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What to expect from the 92nd Arkansas General Assembly

Tax cuts for the richest Arkansans top the agenda for the ledge.

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On Jan. 14, the Arkansas legislature convened for the 2019 regular session, state government's brief spasm of lawmaking, budget-making, wheeling and dealing.

November's blue wave sloshed its way into many statehouses — Democrats gained over 300 state legislative seats across the country in the midterms, including 14 in Texas — but it left Arkansas virtually untouched. The party's pickup of two hard-fought House seats in Northwest Arkansas was offset by the loss of two rural districts in the eastern part of the state. The GOP continues to hold supermajorities in both the Senate (26 out of 35 seats) and the House of Representatives (76 out of 100 seats) — the same ratios as in the 2017 session.

In short, Republicans can pretty much do whatever they want.

Which is what, exactly? Governor Hutchinson has promised "one of the most historic and transformative sessions of the General Assembly that I know we've seen in my lifetime, if not longer," as he modestly phrased it at an event hosted by the Associated Press and the Arkansas Press Association on Jan. 11. The governor has identified four priorities for 2019. They're significant, if not exactly soul-stirring: big tax cuts, a modest teacher pay hike, government reorganization and a plan to pay for roads and highways. As of mid-January, the first three seemed destined for passage. Transportation funding remained the big unknown.

But that's just the tip of the iceberg. Worse and wilder stuff is yet to come, along with a few positive initiatives that might actually have a shot.

Expect conservatives to try to restrict access to abortion even further, especially in light of the new makeup of the U.S. Supreme Court. Though voters approved an increase to the state minimum wage in November, one legislator, Sen. Bob Ballinger (R-Berryville), is already trying to undo it for certain workers. If past sessions are any indication, enterprising lawmakers will aim darts at groups like undocumented immigrants or LGBTQ people. The legislature may try again on referring a so-called tort reform measure to voters, which would limit damages that may be awarded in a civil lawsuit. (Up to three constitutional amendments can be referred to voters for the 2020 ballot.)

Legislators have promised a bipartisan ethics package, given the corruption scandals that have recently ensnared several of their colleagues; Senate President Pro Tempore Jim Hendren (R-Gravette) says "restoring trust in the institution" is his top priority. Hutchinson has asked for juvenile justice reform, including a bill that would require courts to use a "risk assessment tool" that should reduce the number of kids Arkansas locks away for criminal offenses.

More will emerge in the coming weeks — much more. In the meantime, here's what we know is on the menu:

Taxes: The rich get richer

The governor's proposed personal income tax cut would likely be phased in over a three-year period and would reduce state revenue by at least $192 million when fully implemented. The majority of benefits would accrue to the richest Arkansans, with the state's top marginal rate declining from 6.9 percent to 5.9 percent. (Update: On Jan. 30, the governor unveiled a revised plan that would reduce the top marginal rate from 6.9 percent to 5.9 percent but leave other personal income tax brackets unchanged. The revised plan was expected to cost the state $97 million.)

An analysis made by the Institute on Taxation and Economic Policy found the top 1 percent of earners in the state — a group making over $436,000 annually — would reap 46 percent of the total tax cut, or an average windfall of $8,128 per taxpayer. The middle 20 percent of earners — those making $36,000 to $55,000 annually — would see an average cut of $52.

The analysis also found the plan would actually raise taxes by a total of $33 million on some 200,000 Arkansans with low-to-middle incomes, due to the way it simplifies and flattens the rate structure. After the Arkansas Democrat-Gazette reported that fact in January, the governor said he wanted a fix to ensure no taxpayers would see a tax increase. Hendren, who is also the governor's nephew, said in January he thought the bill would "be determined in the first month of the session."

Whatever the final plan, there's little doubt Republicans will rally around it. Bruno Showers, a senior policy analyst with Arkansas Advocates for Children and Families, said the tax cut "would make things more regressive" by shifting more of the cost of state government from the rich to the poor and middle class. Hutchinson previously championed $150 million in personal income tax cuts for low-to-middle income earners (those earning under $75,000) in 2015 and 2017. However, Showers said, such cuts tend to be of little help for poor families because those households pay most of their taxes in the form of sales and excise taxes, not income taxes.

To truly benefit lower-income households, Showers said, the legislature should pass an earned income tax credit. Rep. Charles Blake (D-Little Rock), the House minority leader, said Democrats will forward a tax package centered on a state-level EITC, as in past sessions. "I can't sit here and say we're going to oppose the governor's tax bill, but we want people to see [the proposals] side by side," Blake said.

The personal income tax cut for the rich may be just the beginning. Republicans also hope to pass various corporate income tax cuts that would slice hundreds of millions more from the state budget, offset slightly by a new sales tax on online purchases. The net cost of all these changes, including the personal income tax cut, would be about $400 million over an eight-year period; Hendren, who chaired the task force that produced the plan, has said the state can afford it.

Others disagree. "If you're going to cut taxes that much, you have to either cut services or raise taxes elsewhere," Showers said. "There's less money to go to quality education, infrastructure, public safety, just basic things. Those are things that businesses care about, so if we're not investing in those things ... that could harm economic development."

Education: More for teachers. But less for schools?

Rep. Bruce Cozart (R-Hot Springs), the chairman of the House Education Committee, has introduced a bill that enacts the governor's proposal to raise the minimum salary schedule for teachers statewide. Over a four-year period, beginning this fall, the minimum amount a school district could pay a first-year teacher with a bachelor's degree would rise from the current $31,800 to $36,000. Minimum pay for a new teacher with a master's degree would rise from $36,450 to $40,650.

The current schedule also dictates minimum salaries for each subsequent year of experience up to 15, and the raise would apply to each. The estimated cost to the state would be an additional $60 million. (Legislators raised the minimum salary schedule in 2017, but only by $400 over the next two school years.)

Does that mean every Arkansas teacher would get more money? Not quite. Though state law designates a floor, many school districts have higher starting pay. New teachers in Springdale last year earned $47,266, which is higher than the state's minimum for a 15-year-veteran with a B.A. even at year four of Cozart's proposal ($42,750). Out of 206 school districts listed in a 2018 report by the Bureau of Legislative Research, 61 already paid new teachers $36,000 or more.

Still, thousands of teachers could see a raise if the bill passes. Republicans might be loathe to admit it, but the proposed increase may partly be a proactive response to the massive teacher walkouts in other red states last year over stagnant school funding. In Oklahoma, where budget deficits (fueled by tax cuts) led to many districts instituting four-day school weeks, protesting educators won a raise of about $6,000. Arkansas lawmakers may want to take steps to keep such unrest at bay.

But public school advocates have more to worry about this session. In 2017, the legislature narrowly rejected a bill by Rep. Jim Dotson (R-Bentonville) to establish a pilot "education savings account" program, a voucher-like scheme that would have diverted tax money from public schools to be used for private school tuition and other purposes. Dotson has indicated he'll introduce legislation in 2019 to achieve similar aims.

The governor supports such so-called "school choice" legislation, though he said it should be "small-scale" and target low-income families. "I don't believe choice options undermines [traditional public education]," Hutchinson said in January. "I think it actually strengthens it, makes it better."

Democrats can be expected to oppose vouchers, but so will some Republicans, due in part to influential public school groups like the superintendents association. Dems have also said they'll push for additional investments in pre-K. Rep. Megan Godfrey (D-Springdale), a public school teacher who defeated a Republican incumbent last fall, said in January she was hopeful Democrats could work with the governor on such issues. "I know my Republican colleagues can agree that every child in Arkansas deserves to go to pre-K," Godfrey said.

Medicaid: Accepting the

inevitable

The annual Medicaid budget has been the source of endless drama in recent years, thanks to a small group of Republicans seeking to end Arkansas Works, the state's name for Medicaid expansion. The program, which is funded by the Affordable Care Act, provides health insurance for some 230,000 low-income Arkansans.

The governor's decision to keep Medicaid expansion intact has led to repeated clashes with conservative legislators opposed to "Obamacare." Year after year, a bloc of hardliners has held up passage of the entire state Medicaid budget. Those wanting to roll back expansion have always been in the minority, but they were able to block the annual appropriation because spending bills typically require a three-fourths supermajority in both chambers. Nonetheless, the standoffs have always ended the same way: After multiple votes and intense political pressure, a few conservatives defect to the "Yes" camp and the bill squeaks its way to passage.

Last year's fiscal session lacked the typical fireworks. The Medicaid appropriation passed the House and Senate on the first try by safe margins. The hardliners came around in part because the governor had just announced the state's receipt of permission from the Trump administration to implement a first-of-its-kind work requirement for some Arkansas Works recipients.

The work rule went into effect June 1. Seven months later, about 18,000 people had been kicked off Arkansas Works because of the requirement and tens of thousands more had been pared from the rolls for other reasons such as harsher administrative policies. (A strong economy has also helped, the governor argues.)

Most health policy advocates say the work requirement is a disaster for the working poor. But the reduced enrollment figures will probably soothe opponents of Medicaid expansion and ease its reapproval this year. Also, divisions within the Republican caucus appear less pronounced than in previous years, with the Capitol's more rebellious conservatives now marginalized, co-opted or defeated by primary opponents.

"I don't see a controversy over Arkansas Works," Hutchinson said in January. "I think it's settled in to our health care system."

However, a lawsuit seeking an end to the Arkansas work requirement is before a federal judge who struck down a similar rule in Kentucky last year. If the court invalidates the work rule in the next two months, might the legislature try to end the entire program?

Hendren said no. Members "know the turmoil that would throw our budget into and the turmoil it would throw the lives of over a quarter-million people in Arkansas into if we were to make such a dramatic change based on a court ruling," he said. "I may be wrong ... [but] I don't see a lot of appetite out there to start playing shutdown politics over budgets."

Roads: Desperately seeking a free lunch

States everywhere have struggled with transportation funding shortfalls for the same reason: Increased vehicle efficiency means drivers, on average, pay less today in fuel taxes for every mile of road traveled than they did a few decades ago. That, plus a shortage of federal funds and increased maintenance costs, has left gaping holes in both budgets and roads. Arkansas transportation officials have recently said they need between $300 million and $478 million more in annual revenue.

The real problem is that too many legislators are afraid of the most obvious solution, which is to raise taxes on gas and diesel. Rather than raise taxes themselves, lawmakers may instead refer an initiative to the 2020 ballot — though asking voters for more money directly is always a tough sell, and a failed election would make it even harder politically to tackle the problem afterward.

"Everybody wants the ice cream but nobody wants to get fat," Hendren said. "It's one thing to go to the ribbon-cutting of roads opening and highways being renovated. It's another thing to vote for the revenue to make that happen."

That means legislators will be tempted by a third option, which is to filch money from other places in the state budget. House Speaker Matthew Shepherd (R-El Dorado) said in January that he prefers "trying to look internally first at what revenue might be available" before seeking new revenue.

In 2016, the governor diverted general revenue and surplus funds to access federal matching grants then available for roads. His spokesman, J.R. Davis, said in January that was "a good short-term fix, but now we need a long-term fix." Hutchinson opposes dipping further into general revenue, Davis said.

Because highway funding has divided Republicans in past sessions, Democrats could have rare leverage on the issue. Rep. David Whitaker (D-Fayetteville), who sits on the House Transportation Committee, said there's a broad consensus within his party that "some kind of tax revenue enhancement is going to be necessary" and noted that "there are members of the Republican caucus who see eye to eye with us."

Whitaker said he felt voters would approve a revenue increase in 2020 if it was presented to them candidly. "My experience in Arkansas is that every time the government has honestly gone to people and said, 'This is what this is going to pay for' and provided specifics ... they vote yes," he said.

Transformation: Shuffling the deep state

The governor is fond of noting that his "transformation" proposal would be the first major reorganization of state government agencies since 1973, under Democrat Dale Bumpers. About 20 years ago, Republican Mike Huckabee attempted a large-scale reorganization but failed to convince the legislature to go along with his plan. Hutchinson has a better chance at success, given that his party has an iron grip on the Capitol. (Both chambers were firmly controlled by Democrats during the Huckabee era.)

Hutchinson proposes assigning most state agencies, boards and commissions to 15 umbrella Cabinet-level departments that would report to the governor, as opposed to 42 today. Among the myriad changes: The Department of Correction (state prisons) and the Department of Community Correction (probation and parole) would merge into one. So would the Department of Parks and Tourism and the Department of Arkansas Heritage. The departments of Education (K-12 schools) and Higher Education would also become a single department, though state colleges and universities would remain independent. A new Department of Commerce would include functions such as insurance regulation, economic development and workforce services. A new Department of Public Safety would group together the State Police, the Department of Emergency Management and much more.

Janine Parry, a political science professor at the University of Arkansas, said successful reorganizations of state government often coincide with big partisan shifts of the kind that's occurred in Arkansas over the past decade. The new party in power "wants to put their own stamp on government," she said. Arkansas has also been undergoing a "wave of institutional reforms" since around 2000, Parry said, from attempts to standardize the structure of local courts and end partisan judicial elections to increases in pay for elected officials. "Essentially, it all amounts to professionalization of our institutions," Parry said. Many other states undertook such reforms decades ago.

It's another question entirely whether a reorganization proposal is actually beneficial. The governor has said his plan will meet certain objectives, like "improving transparency and access." But, Parry said, "those are buzzwords. How do you measure that? I don't know. ... The devil's in the details."

Sponsors of the legislation say they expect the omnibus transformation bill to be around 1,500 pages. That's an awful lot of devils to keep an eye on. 

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