Arkansas' public schools, prisons and Medicaid program would receive boosts in funding while most other state agencies would see a small cut under a $5.2 billion budget plan Gov. Asa Hutchinson presented to lawmakers on Tuesday.
Finance officials outlined a plan that taps into the state's surplus to fill funding gaps as lawmakers advanced Hutchinson's campaign promise to cut income taxes for the middle class by about $102 million a year. Hutchinson, a Republican, was sworn in as governor earlier this month.
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Hutchinson's proposal calls for increasing the state's Medicaid budget by $80 million and boosting money for public schools by nearly $51 million. He proposed keeping funding for the state's colleges and universities flat, while most other state agencies would see a 1 percent cut in funding. The budget would increase state spending by 3 percent, or nearly $150 million.
Hutchinson also called for a 1 percent cost-of-living pay increase for state employees.
The governor is proposing using about $157 million of the state's $216 million surplus to shore up funding for several agencies. Most of that would go toward Medicaid, which would receive $90 million in one-time money, and Hutchinson also called for setting aside $40 million for school facilities.
Lawmakers expressed some concern about relying on one-time money for ongoing needs.
"I don't like it, but I'm just thankful we've got it," said Sen. Larry Teague, D-Nashville, co-chairman of the Joint Budget Committee. "I'm just thankful we've got a surplus to use, kind of like a savings account."
A House panel, meanwhile, advanced Hutchinson's proposal to cut income taxes by 1 percent for those making between $21,000 and $75,000 a year. But the measure was amended by the House Revenue and Taxation Committee to restore a portion of a capital gains tax break it originally called for repealing — a move that will add about $9.7 million to the cost of the package.
House Speaker Jeremy Gillam said he believed the state could afford to keep part of the capital gains tax break. Gillam said he expected the House to vote on the bill, which was approved by the Senate last week, as soon as Thursday. If approved, the measure would have to go back to the Senate for a final vote before heading to the governor's desk.
"Revenues are looking up and at the end of the day I think we'll be able to make sure there are no services cut with this whatsoever," Gillam, R-Judsonia, told the panel.
The two members of the panel who voted against the proposal said they were worried it didn't do enough for low-income residents and that it's unclear how the state will pay for the reduction.
"I think we should have tax relief, but we have to make sure that we can afford it and we have to make sure it's as progressive as it can be," said Rep. Vivian Flowers, D-Pine Bluff.
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