LITTLE ROCK – As the legislature gets close to wrapping up the 2018 fiscal session, one of the final bills to be considered is the state balanced budget bill known as the Revenue Stabilization Act.
Whether in fiscal sessions or regular sessions, the balanced budget law is traditionally among the last measures passed by the General Assembly.
The appropriation for the Medicaid program is also one of the last bills approved by the legislature. It is one of the largest expenditures of state tax dollars, and usually is one of the most controversial spending bills in every recent legislative session.
The Revenue Stabilization Act was first passed by the legislature in 1945 by a unanimous vote in the House of Representatives and a 30-to-1 vote in the Senate.
It has proven to be a flexible method of balancing state government’s budget. A legal challenge of the Revenue Stabilization Act was filed in 1961 and the following year the state Supreme Court upheld its constitutionality. The ruling was unanimous.
The justice who wrote the majority opinion said that the “Revenue Stabilization Law is a complex accounting tool designed to insure that the recipients of State funds receive monies only so long as cash is on hand.”
It still functions well today. Legislators prioritize all state agency spending requests. If the economy is healthy and general revenue is collected at projected levels, state agencies receive what they are budgeted to receive.
When the economy goes into a downturn, income taxes decline because fewer people have jobs. Sales taxes decline because families cut back on spending. Corporate income taxes are reduced because profits suffer. The total amount of state general revenue falls below estimates, and as required by the Revenue Stabilization Act, state agencies must cut back on spending in the low-priority categories.
State aid for public schools is considered a top priority, after a legal challenge in the Lake View school funding case. The plaintiff was a small, rural school that challenged how the Public School Fund was distributed. In ruling for the Lake View District, the Supreme Court said that the state Constitution obligated the state to provide an adequate education for all Arkansas children. The practical result has been that school funding is considered immune from budget cuts.
School funding amounts to about half of state general revenue spending, therefore about half of state spending is protected from budget cuts. That means the rest of state government is hit even harder when the Revenue Stabilization Act mandates spending reductions.
The Joint Performance Review Committee will meet regularly between now and next January to prepare a comprehensive package of measures to improve school safety, in the event of an active shooter. The measures will be presented to the legislature during the 2019 regular session.
In related news, the governor announced that he would create a commission to evaluate school designs, security policies, emergency plans, school counseling and mental health issues. The School Safety Commission’s initial report is due on July 1, 2018.