LITTLE ROCK — The chairman of the House Revenue and Taxation Committee sees the state’s proposed $4.9 billion budget and all of its moving parts as a six-sided Rubik’s Cube.
“When you’re watching a youngster sitting in the corner working on the Rubix Cube, you keep looking and it looks like the same mess over and over,” said Rep. Charlie Collins, R-Fayetteville. “But in reality, that youngster is moving things around and you can’t see it until all of a sudden, pop, two turns and the whole thing comes out fitting together.”
Collins said lawmakers are addressing the 2013-2014 fiscal budget in a similar fashion, trying to match up a balanced budget at current funding levels, while mixing in an anticipated $300 million surplus and a sizable amount of tax cuts, along with expanding health care coverage and finalizing the state’s obligations for a proposed $1.1 billion steel mill project in Mississippi County.
“All of these need to fit together in such a way where at the end of the day we have the right policy for Arkansas, a balanced budget, the right health program moving forward.”
Collins and other legislative leaders said last week they are still turning the Rubix Cube and that they are close to solving the complicated puzzle.
Gov. Mike Beebe has proposed reducing the state grocery tax with in his proposal balanced budget, which also calls for tapping the surplus to help cover a shortfall in the state Medicaid program. The governor is working with legislative leaders to fashion a program to provide health insurance for up to 250,000 low-income Arkansans who can afford it.
Closing the steel mill deal would require legislative approval for a $125 million bond issue under Amendment 82, the so-called superproject amendment.
House Speaker Davy Carter, R-Cabot, has suggested parameters on tax cut proposals and asked lawmaker to limit the total amount of tax cuts to $150 million.
Senate President Pro Tem Michael Lamoureux, R-Russellville, says Senate leaders are reviewing tax cut proposals and will come up with their own estimates on how much taxes can be cut, possibly this week.
The goal, the legislative leaders said, is for the House and Senate to come to an agreement on an amount of tax cuts and then move forward to accomplish that goal.
Last week, the Senate Revenue and Taxation Committee endorsed and the Senate passed 34-0 Senate Bill 463 by Sen. Jim Hendren, R-Gravette, which would exempt the service pay of about 6,300 active duty military personnel from the state income tax.
The tax cut would cost the state about about $7 million annually, funds the state fiscal office says the state cannot afford within Beebe’s balanced budget proposal.
Lamoureux asked that the measure be held in the Senate rather than be transferred to the House for consideration.
“I have all the confidence the bill will eventually become law,” Lamoureaux said, but he said it cleared the Senate before the leadership could confer with House leaders on an overall tax reduction goal.
“It kind of came out of here a little faster than the other ones. I wanted to slow up and let the negotiations move forward before we sent that to them,” Lamoureux said, adding that all tax-cut measures will be considered.
“I think we need to do a fair valuation of the true cost of the tax cuts … we’re re-looking at the bills and making sure that the long-term amount of the cuts … in years three, four, five and out, doesn’t grossly exceed the amount in the first two years, so that whatever agreement we reach, the bills reflect that agreement,” he said.
Carter also said the House is “trying to evaluate all these proposals collectively.”
“We’re still revising the impact numbers and looking at what’s on the table, he said. “We’re still looking at the aggregate impacts of all of the tax bills that have been presented.”
With $2 billion in tax reductions proposed, “we’re going to make sure we’re responsible in what we send out and how we analyze the pros and cons of all the bills,” the House speaker said.
Sen. Jake Files, R-Fort Smith, chairman of the Senate Revenue and Taxation Committee, said he anticipates the Legislature will support a reduction in the sales tax manufacturers pay for electricity and natural gas.
Rep. Lane Jean, R-Magnolia, has filed House Bill 1218 which would reduce the tax from the current 4.375 percent to 1 percent at a cost of about $13.1 million next fiscal year and $25.4 million the following year, according to the Bureau of Legislative Research.
Collins said he expects proposals to reduce the state’s income tax also will get serious consideration.
Beebe has successfully pushed for reducing the grocery tax from 6 percent to 1.5 percent since taking office in 2007. His latest balanced budget proposal includes further reducing the food tax to 0.125 percent, eliminating all of the state sales tax on groceries except for a one-eighth cent conservation tax approved by voters as Amendment 75 in 1996.
The tax cut, which officials estimate would cost the state $69 million, would be triggered if obligations in several key areas decline by at least $35 million for six consecutive months. They include payments the state must make to the three Pulaski County school districts as part of a desegregation settlement and some state bond payments.
Collins said no decision has been made on whether to include the governor’s tax cut proposal in the Legislature’s tax cut goals or to allow it to occur just as Beebe proposed.
“It’s too early to answer how that is going to come out,” he said. “I think one school of thought is that the governor has laid out his proposal as he would desire it to happen. I tend to respect that and my goal, off the top of my head, would be to be able to deliver what he has asked for, but that doesn’t mean that has got to be that way. Obviously, this all needs to be part of a complete program.”
In fact, all of the tax cut proposals now before the House and Senate committees could be changed, Collins said.
“I think people have different priorities and all of us have different views on what we think is the most impactful in terms of things like job growth and things of that nature,” he said.