FINANCING STATE PROGRAMS IN Bureau of Legislative Research, 2008
A Discussion of the Revenue Stabilization Law and General Improvement Fund. A Presentation by the Bureau of Legislative Research
THE ARKANSAS BUDGET HOW BIG IS IT? WHERE DOES IT COME FROM ? WHO GETS THE MONEY?
“GENERAL REVENUES” are those funds received by the State from fees and taxes levied on the general population of the state. The proceeds are not designated to be used for a particular purpose but are allocated every two years by acts of the General Assembly. Interest earnings are retained in the State Treasury.
“SPECIAL REVENUES” are those taxes and fees in the State Treasury which are designated or earmarked by law to be used for a particular purpose. The State Treasury retains most of the interest earnings.
“FEDERAL REVENUES” are those monies in the State Treasury received from the U. S. government either as project grantsin-aid or as reimbursement for eligible expenses. The Federal government retains any interest earnings.
“TRUST FUND REVENUES” are those funds in the State Treasury that are received by the State in which the State is a trustee and is acting in a fiduciary capacity. Trust funds retain their interest earnings.
“CASH FUND REVENUES” are those funds received by the State which are not required by law to be deposited into the State Treasury. Cash funds retain their interest earnings.
“APPROPRIATION” is the authority, granted by and limited by the General Assembly, to spend money under the control of the State of Arkansas.
SPENDING IS LIMITED BY THE AVAILABLE APPROPRIATION OR THE AVAILABLE MONEY, WHICHEVER IS LESS!
Types of Revenue and Their Distribution
ARKANSAS REVENUE COLLECTIONS (Millions) 1996 -2008 FISCAL YEARS
7 10 %
TOTAL STATE REVENUE – 2008 $18 Billion Trust & Other Non Revenue General Revenue 15% 31% Special Federal 24% Cash 21% 9%
Three Methods of Funding Available • DEDICATED SOURCE • GENERAL IMPROVEMENT FUND • REVENUE STABILIZATION LAW
Three Methods of Funding Available • DEDICATED SOURCE
DEDICATED SOURCES OF FUNDS • State Dedicated Tax or Fee (Special Revenue)
The Constitution says “…no moneys arising from a tax levied for one purpose shall be used for any other purpose. ”
SPECIAL REVENUES - 2008 $ 1. 7 Billion
DEDICATED SOURCES OF FUNDS • State Dedicated Tax or Fee (Special Revenue) • Federal Grant-in-aid
FEDERAL FUNDS – 2008 $4. 2 Billion Health & Human Services 68%
DEDICATED SOURCES OF FUNDS • State Dedicated Tax or Fee (Special Revenue) • Federal Grant-in-Aid • Cash Funds
DEDICATED SOURCES OF FUNDS • State Dedicated Tax or Fee (Special Revenue) • Federal Grant-in-Aid • Cash Funds • Trust Funds
TRUST AND OTHER NON-REVENUE FUNDS 2008 $2. 7 Billion
DEDICATED SOURCES OF FUNDS • State Dedicated Tax or Fee (Special Revenue) • Federal Grant-in-Aid • Cash Funds • Trust Funds • Non-revenue Receipts
Three Methods of Funding Available • DEDICATED SOURCE • GENERAL IMPROVEMENT FUND
General Revenue Collections Under or Over Maximum Allocations 1993 -2008 FY "Surplus"
1/2 Interest Earnings $56. 7 M 2006 -2007 Recovered Fund Balances $11. 2 M Excess Old GIF Projects $. 6 M General Previous GIF Revenue Session Allotment Account/Balances Reserve Budget Reserve Fund $581. 9 M $155. 3 M GENERAL IMPROVEMENT Set Aside or Mandatory Obligations Governor’s Discretionary Biennium $489. 9 M $187. 3 M Legislative Biennium $40 M
Three Methods of Funding Available • DEDICATED SOURCE • GENERAL IMPROVEMENT FUND • REVENUE STABILIZATION LAW
ACT 311 of 1945 The Revenue Stabilization Law
“Arkansas’ Present System of Tax Allocation and distribution is as archaic as the old tasseled surrey - -complex, confusing, inefficient. The system itself is a burden on the taxpayers. ” - Governor Ben Laney, 1945 Governor Ben Laney
“…I propose as our next step that our archaic and hydra-headed system of over one hundred state funds be forever eliminated, ” – Governor Ben Laney, 1945 Governor Ben Laney
What It Did » Removed the dedication from major broad-based taxes » Provided a fund distribution from a pool to various operating funds » Allowed the legislature to set their funding priorities every two years » Prevented deficit spending » Reduced funding instability due to changing economic conditions » Assured agencies of even cash flow
What It Also Did » Permitted the approval or mandate of a program without providing funds to implement it, raising unrealistic expectations » Allowed the Governor to manipulate financing and timing of legislative enacted initiatives » Permitted agencies and the Governor to determine programmatic priorities within funds and disregard legislative intent » Created uncertainty in the agency financial plan for the year
What’s this A and B Stuff?
The Steps The Legislature, with consultation with the Governor: • Determines the Maximum General Revenue support to be distributed over the next two years • Determines the maximum amount each general revenue fund is to receive from general revenues for the next two years • Determines the number of priority categories (A, B, C…) • Sets the minimum level of support required for each general fund and designate it as “A” • Sets the next level of support for each fund and designates it as the next priority (A-1 or B) • Continues the steps until the maximum level is reached
Revenue Stabilization Law Revenue Flow
Can we see an example?
General Revenues 2007 -08 FY Other 1% Income 56% Insurance 2% Luxury 3% Sales/Use 38% $5, 618 Million Plus $4. 7 M Transfers Refunds/Claims $497. 6 M Take Out Debt Service $26. 2 M $1, 093. 2 Million Public School Desegregation $58. 7 M Educational Excellence $298. 4 M Central Services & Constitutional Officers $167 M City/County Tourist Promo $7. 2 M Aging Transport $2. 1 M Educational Adequacy $26. 4 M Economic Development Incentive $10. 3 M
$4. 5 Billion Net Available Gen. Gov Gen Ed Corr 4% 2% 7% Other 3% Hi. Ed 16% Public School 43% DHHS 25% Public Schools 100% Corr 22% Other 9% Public Schools 2% Gen Ed 1% Gen Gov 9% Hi Ed 42% DHHS 15% A A 1 B $4, 149, 395, 153 $70, 000 $133, 266, 794 Reserve $176. 5 M
The legislature does not specify which programs are in which priority. The Governor and his agency heads decide priorities within the funds.
For the 2007 -2008 year the Stabilization looks like this:
Revenue Stabilization Law • Take all General Revenue collected • Add $4. 7 Million in Transfers • Take out $1, 050 Million for Claims, Refunds, Desegregation Costs, Educational Excellence and Processing Fees • Distribute $4. 1 Billion as follows: 43% to Public Schools 25% to Health & Human Services 16% to Higher Education Institutions 7% to Corrections 4% for General Government 3% to Local Aid and Misc 2% to General & Workforce Education THEN
• Take Next $70 Million for Public Schools THEN
• Take Next $133 Million and spread: 42% to Higher Education Institutions 22% for Corrections 15% to Health/Human Services 10% for Misc. Gov’t Functions 9% for General Government 2% to Public Schools • Then $176. 5 million surplus to General Revenue Allotment Reserve Fund
GENERAL REVENUE PROGRAMS
GENERAL REVENUE PROGRAMS 2007 -2008 FISCAL YEAR (Millions) Higher Ed $709. 9 16% Gen Ed $99. 3 General Gov 2% $164. 8 Other & Local Aid 4% $138. 9 3% Public School $1856 43% Corrections $339. 9 8% Health/Human Services $1043 24%
CHANGE IN GENERAL REVENUE DISTRIBUTION 1998 -2008 FISCAL YEARS
EDUCATIONAL ADEQUACY • • • In response to a Supreme Court Decision (“The Lake View Case”), several measures were enacted in the Second Extraordinary Session of the Eighty. Fourth General Assembly, the Eighty-Fifth General Assembly’s Regular Session, First Extraordinary Session of 2006 and the Eighty-Sixth General Assembly’s Regular Session of 2007. Over $4 billion, including $696 million for public school facilities and $2. 3 million from Educational Adequacy Fund, in additional funding has been allocated for Public Schools through FY 2009 over the FY 2003 funding level. A new public school formula was enacted that provides: – $5, 719 per ADM (Average Daily Membership) in FY 2008 and $5, 789 per ADM in FY 2009 – National School Lunch (NSL) Student Funding: • Greater than 90% of enrolled students in the program - $1, 448/NSL student • 70 -90% of enrolled students in the program - $992/NSL student • Less than 70% of enrolled students in the program - $496/NSL student – $4, 063 per Alternative Learning Environment Student – $293 per English Language Learner Student – Professional Development Funding Equal to $50 times the school districts previous school year ADM $780. 5 million allocated for Public School Facilities between FY 2003 and FY 2009. Additional funding for pre-kindergarten-$46. 7 million in FY 2008 and FY 2009
• • • Various student assessment, teacher incentive & other programs New Taxes were enacted to provide additional funding as follows: – 7/8% additional Sales & Use tax, including expanding the base to include certain service companies or business practices ($410. 5 million in actual collections in FY 2008, $423. 8 million in FY 2007, $404. 5 million in FY 2006, $372. 5 million in FY 2005 and $93. 4 M collected in FY 2004) – Corporate Franchise tax increase ($12. 8 million in actual collections in FY 2008, $12. 6 million in FY 2007, $10. 99 million in FY 2006 and $11. 2 million in FY 2005) – Tax Amnesty Program ($3. 4 million in FY 2006) Adopted the “Doomsday Clause” which provides that if the Chief Fiscal Officer of the State determines that there are not adequate resources in the Educational Adequacy Fund and Public School Fund, then all other general revenue funds and fund accounts are reduced by the amount needed. Act 20 of the First Extraordinary Session of 2006 expanded the “Doomsday Clause” to protect the Educational Facilities Partnership Fund Account. In addition to State Foundation Funding, the General Assembly authorized $13. 4 million in FY 2008 and $14. 3 million in FY 2009 for a 98% Actual Collection Adjustment appropriation which insures that districts receive the full 98% of the Uniform Rate of Tax that the State Foundation Funding formula assumes is collected. In FY 2008, the Department of Education required over $5 million more than the authorized level to insure the 98% actual collection rate. Beyond Adequacy, the General Assembly provided Enhanced Educational Funding of $51 per ADM in FY 2008 and $87 per ADM in FY 2009.
PUBLIC SCHOOL FUND 1992 -2008 FISCAL YEARS Total $2, 090 MILLIONS
$50, 816 $44, 493 National Arkansas Source: National Education Association, Rankings of the States, various years; Estimates of School Statistics, various years
PUBLIC SCHOOLS BONDED DEBT Statewide Fiscal Year Ending June 30, 2007 7. 2% increase 14. 6% increase 7. 2% increase 17. 4% increase 11. 1% increase 6. 6% increase FY 2007 FY 2006 2, 611, 877, 943 2, 450, 645, 825
Public School Revenue Sources 2007 State Funds $2, 371. 3 M Federal Funds $484. 4 M 53% Local Funds $1, 382. 5 M Misc. Funds $265. 2 M 10. 2% 30. 9% 5. 9% $4, 503, 318, 463 in 245 Districts
Local School District Funding 2006 Local & Other NATIONAL (National Center for Education Statistics) State Federal ARKANSAS *For Arkansas Local & Other funding is inclusive of State Uniform Rate of Tax (URT) Funds.
Higher Education Institutions Current Funds 2007 % % Tuition & Fees $473 Million Hospitals & Clinics $669. 6 Million 8 4. 6% 0. 18. 1% . 8 24 Federal Appr. $18. 5 Million Sales and Services $278 Million 10. 3 % State Appr. $670. 9 Million Gifts, Grants & Contracts $488. 5 Million 2 17. 3% 3. 8% $2, 701, 684, 356 Misc. Funds $103. 1 Million
Higher Education Institutions On-Campus Headcount Fall 1996 – Fall 2007 T h o u s a n d s
Higher Education Institutions Operating Funds from State Sources - 2008 $22. 4 M $67. 6 M $709. 9 M $799. 8 Million Total
Higher Education Tuition and Median Family Income Changes from 1996 -2006 SREB-Southern Regional Education Board
Institutions of Higher Education NWACC ASU-MH NACC UAF X BRTC X ANC OZTC ASUN UACCB ASUJ UAFS UACCM ATU TECH X UCA NPCC RMCC ASU-B CCCUA EACC X PTC X UALR & UAMS OTC UAPB X SEATC HSU UACCHOPE SAU-TECH SAU SACC M-SCC UAM PCC-UA
GENERAL REVENUE PROGRAMS 2007 -08 FISCAL YEAR Health Human Services 24% $1 Billion $53. 9 $25. 0 $57. 2 $47. 0 $49. 1 $73. 1 $58. 7 $678. 8 Health Other Admin/County Offices Youth Services Children/ Family Behavioral Health DDS Medicaid/ Misc. Aid
$ Millions MEDICAID EXPENDITURES 2002 -2008 FISCAL YEARS State, Federal & Tobacco
CHANGE IN MEDICAID EXPENDITURES 1998 -08 FISCAL YEARS 179. 11% 148. 28% 143. 83% 69. 12% RUG AID A TOT DIC L ME PRE SCR ND IPTIO ICAL ARE MED / M C ITAL -TER OSP G H LON
% Federal Share FEDERAL MEDICAID MATCH RATES
Medicaid Recipients for Selected Services 2008 Total Recipients Total Expenditures (Millions) 359, 045 $411 22, 225 $712 7, 095 597, 761 $358 $702 702, 580 $1265 432, 472 Hospitals Medical Nursing Homes Drugs Home Health $14 Other Recipients may be counted once in multiple groupings (e. g. both Medical and Drugs)
Medicaid Recipients for Selected Services 2008 Total Recipients Total Expenditures 16. 9% 1. 1% 20. 6% 11. 8% <1% 28. 2% 10. 3% 20. 3% 33. 1% 20. 4% 36. 5% Hospitals Nursing Homes Home Health <1% Medical Drugs Other Recipients may be counted once in multiple groupings (e. g. both Medical and Drugs)
GENERAL REVENUE PROGRAMS 2007 -08 FISCAL YEAR Criminal Justice $61. 8 $68. 6 $3. 6 $414. 8 M $271. 3 $9. 5 $ 414. 8 Million State Police Community Correction Crime Information Center Department of Correction County Jail Reimbursement
ARKANSAS STATE POLICE TROOP LOCATIONS BENTON BOONE CARROLL L WASHINGTON I MADISON NEWTON RANDOLPH FULTON BAXTER MARION IZARD CLAY GREENE SHARP LAWRENCE SEARCY STONE CRAIGHEAD INDEPENDENCE CRAWFORD JOHNSON POPE VAN BUREN FRANKLIN B CLEBURNE POINSETT J LOGAN YELL H CROSS FAULKNER WHITE CRITTENDEN WOODRUFF ST. FRANCIS PERRY SCOTT PULASKI GARLAND POLK PIKE K LONOKE A SALINE MONTGOMERY HOWARD HOT SPRING JEFFERSON GRANT CLARK DALLAS LEE PRAIRIE MONROE SEVIER CLEVELAND LINCOLN ARKANSAS E DESHA LITTLE RIVER HEMPSTEAD NEVADA OUACHITA DREW CALHOUN MILLER C JACKSON CONWAY SEBASTIAN MISSISSIPPI G LAFAYETTE COLUMBIA UNION BRADLEY F ASHLEY CHICOT D PHILLIPS
STATE SUPPORT FOR CORRECTIONS FISCAL YEARS 1997 -98 THROUGH 2007 -08 (Millions)
STATE INMATE POPULATION FISCAL YEARS 1997 -98 THROUGH 2007 -08
POPULATION AND PRISON CAPACITY FISCAL YEARS 1997 -98 THROUGH 2007 -08
STATE ADULT CORRECTIONAL FACILITIES Northwest AR Work Release Center North Central Unit Mississippi Co. Work Release Center Mc. Pherson Unit Grimes Unit Boot Camp Hawkins Center for Women Wrightsville Unit Benton Unit Ouachita River Correctional Unit. Special Needs Texarkana Regional Correctional Center East AR Regional Unit Diagnostic Unit Pine Bluff Unit Randall L. Williams Correctional Facility Maximum Security Unit Tucker Unit Cummins Unit Varner Unit Delta Regional Unit
INMATE DEMOGRAPHICS 2008 • AVERAGE SENTENCE • AVERAGE TIME SERVED • RACE – White – Black – Hispanic – Other • SEX – Male – Female Male 36 Years Female 35 Years 9 years 0 months 25 days 2 years 9 months 8 days 51% 46% 2. 6% 0. 4% 92. 2% 7. 8%
INMATE COST PER DAY FY 2008 • • • ADC Inmate Care & Custody DCC Residential Services Drug Courts Probation/Parole County Jail Reimbursement $57. 13 $50. 27 $12. 75 $1. 64 $28. 00
FINANCING STATE PROGRAMS IN Bureau of Legislative Research, 2008
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