day fund that could be used for tax cuts down the road, or in an emergency.
Richard Weiss, director of the state Department of Finance and Administration, said the fiscal office had not completed its analysis of the proposal and he had not yet discussed it with Gov. Mike Beebe.
“It has a lot of implications, a whole lot of implications,” Weiss said. “The state is extremely well-served with the revenue stabilization law and the way that constrains spending. It looks to me like this would supersede that, which I don’t think would be helpful.”
Westerman said the bill would be a complement to revenue stabilization.
“The Revenue Stabilization Act says you can’t spend more than you take in, which is a good thing,” he said. “What it doesn’t do is limit the amount you can spend that you take in. What we do is more or less spend everything we do take in. Our budget is essentially how much revenue we collect.”
He said his bill was an approach to smooth out the budget process and make it more responsible by saying the state can only increase its spending growth one year to the next by a set amount.
Beebe spokesman Matt DeCample said Thursday the governor’s office was reviewing the bill and had no immediate response to it.
The state has not finished a fiscal year in the red in decades, mainly due to the Revenue Stabilization Act passed by each General Assembly to set annual priorities for state spending — and cuts when necessary.
Currently, the state faces the prospect of a projected $139 million shortfall in its Medicaid program that Beebe has proposed to address with part of the state’s estimated $300 million surplus, efficiency measures and possible cuts in some human services.
Republican legislative leaders — the GOP holds majorities in both the House and Senate — have advocated using more of the surplus and making none of the cuts.