- Associated Press - Wednesday, November 9, 2016

LITTLE ROCK, Ark. (AP) - Gov. Asa Hutchinson proposed cutting Arkansas’ income tax by $50 million in two years, setting up a fight with fellow Republicans who are pushing for a deeper reduction the day after the nation’s voters injected uncertainty into the future of the state’s hybrid Medicaid expansion.

Hutchinson detailed his $5.4 billion budget for the coming year, calling for increases in spending for public schools, Medicaid, prisons and the foster care system. His income tax proposal, which wouldn’t take effect until the fiscal year that begins July 1, 2018, would initially cost $25 million and cost $50 million when fully implemented the following fiscal year.

The Republican-led Legislature approved Hutchinson’s plan last year to cut income taxes by $102 million, and some Republicans have been calling for a similar reduction to take effect more quickly. But Hutchinson warned he’d oppose that unless it’s offset by closing tax exemptions or budget reductions elsewhere.

“It does not take a PhD in economics to know that we can’t say yes to every spending need, and we should also not say yes to every tax cut idea,” Hutchinson told lawmakers. “We have to set priorities and we have to measure results.”

Hutchinson is likely to face resistance from some GOP lawmakers who want to see deeper tax cuts sooner, as well as tax breaks for military veterans and others. Republican Sen. Bart Hester, who last month called for cutting income taxes by $105 million in the coming year, said he believed there was room for more reductions than Hutchinson has proposed.

“My goal this upcoming session is going to be to find some of the other areas where there are things that are not needed and look to cut those in exchange for a tax cut or do some trading,” Hester said.

Hutchinson detailed his budget the day after Donald Trump won the White House and Republicans maintained control of Congress, a move that raises the possibility that the federal health care overhaul could be repealed. It also leaves in limbo more than 300,000 Arkansas residents who receive subsidized health coverage through that law.

Citing the potential end of the program and the state’s revenue falling short of expectations so far this fiscal year, Democrats urged caution about any tax-cut discussions.

“If it goes away and we lose those expansion dollars … then it’s going to impact our budget, maybe not in the first fiscal year but in the second fiscal year it certainly could and we’ve got to be conscious of that with the decisions we make,” Democratic Sen. Bruce Maloch said.

Arkansas’ voters also approved legalizing medical marijuana in Tuesday’s election, a move that Hutchinson has said will cost the state as much as $5.7 million to enforce. He said he’ll ask lawmakers for $3 million from the state’s rainy day funds to pay for the program’s startup costs.

Hutchinson’s budget proposal would increase state spending by $153 million - nearly 3 percent. He also proposed that that none of the state’s expected $229 million surplus go toward a fund that the governor and lawmakers have typically divvied up for various capital projects, including $100 million for public school facilities.

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

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