The Arkansas budget conundrum awaits price tags for education, public safety, and healthcare

As the first month of regular session concludes, lawmakers have no clarity on Gov. Sarah Sanders’ administration’s award for education, public safety or health care, let alone a blueprint for the state’s expected $6 billion balanced budget. Dollar.

Senator Jonathan Dismang, R-Beebe, chairman of the joint budget committee, said he is awaiting the first drafts of new school policies and prison and correctional reform legislation.

“I haven’t seen the education plan, so I don’t have rough figures on what it’s going to cost for what we’re going to do. We know that there is a portion that goes towards increasing teachers’ salaries. That too will have a direct impact. But again, I have no idea if I’m just being transparent about what that’s going to look like and so you see how hesitant I am on the budget,” he said.

This week, Democrats released a plan to increase teachers and unclassified staff. It carries a price tag of around $400 million.

Dismang said the prison construction – which could include between 1,500 and 5,000 new beds – will likely come from one-off surplus funds, but operations must be factored into the budget. The state could be years away from rising prison costs because new beds will take time to build, although parole reforms could accelerate those costs. The cost of building 1,000 new prison beds has been estimated at up to $100 million.

“The immediate budgetary impact – there will be none – because it will be a five to six year process to build a new prison,” Dismang said. “Where we’re going to have immediate budgetary implications is if we change the parole laws. There must still be a place for these people to go. And again, I haven’t seen what that plan looks like, but that would be your immediate cost.”

One of the other important factors in federal budgeting revolves around Medicaid and healthcare costs. At the national level, states will discontinue their continuous enrollment of Medicaid recipients, a move initiated during the COVID-19 pandemic. That means some current Medicaid applicants will leave, but it also means the state will see a reduction in the federal match rate. Both changes affect the state budget.

Dismang said he’s not sure how big this universe of departing recipients will be and what the budgetary impact will be.

“Not at this point and because we were mainly waiting. We’ve been saying for a while now that this will resolve, and it has yet to resolve. So we don’t know who is packed in it and what it looks like. We know we have good reserves to withstand some of the changes now and then as this government works towards the long-term plan,” he said.

The budget manager hopes Medicaid expansion, another area where lawmakers have struggled to secure funding, won’t be as contentious as it has been in previous years. The current plan, AR Home, will require 75% approval from both houses to continue funding, although it is likely to be included in the Department of Human Services’ budget. Right now, the federal agencies are paying 90% of Medicaid’s expansion costs. With traditional Medicaid, the Feds only pick up about 70% of the bill.

Though no substantive discussions have been held with the Sanders administration about its position on Medicaid expansion, Dismang sees the reversal as a budget wrecker.

“I don’t think we should hesitate. We’ve worked through that over and over again over the years and I think at this point we’ve put it behind us. Of course, I haven’t spoken to anyone who wants to make big changes in this session. I think it would be a mistake [do that], just because of everything else we’re up to. But again, I’d be shocked if we’re going to push that amid these other big three things we’re trying to move forward with,” he said.

Despite the uncertainty surrounding education, prisons and health care, tax reform is still on the table, Dismang claims. So that the state does not torpedo the reserves it has built up in recent years, it wants to link future tax reform measures to budget triggers. He has several areas of focus that he plans to focus his attention on tax cuts.

“I think it’s going to be tied to triggers to make sure we don’t have to go back to our disaster reserve fund, for example,” he said. “I will focus on individual income taxes. I think we should do more for historical tax credits, so I’m going to look at that. The film industry too. In my opinion, these items are tax credits or incentives that help boost business in the economy, bring people to Arkansas, and are truly income neutral.”

You can watch the full interview with Dismang in the video below.

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