Notably, the state of Arkansas has $ 422 million more in revenue than expected. But the Senate chairman of the Legislature’s Joint Committee on Budgets – and a bean counter in his other job – says he should act like he doesn’t.
At a time when some states are really hurt, Arkansas exceeded its sales forecast by $ 421.8 million seven months into the fiscal year.
But Senator Jonathan Dismang (R-Searcy) says the state shouldn’t count on this money because it’s the result of “cheap money” through low interest rates and “free money” from the federal government.
“It ends at some point,” he said. “Interest rates will go up and free money will stop flowing out of the government, or at least one would think it is. And when that happens, try to keep yourself from getting into a situation where you’ve spent the money like it’s going to last forever. “
President Biden has proposed a federal spending package of $ 1.9 trillion to fight the pandemic and prop up the economy. This comes after Congress and President Trump spent $ 4 trillion on the same causes last year. Biden’s plan calls for a check for $ 1,400 that would go to most of us. He’s still negotiating the details with Congress, but a package is coming. All of this adds up to $ 28 trillion in national debt with no plans to repay it.
Dismang had little to say about the federal government’s persistent inability to balance its budget through good times and bad. It can print money and Arkansas can’t. He said he focused on things that he could influence.
What he can influence is the state budget as chairman of the Senate of the Joint Budget Committee. It’s a job that he is well suited to as an accountant for a group of real estate investors. At the beginning of his Senate career, he was the temporary President of the Senate and chaired this chamber.
Dismang says the state should focus on increasing its long-term reserves in order to be ready when money is no longer “cheap” or “free”. Governor Asa Hutchinson also plans to increase the long-term reserve fund from the current US $ 210 million to US $ 420 million by the time he leaves office in two years.
Meanwhile, Dismang is the Senate sponsor of two bills that would reduce revenue.
His Senate Act 236 would exempt federal and state unemployment benefits from state income taxes in 2020 and 2021. Dismang says no money was withheld from recipients’ paychecks and it is doubtful that they saved any. In a normal year, about $ 100 million is paid in unemployment benefits. Last year it was $ 2.6 billion. But the state of Arkansas shouldn’t count on this tax revenue. “Again, it’s one-time money,” he said.
The bill was passed by a Senate committee on Wednesday and will be presented to parliament once it has reached the entire Senate.
Meanwhile, Dismang is the Senate sponsor of Rep. Les Eaves (R-Searcy) House Bill 1361, which aims to align state tax law with federal requirements regarding the paycheck protection program loans the federal government granted to businesses last year Has. Corporations were told by the government that they had to spend all of the money to make it forgivable, which means they couldn’t save anything to pay their state taxes on it.
That bill would reduce planned government revenues by approximately $ 180 million. Dismang’s unemployment insurance bill would cut government revenue by an estimated $ 51 million.
Arkansas does a decent job of maintaining a balanced budget – much better than the federal government. This is mainly because there is a legal mechanism in place, the Revenue Stabilization Act, that mandates it.
But mechanisms can be bypassed. Equally important is a culture of fiscal responsibility, which is made possible by bean counters in the state government, including in the legislature.
Can this culture survive all this cheap and free money? It can, as long as everyone remembers that money will not be cheap forever and is never really free.
Steve Brawner is a syndicated columnist based in Arkansas. Email to [email protected]. Follow him on Twitter at @stevebrawner.