- Associated Press - Thursday, May 5, 2016

LITTLE ROCK, Ark. (AP) - Arkansas lawmakers approved the state’s $5.3 billion budget for the coming year on Thursday, wrapping up this year’s fiscal session as a debate over how to boost funding for highways looms.

The House and Senate passed identical versions of the proposed Revenue Stabilization Act, which sets spending priorities based on expected revenues. The measure passed on a 23-9 vote in the Senate and 87-5 in the House. The proposed budget, which now heads to Gov. Asa Hutchinson’s desk, calls for a $142.7 million increase in state spending, with most of that tabbed for Medicaid, the child welfare system and public schools.

“It’s conservative, but I think it meets a lot of the immediate needs we’ve got,” House Speaker Jeremy Gillam told reporters. “There’s always going to be things in the state that we’re not able to accomplish, but state government is not in the position to solve every problem the state has.”

The session had been dominated by a fight over the future of the state’s hybrid Medicaid expansion. Lawmakers last week rejected an attempt to override Hutchinson’s veto of a measure to end the program, which uses federal funds to purchase private insurance for the poor.

The Legislature is set to formally adjourn Monday, but Hutchinson said he’ll call them back May 19 for a special session on his proposal to raise money for state highways. Hutchinson, a Republican, has proposed tapping into one-time money and diverting tax revenue from vehicle sales to road needs.

Democrats have said they’re wary of diverting general revenue for roads, saying the move would mean less money available for other needs such as public schools and higher education. Top Democrats from both chambers said they want the session to look at longer term solutions for highway funding, including potential tax increases.

“I think the governor’s really got to take some leadership here and look for new revenue solutions,” said House Minority Leader Michael John Gray, a Democrat from Augusta.

Democratic Rep. Joe Jett said one idea he and Republican Sen. Bill Sample, who chairs the Senate Transportation Committee, are floating would partially end the state’s sales tax exemption on motor fuel to raise money for roads, and index the tax to inflation.

“This is not in competition to his plan whatsoever,” said Jett, who chairs the House Revenue and Taxation Committee.

Hutchinson has said he’s opposed to raising taxes, which would likely face resistance among Republicans who control both chambers of the Legislature. He said he’d prefer lawmakers look at longer term funding solutions during next year’s regular session.

“In my judgment, this was not the right time to increase the price at the pump and so that’s why I presented this proposal,” Hutchinson told reporters.

Hutchinson said he’s no longer looking at ending an economic development tax credit to make up for the general revenue transfer, saying he’ll instead rely on returns on state investments that are expected to generate $20 million a year.

Hutchinson said the highway session’s agenda will also include legislation aimed at protecting the hybrid Medicaid expansion. Legislative leaders have proposed setting a Dec. 31, 2021, end date for the program to protect it in case a judge overturns Hutchinson’s line-item veto that saved the program.

The governor cautioned lawmakers about expanding the scope of the fiscal session, which is intended to focus primarily on budget issues, by attaching policy proposals to agencies’ budgets. Those proposals included a plan included in the Department of Workforce Services’ budget to seek federal approval for new limits on welfare benefits. The Senate gave final approval to the DWS budget on a 28-6 vote.

“I hope in the future we can get back to really narrowly focus on the budget issues that was the original intent of the voters of Arkansas,” Hutchinson said.


Follow Andrew DeMillo on Twitter at www.twitter.com/ademillo

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