Arkansas state government is awash in surplus funds because the legislature made budgets conservatively on the basis of experts’ predictions of an inevitable economic slowdown that has not yet occurred.
Because of that tight budgeting, public schools won’t get any more money per pupil next year than last, which has merely put the state’s system of education back before the state Supreme Court. Medicaid is tightly budgeted though health care costs soar and we’re a poor state with above-average needs in public health care assistance and a highly favorable 3-to-1 matching Medicaid rate from the federal government.
The only people making out well are legislators running home with money for local projects — money, you see, that came from the surplus arising from overly pessimistic economic forecasts and ensuing tight constraints on real state needs.
It’s a simple process: Economic experts predict a slowdown. Legislators budget tightly for schools. The economy does not slow down. Income exceeds budgets. We have a surplus. Legislators seize the surplus for play-pretties. Money that could have been budgeted for schools goes to street lights for Bigelow.
And here’s the kicker: Some of these same legislators who hamstrung the public schools but ran home with pork now behold projections of $333 million in surpluses at the end of the next biennium and want to cut taxes. Not cut taxes, really, so much as cut tax rates.
Sen. Tracy Steele of North Little Rock, for example. He joined that “Brotherhood” by which a coalition of senators insisted on $750,000 for each senator from the surplus. He spent some of his slush fund on private colleges. His unholy alliance with rural senators required him to vote against protecting his hometown’s water supply. Now he steps to the head of the parade to beat his chest about cutting taxes.
If we cut future tax rates because we have extra money on hand for the moment generated by budgets that were conservative and an economic performance that was better than expertly projected, then we’ll merely exacerbate our budget predicament when the economy does in fact turn down, as it almost certainly will.
Wait to see what the courts do if we are forced by low collections actually to cut funding in mid-term to public schools. Wait for the demonstrations on the Capitol steps if sick children and poor old people sustain actual cuts in Medicaid.
To cut tax rates because of conservative budgeting and a surprisingly well-performing economy is to make a permanent adjustment to a fleeting circumstance. It’s like winning at Tunica and quitting your job.
Here’s what we ought to do instead:
1. Fold a conservative amount of that surplus into the ongoing general revenue budget on the theory that we need to catch up for several years of too-conservative general revenue budgeting. That would help the schools, Medicaid and prisons, primarily.
2. Set aside a limited portion of that surplus for legitimate capital improvements, meaning those of statewide need and only a few local ones subjected to pre-audit. I have nothing against rural volunteer fire departments, as long as we know what we’re getting for what we spend.
3. Send back the rest — if there is any remainder — to the taxpayers, not in tax rate reductions, but in simple and one-time tax-rebate checks. That taxpayers sent in too much this year at current tax rates doesn’t mean they’ll send in too much next year at those tax rates. We should send back to taxpayers what they have overpaid currently, not what we might need years from now. It won’t be much — less than $100 per income tax filer, on average. But it would be better to let the taxpayer spend that money at the supermarket than let the local state senator spend it on street lights or his favorite private colleges.