Joint Budget Committee
October 18, 2022
Actions Taken (click each to jump to that discussion)
- Parks and Tourism Shared Services approved
- Arkansas Arts Council approved
- Natural and Culture Resources Council approved
- Parks and Tourism approved
- Capitol Zoning Commission approved
- DFA Legislative Audit Findings (PPP fraud)
- DFA Shared Services approved
- DFA Disbursing Officer approved
- DFA Management Services approved
- Alcoholic Beverage Control Division approved
- DFA Revenue Services approved
- DFA Assessment Coordination approved
- Child Support Enforcement approved
Legislative Audit: [not available]… one of the awards totaling $1,310. However, Parks was able to recoup that erroneously paid fund because it was notified by the applicant of an error in the banking information used for the transaction. The agency’s limited review of expenditure documentation and reduced award amounts failed to ensure that all applicants submitted sufficient appropriate expense documentation. In addition, agency controls failed to identify an ineligible business during its limited review. This concludes our findings.
Wardlaw: Any questions from the members to Audit? Representative Love, you’re recognized.
Love: Thank you, Mr. Chair. This is the first time I think I’ve ever heard someone say they paid out sick leave. Can you talk to me about the policy that governs the payout of sick leave?
Legislative Audit: So if an employee retires from the state – this was allowed several years ago – they have an amount that you can pay and it’s only a maximum amount of $7,500. And they either have to retire or I think it’s death that the family can receive a benefit. But there’s certain parameters and they have to have so many hours. And then it’s determined if it’s 60%, 70%, or 80% of their accumulated hours. And then they have to multiply that by a percentage of their pay. So there’s a formula and there’s a form that they have to fill out that OPM has that walks them through it. And in this particular instance they did not. They had the form correct, but then when it was entered into the system, it was incorrect. They paid them for the full amount.
Love: All right. Thank you.
Legislative Audit: You’re welcome.
Wardlaw: Seeing no other questions– Representative Springer, you’re recognized.
Springer: Good morning. Thank you, Mr. Chair. Did the agency recoup? the money that was overpaid?
Legislative Audit: The agency will have to respond to that. Probably they have a better idea. I know that we have finished the audit work. The review process isn’t finished to verify that in the 2021 audit they did not have any more overpayments. But at that point, they were still in the process of trying to recoup. So I couldn’t get an answer before the meeting to see where it stands right now. But the agency should be able to answer that.
Wardlaw: When the agency comes forward, you’ll be able to reask that question. Okay. Seeing no further questions, thank you, guys for your report. So with that, we’ll call the agency to the table, and we’ll go to Billy for the budget.
Parks and Tourism Shared Services
Bureau Staff: Thank you, Mr. Chair. We’re in tab 2 of Manual 1. So if you go to tab 2, this is page 213. We’re on the Parks, Heritage, and Tourism Shared Services section. Again, that’s tab 2, page 213. The department is comprised of agencies and programs from the Division of Heritage, the Divisions of Parks and Tourism, and the Capital Zoning Commission. Cabinets were provided to shared services section to eliminate duplication of services and provide efficiencies. Page 213 shows state contracts awarded to minority owned businesses and an employment summary. On page 214 is their budget request. And this section provides for the shared services of the department across all divisions and programs supported by a paying account. On page 215 is the appropriation summary. The total authorized in 2023 is $10.76 million. The request for 2024 is $11.9 million. And in the second year, it’s $12,025,000. So it’s an 11% increase in the first year and 12% increase in the second year. The executive recommendation for each year is just $500 less than the agency request. Looking at the change levels, we’ll start with regular salaries line item. What’s authorized in 2023 is $5.3 million. The request in 2024 is $5.8 [million]. That’s a 9% increase. That carries over into 2025. Then personal services matching is $1.8 million authorized. The request for the first year is a little over $2 million. That’s a 10% increase. And then in 2025, it’s a 13% increase. Those changes are due to salary and match adjustments continuing into the new biennium. The agency also requests restoring growth pool positions and doing reclassifications. The executive recommendation provides for all that except for the reclassification. That’s a $500 less difference. Looking at operating expenses, $2.2 million is authorized. In 2024, the request is for $2.9 [million]. That’s a 29% increase. In 2025, it’s a little bit less, 28% increase. And this is due to accommodating rising costs due to inflation. Next line item is professional fees. $941,000 is authorized, $943,000 is requested. It’s a less than 1% increase. And it’s the same in 2024. This is– I’m sorry, the same as 2025. This is to accommodate rising costs due to inflation as well. The grants-in-aid is the next line item. $56,000 was authorized. The request in 2024 is $0. So they’re trying to zero out that line item and sustain in 2025. This is to discontinue as grants are processed through the Heritage Division and not shared services. Looking at capital outlay– it’s the last line item –$101,000 was authorized. $50,000 is requested. That’s cut in half. It’s the same in 2025. And this is to– they just want to restore capital outlay to allow for replacement of capital assets. sure. I think we’ll move now to the Division of Heritage, and this is going to jump forward in the manual to page 222.
Bureau Staff: So on page 222 begins the Division of Heritage budget request. And the department– I’m sorry, the Division of Arkansas Heritage was created in 1975 to preserve and promote Arkansas’s natural and cultural heritage as a source of pride and enjoyment for all. It consists of eight divisions. The Arkansas Arts Council, Arkansas Historic Preservation Program, Arkansas Natural Heritage Commission, Arkansas State Archives, Delta Cultural Center, Historic Arkansas Museum, Mosaic Templars Cultural Center, and the Old State House Museum. Pages 222-223 show an appointment summary, publications, and state contracts awarded to minority-owned businesses. On page 224 is their appropriation summary. The division has 18 requests. Eight sections have a change level. There are other sections where the only change is carrying forward salary match adjustments into the new biennium. The total authorized budget in fiscal year 2023 is $25 million. The division requests almost $26.4 million for the biennium. That’s a $1.3 million increase for about a 5% change level overall. The executive recommendation is for almost $42 million, which is a 66% increase over that authorized amount. And that’s $16 million more than agency requests. The majority of the difference comes from the executive recommending a new $15 million appropriation section. The division is funded from general revenue, special revenue, from 9% of the 1/8-cent conservation sales tax, federal grants, and cash funds from museum, gift shops, and cultural center proceeds. The first change level begins on page 226. This is Conservation Tax Amendment 75, and this section provides for programs and supplements general revenue for administration of the division. It’s supported by the Division of Heritage special fund account. On page 227 is their summary. The total authorized in 2023 is $5.67 million. The request in 2024 is a little over $6 million, and that’s a 6% increase. It’s another 6% in 2025. And the executive recommendation provides for this agency request. The change levels begin on regular salaries line item. $850,000 was authorized. The request for 2024 is $926,000. That’s a 9% increase. That 9% carries over to 2025. In personal services matching, $315,000 was authorized. The request for the first year is $391,000. That’s a 20% increase. And then in 2025, it goes up to $405,000. That’s a 29% increase over authorized. These are salary match adjustments carrying over into the next biennium. The next item is conference and travel. What’s authorized in 2023 is $73,000. The request in 2024 is $100,000. It’s the same in 2025. This is due to increased travel costs. And in capital outlay, what’s authorized in 2023 is $100,000. The request is for $250,000 for the biennium. And this is to replace aging vehicles and other capital needs. Looking at the funding sources table at the bottom, the fund balance going into fiscal year 2022 is $5.74 million. The fund collected special revenue in the amount of $8.6 million. That’s from the 1/8-cent conservation tax. The other line shows $213,000. The division spent $3.9 million in fiscal year 2022. That leaves a balance of $8.6 million going into fiscal year 2023. The next change level will be on page 230. If you go to page 230, this is the Arkansas Major Historic Rehabilitation Trust, and this is the new appropriation that I mentioned earlier. It’s to spend $15.25 million from a transfer from general revenue allotment. This is to offset the income tax credits allowed in Act 855 of 2019. It’s supported by the new fund that’s created in that act, the Arkansas Major Historic Rehabilitation Trust Fund. On page 231 is the summary. Again, this is new. So there was nothing authorized in 2023. And the request is not by the agency, but it’s from the executive, and it’s $15.25 million. The next item is on page 234. On page 234 is the Delta Cultural Cash and Treasury. And this section supplements the operating expenses of the Delta Cultural Center. It’s supported by a cash and treasury fund. On the next page, 235, is their summary. The total authorized in 2023 is $80,000. The request for the biennium is $120,000, so that’s a 50% increase. And the executive recommendation provides for the agency request. Change levels begin with operating expenses as $50,000 in 2023 goes up to $75,000. This is used for exhibits, events, and education programming. And then the resell line item was $30,000 authorized. The request is for $45,000 for the biennium. That’s a 50% increase, and it’s due to increased costs for purchasing gift shop items. Looking at funds sources at the bottom of the page, the fund balance going into fiscal year 2022 was $162,000. The fund collected cash funds in the amount of $29,000. The division spent $127,000 in fiscal year 2022. That leaves a balance of $64,000 going into 2023. The next change, that was on page 238. On page 238, is the Old State House Cash and Treasury. And this section supplements the operating expenses of the Old State House programs and activities. It’s supported by a cash and treasury fund. On page 239 is their appropriation summary. In 2023, $284,000 was authorized. The request for 2024 is $386,000. So it’s a 36% increase, and it goes for both years of the biennium. The executive recommendation provides for the agency request. If you look at operating expenses line item, what was authorized in 2023 is $190,000. The request for the biennium was $266,000. That’s a 40% increase. And then looking at professional fees, $12,000 was authorized. $37,000 is the request, so that’s tripled. Both these line items increased to account for expenditures previously paid from an unappropriated cash fund. Looking at funding sources at the bottom of the page, the fund balance going into fiscal year 2022 was $458,000. The fund collected cash funds in the amount of $49,000, and the division spent $98,000 in 2022. That leaves a balance of $409,000 going into 2023. Next item is on page20242. So if you go to page20242, that’s the next change level. It’s for Historic Preservation Federal Program. And this section supports coordination of the State Historic Preservation Plan with the federal government. It’s supported by a federal fund. On page20243 is their appropriation summary. And what’s authorized in 2023 is $1.4 million. The request for 2024 is $1.49. That’s a 3% increase, and that carries over into 2025. The executive recommendation provides for this request.
Bureau Staff: If you look at regular salaries, what’s authorized is $608,000. The request is for $626,000. That’s a 3% increase, the same in 2025. Personal services matching is authorized at $216,000. The request is for $234,000. That’s a 9% increase. And then in 2025, it goes up to $243,000. That’s a 12% increase. Overall, these are increases from salary match adjustments carrying over to the next biennium. There is a small decrease that’s embedded but it’s not part of the net change that is from transferring position to the Main Street cash section. It’s about $60,000 salary and $20,000 match. Looking at funding sources, the fund balance going into fiscal year 2022 is $40,000. The fund collected federal revenue in the amount of $939,000. Those are National Park Service grants. The Division spent $805,000 in 2022. That leaves about $174,000 going into 2023. On the next page is the Historic Preservation Main Street cash and treasury. This is page20244. And this section provides professional services and training to support the Main Street Program activities and to administer the state tax credit program supported by a cash fund. On page20245 is their summary. The total authorized in 2023 is $25,000. The request for 2024 is $105,000. The request for 2025 is, again, $105,000. And the executive recommendation provides for the agency request. Looking at what’s authorized in 2023, regular salaries were zero. The request is for $59,000. That’s the same in 2025. Personal services matching was zeroed out, and the request is for $20,000. And this is to accommodate that position transfer that was from the last section that I discussed. Looking at funding sources, the fund balance going into fiscal year 2022 is $387,000. The fund collected cash funds in the amount of $98,000. This is revenue from technical assistance. And the division has spent $0 in fiscal year 2022. That leaves a balance of $485,000 going into 2023. The next page,20246, is Natural Heritage Commission Natural Area Management cash and treasury. This section provides management and stewardship funds for natural areas throughout the state. It’s supported by a cash fund. On page20247 is their request. The total authorized in 2023 was $316,000. It’s the same going through the next biennium. But there is a reallocation. If you look at the professional fees line item, it’s zeroed out for 2023. But there is a $60,000 request for 2024 and 2025. And then land acquisition is a decrease from $255,000 to $195,000. That is $60,000. So they’re reallocating $60,000 from Land Acquisition to Professional Fees. And this is due to an increase in architect fees. And also the executive recommendation provides for this request. If you look at funding sources at the bottom table, the balance going into 2022 is $615,000. The fund collected cash funds in the amount of $339,000. That’s interest, donations, timber thins, and grants. The Division spent $174,000 in 2022, and that leaves a balance of $758,000 going into 2023. The next change level is page 250. If you go to 250, that’s Natural Heritage gas royalty expenses. This section provides for administration of the Natural Heritage Commission from gas lease payments supported by the Arkansas Heritage Fund. On page 251 is the summary. And the total authorized in 2023 is $175,000. The request for 2024 and 2025 is $440,000. The executive recommendation provides for this request. And this is to align appropriation with revenues. This is from gas royalty expenses. Looking at funding sources at the bottom of the page, the fund balance going into 2022 is $59,000. The fund collected $242,000 in special revenue, another $375,000 on the other line, and these are gas lease payments and grants reimbursements. The division spent $20,800 in fiscal year 2022, and that leaves a balance of $656,000 going into 2023. The next item is on page 20258.
Bureau Staff: On page 20258 is the National Digital Newspaper Program. This section provides historic newspapers available to the Library of Congress. It’s supported by a federal fund. The total authorized in 2023 is $284,000. The agency request is– I’m sorry, $345,000 in 2024. That’s a 22% increase, but then that goes down a bit in 2025. It’s only a 7% increase at $305,000. The executive recommendation increases. Well, I spoke with DFA just before this meeting, and they are now requesting to go with the agency request. In this manual, the personal service match is about $10,000 more. That might be a misprint. So they are requesting that we go with the agency request for this line item. So the agency request is $345,000. There’s some change levels. They begin with regular salaries. In 2023, $106,000 was authorized. In 2024, $204,000 was the request. That is a 92% increase. And in personal services matching, $20,000 was authorized. $50,000 was the request. And these are salary adjustments and to maintain staff requirements to complete the project. The next line item is operating expenses. $151,000 was authorized. It’s a decrease in 2024 by 46% to $81,000. And then in 2025, a decrease to $66,000. And this decrease is to provide grant funds for personnel. Then looking at conference and travel, $5,900 was what was authorized. And in 2024-2025, the request is for $10,000. Looking at fund sources, the fund balance going into fiscal year 2022 was $15,000. The federal revenue line shows $108,000 was collected. The division spent $117,000 in fiscal year 2022. And that leaves a balance of $5,700 going into 2023. Mr. Chair, that is the last change level for the Division of Heritage.
Wardlaw: Representative Cavenaugh, you’re recognized for a question.
Cavenaugh: Thank you, Mr. Chair. I’m over here to your right. Good morning. Thank you for coming. My first question is going to be dealing with the conservation tax and it’s on 227. My real question is we have such a large fund balance in this, what are we doing or what can we do with that fund balance?
Hurst: Yes, ma’am. Representative Cavenaugh, we do keep a balance in there but a much smaller balance to cover any operating challenges that we might have during the course of the next two years. But we intend to– you all approved the Cultural Institutions Trust Fund in the last session and we intend to fund that with a $2.5 million transfer from the conservation tax. We have appropriation, so we will do that. That will go to applicants for cultural institutions that are eligible according to the rules that were promulgated. So that will use a substantial amount. We’re also going to ask for a new rule which will allow us to provide operating support for cultural institutions to mirror the one that was passed for capital improvements. So with that, we would also use conservation tax to support that project.
Cavenaugh: Follow up, Mr. Chair? So how much of this fund balance do you think that–because it continues to grow. It’s showing that it’s continuing to grow. So I want to make sure if we’re taxing that we’re using the tax dollar to the best of their– of our ability. So how much of that do you think will actually get into this fund?
Hurst: We have historically kept about a $3 million balance in the conservation tax. And using it for those purposes, we’ll bring it down close to that. The conservation tax we anticipate will cool off a little bit. We’re watching it and to make– to see if that happens. If not, we’ll come back to you all with some recommendations on some new ways to spend that money.
Cavenaugh: Okay, thank you.
Wardlaw: Senator Dismang, you’re recognized.
Dismang:Thank you. And I just want to go to page 230, which is, there’s an executive recommendation for $15 million, essentially, to pull out of general revenue allotment reserve funds, so future money, which is not very typical or anything that we would see here. So if you can walk me through a little bit. I mean, I think I understand generally what it does. I’m supportive of the projects. I’m not sure that we need to go and set a precedent telling agencies they can go capture future money in pre-budget meetings. But anyway, if you can just kind of walk me– and I know this not the agency rec but the executive so if you can kind of walk me through that.
Hurst: Thank you, Senator Dismang. We are a little unclear, honestly, on how this will work. With the state historic tax credits, the appropriation lies with the DFA. And so we approve the improvements to historic structures. And so we certify the tax credits, but we don’t have the appropriation. So I’m going to ask Cynthia, who has spoken with the DFA and hopefully can provide some explanation. Thank you.
Dunlap: Good morning. In my discussions with DFA, as the Secretary mentioned, we don’t have all of the details about exactly how this process is supposed to work. But our agency is the agency of record that does certify if a business qualifies for the credit. And it had been– has been determined that the fund would be set up on our agency at this point in order to have a spot to reserve those funds if they become available for any business that qualifies for that credit. And at that point, if funds are made available, they will be deposited into this appropriation. We would have to work with the Department of Finance & Administration to determine how those funds then would be utilized and how they would be managed and transferred at that point. But that’s all we know at this point.
Dismang: So what I’m hearing is we’re probably not prepared to do this, and I’m not going to– that’s putting words in your mouth. There may be some, there’s some additional information to know on how we would carry this out. Again, my apprehension would be it’s not really something we’ve done before, at least to my knowledge and I think to staffs’ knowledge either, again, setting it up so we’re going to transfer funds beforehand in the pre-budget meetings. As far as the program, the projects themselves, I’m very supportive. I mean, I think our downtowns, historic districts, and those sorts of things are the future of Arkansas in a lot of ways. And so I’m very supportive, would like to make sure we fund this type of tax credit moving forward but probably not through this method. And so with that, and I don’t know how I need to make a recommendation, but at the proper time, I’d like to adopt the agency rec on this particular section.
Wardlaw: Thank you, Senator. Representative Cavanaugh, you’re recognized.
Cavenaugh: Thank you, Mr. Chair. I’m going to ask questions on 239 now, which is the Old State House cash. Why is there such a jump projected in operating expenses compared to your actual spend? It’s page 239, I forgot to tell you. Sorry.
Dunlap: Up until last year, Old State House had an unappropriated cash fund that they managed where they were receiving assistance from their foundation. And so they had expenditures that were not showing up in the budget that were flowing through that unappropriated cash fund. And our legal department worked with the foundation and created an MOU, did a lot of review of the laws and state statutes concerning the foundation and the agency, and it was determined that those funds needed to be deposited into the treasury as opposed to going to the unappropriated cash fund. So we made that change last year to put all those funds into their treasury account. And so we had to request additional appropriation at that point to be able to spend those funds through the treasury. So with this biennium, we wanted to adjust their appropriation so that going forward we won’t have to go to Peer. They will have the appropriation available to spend those funds.
Cavenaugh: And the fund balance, is that because of this transfer? Is that what–?
Cavenaugh: Okay. All right. And I have another question if there’s nobody else in the queue. All right. I’m going to go to page20243, which is going to be historic preservation funds. On this, it looks like we’re getting federal revenue of like $9.9 million, but we only gave out grants of $146,000. How come the grants were so low compared to what we actually received?
Hurst: Representative Cavanaugh, I’m not sure where you’re seeing $9.9 million.
Cavenaugh: I mean, $939,000, sorry. The federal revenue was $939, but we only gave out of that $146,000 in grants. Most of it went to apparently operating expenses.
Hurst: And that is how we use the federal grant to operate part of the department. We also get real estate transfer tax to operate the department. We give substantial grants out to county courthouses, to cities, 501c3s that own historic properties. Those grants are funded primarily through the real estate transfer tax collections that fund the department.
Cavenaugh: Okay. So the grants are actually going to be in another appropriation?
Hurst: Yes, ma’am. They’re in real estate transfer tax.
Cavenaugh: Okay. Follow up, Mr Chair? And this is going to go to page number– let me find which one I really want to ask about. On page number 20251, which is the Arkansas Heritage Special Fund account, the fund balance, compared to what your expenses have been, is like a 31.5-year fund balance. What are we going to do with that fund?
Hurst: This is the gas royalty?
Hurst: Primarily, it’s for acquisition of land. The gas royalties, as you all know, were robust originally. They dropped off substantially, and now they have picked up some. But that money is used primarily for land acquisition and maintenance.
Cavenaugh: Okay. Well then, that’s going to tie into 20253, which is the Natural Heritage Federal Fund account. It says that this appropriation uses federal funds to perform the inventory and data management function of the Natural Heritage Commission. This division utilizes appropriation for personnel service and operating expenses. But you’re asking for a $1.7 million appropriation for land acquisition.
Hurst: Natural Heritage works and secures grants, a lot of federal grants, state grants. And they use that primarily for land acquisition and matching money for additional funds to acquire land for the Natural Areas program.
Cavenaugh: Okay. I noticed in actual 2021-2022, we didn’t spend any money on land acquisition, but we had appropriated $1.7 million. Is that a mistake or is that true?
Hurst: There was land acquisition. Probably it was in another well, it was in another pot. The Natural and Cultural Resources Council trust fund also provides funding for acquisition of land for natural heritage. So there was land acquisition in 2021-2022 as well. It just is not in this business area.
Cavenaugh: Okay. Compared to what your spend is, there’s 10.3 years’ worth in the fund balance. So, I mean, will we be using this for land acquisition? I mean, what’s our projected– what projects are we looking at using? Because we keep asking for the $1.7 [million], but if we’re not spending that–
Hurst: Yes, ma’am. They have a priority plan for land acquisition and it’s based on availability, and so they have a number of sources of funding that they use to acquire land for the natural areas program. So they do have an extensive masterplan, priority areas across the state of Arkansas, and then they work to secure the land as it becomes available.
Cavenaugh: And do you know what those priority areas are?
Hurst: They’re all across the state of Arkansas. I am happy to share with you all a map that shows those areas with some explanation.
Cavenaugh: Yeah. If you could, I’d appreciate that.
Cavenaugh: All right. Thank you.
Hurst: Thank you.
Wardlaw: Representative Wooten, you are recognized.
Wooten: Thank you, Mr. Chairman. Madam Secretary, I want to talk just a moment about your personnel. I see that you have approximately 170 vacant positions. 30% of those are over two years old. My first question is, have you relinquished any positions under the new law that we passed in the last session? If so, how many?
Hurst: Yes, sir. We have. I have the latest list from our HR manager. There are a total of 47 positions that are listed at two years or more being vacant, and we are hoping to retain 23 of those. There are2024 that have essentially been eliminated.
Wooten: Of the 47,2024 have been eliminated?
Hurst: Yes, sir.
Wooten: Okay. On the report I’ve got, it shows– mine shows 52 positions with 6 in the Department of– let’s see, there’s 12 in the Department of Heritage. Parks and Tourism has 34. We won’t quibble over 4 or 5, but you all have turned in2024. Follow up, if I may, Mr. Chairman. Are you looking at every one of these positions relative to total need? I mean, if you’ve given up2024, that’s great. We appreciate that. But do you continue– my main question, how long have some of these been vacant? The years, three years, four years, two years?
Hurst: Yes, sir. I’m looking at the list now. Most of them are three, some are four. There is one I’m looking at that is five years. That was a grants analyst, and we have sought to retain that position. We do watch it closely and try to recognize that if we haven’t filled a position in five years, we probably are not planning to use it. We can give it up. We do have– being a very outward-facing agency, during the pandemic, we were able to not fill as many positions, and now we’re finding the need to fill positions that were vacant for a couple of years. So we’re playing a bit of catchup right now. I think we’ll soon find the spot at which we can operate effectively and we’ll be able to potentially let go of more positions.
Wooten: Well, when I come in here, I noticed one, and I can’t remember what page, but you had authorized 93. You only used, I think, 84, and you cut down to 84 in your request. We appreciate that. Thank you very much.
Hurst: Thank you, sir. Thank you.
Wooten: Thank you, Mr. Chairman.
Wardlaw: Representative Cavenaugh, you’re recognized.
Cavenaugh: Thank you. This is going to be on page 20259, which is the digital newspaper program. Excuse me. If you look at your regular salaries, you currently show your spend for regular salaries to be $70,000 with two employees, which is about $35,000 each. But then you’ve got a request that takes it to $$204,000 for two employees. That’s $102,000. That’s a massive increase. And then if you go to 2024-25, it drops down to $181, but that’s still $90,000 per employee. That’s a whole bunch of increase.
Hurst: DUNLAP This program is a grant that was awarded to the State Archives section. And the grant started– we’re in, I believe, the third cycle of the grant. So as the grant funds spend down, then where we can spend it also goes down. So the decrease in the salaries that were there for the previous year is because the grant award funds were less to receive. So the agency has requested to get a final– another grant award that will go over into 2025. And so these requests are to provide for that additional funding that will come from that grant award. And at that point, we would be able to spend more on personnel costs. They moved the funds between operations and personnel so that we could pay staff more than using it for M&O type expenses. But that’s the anticipation of getting that grant award and being able to pay more personnel costs.
Cavenaugh: Well, your personnel number does not increase, just your expense. So you’re currently saying you’re paying $35 [thousand], and then now you want to jump them to $102,000. I mean, that’s a big increase. That’s more than almost triple what they currently make. So we’re going to give somebody three times what they’re currently making because we got federal money coming?
Dunlap: At that point, the personnel request would be changed to be able to accommodate the number of people that we could pay from that salary. So we did not make any personnel requests at this point to increase that, the number of people we were paying in that fund.
Cavenaugh: And how many do you project that you’re going to pay out of that fund?
Hurst: Maybe up to four people.
Cavenaugh: Okay. And did you say this project is projected to end in 2024-25?
Hurst: Yes, ma’am.
Cavenaugh: Okay, thank you.
Wardlaw: Seeing no further questions. I’ll go to Senator Dismang for his motion.
Audience: He stepped out.
Wardlaw: Okay, so if I could get a motion to accept the agency request on page 231. I got that. So moved. Second? All those in favor say aye. All opposed. Ayes have it. Now I need a motion to accept the rest of the budget. Could have been. Do you have discussion on the motion? I’ll recognize you for it.
Love: Thank you, Mr Chair. So I wanted to get DFA to actually answer the question, why was this necessary?
Wardlaw: We don’t question anyone under discussion of a motion. Once a motion’s on the floor, we take a vote.
Love: All right.
Wardlaw: So with that, I have a motion from Representative Lane, seconded by Representative Fortner for the executive rec of the rest of the budget. All those in favor say aye. All opposed. Ayes have it. So with that, we’ll move forward to the Arts Council. So, Billy, you’re recognized.
Arkansas Arts Council
Bureau staff: Thank you, Mr Chair. We’re in the Arkansas Arts Council. This is on page 262. So on page 262 is the Arts Council and this council seeks to advance arts in Arkansas. The Council expands cultural and educational opportunities by investing in museums, theaters, symphonies, and other providers of artistic programming. Page 262 shows state contracts awarded to minority-owned businesses and employment summary and publications. On page 263 is the department appropriation summary. In 2023 $1.15 million was authorized. The request for 2024 is $1.164. That’s a 1% increase, and that’s, again, a 1% increase in 2025. The Division has two appropriation requests. The only change-level is a request for salary and match adjustments to continue into the biennium. The total authorized budget in 2023, again is, $1.15, and the executive recommendation provides for the agency request. They do have American Rescue Plan appropriations spend in 2022. It’s shown, but the appropriation is not requested. This division is funded from federal grants and cash funds from registration fees, sales and interest income.
Bureau staff: If you look on page 264, this is the Arts Council federal program, and on page 265 is their summary. The total authorized was $854,000. The request for 2024 is $865,000. That’s, again, a 1% increase. In 2025 it’s $866,000 and the executive recommendation provides for that request. The only change levels are regular salaries and personal services matching, with those salary match adjustments moving forward into the biennium. Looking at the fund sources table at the bottom of the page – this is on page 265 – the fund balance going into 2022 is $163,000. The fund collected federal revenue in the amount of $725,000. The division spent $502,000 in 2022 and that leaves a balance of $386,000 going into 2023. Mr. Chair, those are the only change levels for the Arkansas Arts Council.
Wardlaw: Any questions for the agency? Seeing none, do I have a motion? So moved by Representative Lane. Seconded by Representative Fortner. The motion is executive rec. All those in favor say aye. All opposed? Ayes have it. So with that, we’ll go to Natural and Cultural Resources Council. Billy, you are recognized.
Natural and Culture Resources Council
Bureau staff: Thank you, Mr. Chair. We’re on page 269. This is the Natural and Cultural Resources Council. The Arkansas Natural and Cultural Resources Council administers grants and trust fund for the acquisition, management and stewardship of state-owned properties acquired and used– or used for Council-approved purposes. Grants are for projects to protect and maintain state-owned natural areas, historic sites and outdoor recreation. On page 269, state contracts awarded to minority-owned businesses and publications are shown. On page 270 is the department appropriation summary. The Division has three appropriation requests. Only one has a change level. The total authorized budget in 2023 is $42 million. The Council requests $54 million for the biennium. That’s a $12 million increase, or about 29%. The executive recommendation provides for this agency request, and the division is funded from 80% of the proceeds from the state’s real estate transfer tax. On page 273 is the change level.
Bureau staff: So if you go to page 273, this is NCRC state-owned lands or historic sites, and this section allows the Council to make grants for the acquisition, management, and stewardship of state-owned property. The appropriation from this section is transferred to agencies when grants are made by the Council. This is supported by the National and Cultural Heritage grant and trust fund. On page 274 is the appropriation summary. The total authorized in 2023 is $36 million. The request for 2024 is $48 million. That is a 33% increase, and that carries over into 2025. The executive recommendation provides for this agency request, and this is all in the grants and aids line item. This increase allows for the Department to disperse the increased funding from the Arkansas real estate transfer tax.
Bureau staff: If you look at fund sources on the bottom table, the fund balance going into 2022 is $53 million. The fund collected $157,000 in interest, and the real estate transfer tax shows $45 million in proceeds. I’ll note that on page 206 of the tax handbook that you have, this shows how the proceeds from this tax have increased, and they increased by 10% in fiscal year 2020, 32% in 2021, and 29% in fiscal year 2022. The Council transferred $20 million through their interagency process and $29,000 through the intra-agency process in fiscal year 2022. That leaves a balance of $78.5 million going into fiscal year 2023. Mr. Chair, those are all the change levels for this division.
Wardlaw: Representative Dotson, you’re recognized for a question.
Meeks: Actually, it’s Representative Meeks pretending to be Representative Dodson, if that’s okay. So, I actually have two questions. The first one is on the increase from $36 to $48 million. Can you kind of give us an outline of what you plan on doing with that increase? And then the second question that I have is, you have an appropriation; it’s 2(m)(z), the NCRC administration appropriation, which is all zeros and has a fund balance of $2,000. Do we still need that? It’s on page 272 in our book.
Hurst: So to answer your last question, that was for the grants manager, Deborah Bevan, and she is part of shared services now.
Meeks: Okay. So that appropriation can go away.
Hurst: Yes, sir.
Meeks: Okay. All right. We’ll note that at the proper time. And then for the–
Hurst: So to your first question, the surplus that we see in NCRC now is due to some turnback money, some projects that were not completed in the two-year grant cycle. There were a couple that had substantial grants that the project was unable to be completed. And so at the end of the two-year cycle, they have to return the full grant; on top of the fact that real estate transfer tax collections were robust, as we have heard. So we have a surplus that we need to distribute. The grants, we have an excess of applications for the projects every year. It always exceeds the grant amount that we can provide, so we won’t have any problem distributing the amount of money because we’ve always had a surplus of applications. As you all know, the NCRC supports projects across the state of Arkansas. University-owned facilities, anything that is state-owned can be funded through this. Upgrades to the State Capitol, the committee meeting rooms were improved with NCRC funds. The blind and deaf school have received large grants, desperately needed. So the fund will be–
Meeks: So it will just go to additional grants and let you further your–
Hurst: Yes, additional grants.
Meeks: Okay. And just to verify, because I saw your team off conferring, I want to make sure we’re still going to get rid of that appropriation.
Hurst: Yes. I think we need a clarification. Thank you.
Dunlap: Need a clarification on the second question. We don’t have any appropriation there, but we do use the appropriation to make our transfers between the agencies. So we do need to keep that for transfer purposes. We just didn’t have an appropriation budget there.
Meeks: Okay. So even though it’s all zeros, you still need it as a mechanism to allow transfers.
Dunlap: We need it for transfers.
Meeks: Okay. All right. Thank you for that clarification. Thank you, Mr. Chairman.
Wardlaw: Representative Cavenaugh, you’re recognized.
Cavenaugh: Thank you, Mr. Chairman. This is going to be along the lines of Representative Meeks. When we’re talking about the excess of applications for the grants, this shows you didn’t give out any grants in 21-22, and that also goes for the Main Street program. It also has an excess in funding balance, and it doesn’t show any grants were given out.
Dunlap: The expenditures for grants will not show up in this appropriation. These appropriations are here only for us to receive the funds. The appropriation is transferred to every individual agency, and so the grant expenditures will show up on the books of the actual agency that received them. And then the other one, the $6 million one, that’s the same thing. That appropriation is transferred into another fund on Department of Heritage, and that’s where the grant awards– it’s under Business Area 865.
Cavenaugh: Can you get us a list of those grants so we can see how much we’re actually giving out, so we have it? Because when we look at it, it looks like you’re not giving out anything when you really are. So that kind of helps us know.
Hurst: Yes, ma’am. We’ll show you a nice history of the NCRC.
Cavenaugh: I appreciate it.
Wardlaw: Representative Wooten, you’re recognized.
Wooten: Yes. On page 274, I’ve got a question about your interest. You’re actual– showing $157,531 in interest, but then in 2024 and 2025, you don’t show any. Is that money not– are you not investing the money to draw interest, or–?
Hurst: Yes, sir, we do. We do try to place the money in places where we can earn interest, and then that is included as we calculate what grant amount we can give out each May. So the short answer is, yes, sir. We will try to get interest on these funds. We place some of it with the treasury and we make investments. Yes, sir.
Wooten: Okay, so where is the– you don’t have any of the $78 million or $53 million invested at this point? I mean, you don’t have an estimated number to–
Dunlap: We do have it currently invested. We work with the different agencies to determine how much of it are they going to need for a certain time period, and based on their needs, we invest whatever balance is left to invest at that particular point. So we don’t have a certain amount that we can invest at all times. We just work with the needs of the agencies. Because we hold the funds, we transfer to the agencies based on their needs. And so if they have funds that they’re not going to need, we will invest them at that point and earn interest. So there’s no projection in those two years; it’s because what we earn for interest is really going to be based on how much we have available to invest at that time. But we typically always invest every year. And then what we earn for interest is based on what kind of results we get from our bids. Here lately, we’ve not gotten very many interests in bids, and our investments have been mainly in commercial paper because we’re not getting any other interest. And so we just don’t have a projection of how much that interest will be. But we do earn interest every year on those funds.
Wooten: You do invest it.
Dunlap: We do invest, yes.
Wooten: Thank you. Thank you, Mr. Chairman.
Wardlaw: Senator Hammer, you’re recognized.
Hammer: Thank you, Mr. Chair. I was looking at your increase for the budget on the shared services transfer and I noticed that it’s going up. And I look at a couple of other categories under your umbrella, and I noticed that some of those are also going up. Could you give me an understanding of why the shared service costs are going up? Or am I misreading it?
Dunlap: The cost of shared services are always going to be pretty much based on the cost of doing business; for instance, operational costs. The shared services costs are transferred to our shared services business area. And so increase in personnel costs and increase in operational costs are the two main reasons for our shared services expenses going up. And so as those expenses go up, the portion that is funded from each one of the different sections will go up accordingly.
Hammer: If the costs are transferred over to the shared service category, are they adjusted down in the area that they came from previously?
Dunlap: Yes. Yes.
Hammer: And how would I see that in the budget report? Where would I identify that or how would I go about looking at that?
Dunlap: When it says– there will be a line that says, “shared services transfers” on each one of the appropriations where the funds were coming from. It will be reflected on that appropriation.
Hammer: Okay. And is that in our booklet or is that a separate form?
Dunlap: It’s in here. It’ll be in the book under– in the funding section, you should see a line that says, “Shared services transfer”. That’s the amount from that particular appropriation that was transferred for shared services.
Hammer: Okay. Thank you.
Wardlaw: Representative Cavenaugh, you’re recognized.
Cavenaugh: Thank you. I’m going to go back to page 274, talking about the excess funds. They got me the list of grants that we actually gave out in 2022. We collected $45.3 million, and we gave out $29.9 [million] of those. So we didn’t give out in grants what we collected by quite a bit. And then when I’m looking at these, I noticed that most of these are going to state projects. They’re going to the state parks, Arkansas Heritage. They’re going to Arkansas Archaeological Survey, UAF, Arkansas Forestry, Secretary of State, Arkansas State University, Henderson, South Arkansas Community, University of Arkansas in Fayetteville and Pine Bluff and Rich Mountain. So are we just using these grants as a way to get other state agencies money to do their projects?
Hurst: To the first question, we spent the appropriation that we had for fiscal year 2022. So we spent the full appropriation. We did come back to you all and ask for additional appropriation last year because we knew we had surplus money, and we spent up to that full appropriation. The grant, the NCRC, was a legislative act, and it was created to support state-owned facilities for the acquisition of state-owned lands. So it is very much supportive and is 100% supportive of state-owned properties and amenities. That is how the NCRC was designed to function. And so the real estate transfer tax is divided between outdoor recreation grants, the Arkansas Historic preservation program and Main Street, and then the Natural and Cultural Resources Council trust fund.
Hurst: And it gets 80%.
Cavenaugh: Okay. When you say acquisition, that makes me think that we’re buying new stuff.
Hurst: The acquisition is based on land acquisition. So the Natural Heritage Commission can use NCRC to acquire land for conservation purposes. State parks can use it to acquire land to expand state parks. We might also use it in heritage for the acquisition of artifacts, to create exhibits, curatorial needs. So it is for the acquisition in that regard. The rest of it is for– it’s primarily based on historic preservation. So big projects like the State Capitol, we gave the Secretary of State a large grant. I believe it was about a million dollars.
Cavenaugh: For the windows?
Hurst: For the windows, yes, ma’am. So the historic windows have been replaced by the Natural and Cultural Resources Council trust fund.
Cavenaugh: Okay. Thank you.
Wardlaw: Seeing no further questions, do I have a motion? I have a motion from Representative Meeks. I have a second from Representative Fortner. All those in favor, say aye. All opposed. Ayes have it. With that, we’ll move on to State Parks and Tourism division. Billy, you’re recognized.
Parks and Tourism
Bureau staff: Thank you, Mr. Chair. We’re on page 277, so if you can move to 277 in your binder. This is the Parks and Tourism Divisions, and the Parks and Tourism Division’s mission is to enhance quality of life through outdoor experiences, connections to Arkansas Heritage, and resource management. There are 54 state parks located across the state. Pages 277-278, this shows the employment summary, publications and state contracts awarded to minority-owned businesses. On page 279 is the department appropriation summary. The division has 14 requests. All the five sections have a change level for something other than normal salary adjustments being carried over into the new biennium. The total authorized budget in 2023 is $170 million in spending authority. The division requests $213 million for the biennium. That’s a $43 million increase, or about 2025% change level. The executive recommendation provides for just $112,000 less than the agency request. The division is funded from general revenues, special revenue from 45% of the 1/8-cent Conservation Sales Tax, federal grants and cash funds from sales and rentals at state parks. The first change level is on page 285. On page 285 is State Operations. And this section provides for administration of the division. It is supported by a general revenue fund. On page 286 is their summary. And the total authorized in 2023 is $16,046,000. The request in 2024 is $18,235,000. That’s about a 14% increase. It goes up a little bit more in 2025 at a 15% increase. And the executive recommendation is for $867 less than the agency request. Those change levels begin with a regular salaries line item. What was authorized in 2023 is $11.4 million. The request in 2024 is $12.8. That’s a 12% increase. There’s another 12% increase in 2025. Personal Services Matching shows $4.5 in 2023. And in 2024, it’s $5.3. That’s an 18% increase. It’s a little bit more in 2025 at $5.6 million. That’s a 23% increase. These are mostly salary match adjustments that are continued into the new biennium. But the agency also requests reclassifications and upgrades. The executive recommendation provides for the adjustments, but not for the reclassifications and upgrades. And that’s the $867 difference.
Bureau staff: If you look at funding sources, the fund collected $19.8 million in general revenue. The division does not have carry forward language, so there are no fund balances. If you look at the next page, page 287 is the Conservation Tax. And this section provides for the special revenue administration of the division. It’s supported by the special revenue fund. On page 288 is their summary. The total authorized in 2023 is $55.3 million. The request in 2024 is $65.6. That’s a 19% increase and another 19% increase in 2025. The executive recommendation is for $47,000 less than the agency request each year. Looking at the change levels, they begin with regular salaries. What was authorized in 2023 is $6.3 million. The request is for $7 million. That’s an 11% increase. And that carries over in 2025. Personal services matching is $2.6 authorized. In 2024, the request is a little over $3 million. That’s a 16% increase. It’s more in 2025. It’s 3.2 million. That’s a 20% increase. Again, these are primarily salary match adjustments continued into the new biennium. The agency also requests a new position. The executive recommendation provides for the adjustments, but not for the new position. And that accounts for that $47,000 difference. Looking at operating expenses, what was authorized in 2023 is $11.6 [million], and in 2024, the request is $12.3. It’s the same in 2025. That’s a 6% increase, and this is due to rising cost of operations from inflation.
Bureau staff: Construction is the next line item. $26.8 million is authorized. The request is for $32.8 [million]. That is a $6 million difference, or 22%. That’s the same in 2025. And this is to accommodate large construction projects for continued and planned new projects. Looking at capital outlay, $1.8 million was authorized. The request in 2024 is $3.5 million. That’s an 86% increase. It’s the same in 2025. And this is due to the backlog of equipment caused by distribution interruptions and the need for specialized equipment and also increased cost of overall capital asset purchases. Looking at special maintenance, what was authorized in 2023 is $3.1 million. The request in 2024 is $4 million. That’s a 26% increase. And this is due to increased cost of construction materials and contract vendor cost required to maintain and support infrastructure and parks. If you go down to funding sources at the bottom of the page, the bottom table, the fund balance going into 2022 was $29.54 million. The fund collected special revenue in the amount of $43 million. That’s the 1/8-cent Conservation Sales Tax. And the division spent $28 million in fiscal year 2022. At least a balance of $43.9 million going into 2023.
Bureau staff: Next page is page 289. This is Keep Arkansas Beautiful. And this section provides for the administration of that program. It’s supported by a special revenue fund. On page 290 is their summary. And the total authorized in 2023 is $869,000. The request in 2024 is a little over a million. That’s an 18% increase. And in 2025, it’s a little bit more than that. It’s a 20% increase. The executive recommendation provides for this agency request. The change levels begin with extra help. What’s authorized in 2023 is $2,500. The request is for $6,000. That’s a $3,500 difference. And personal services matching, $46,000 was authorized. $51,000 is the request. That’s a 10% increase. It goes up to 14% in 2025 at $53,000. This is to allow for manning their mascot and providing supplies for community cleanups. Next line item is operating expenses. $76,000 is what’s authorized. The request is for $88,000. That’s a 16% increase. And it’s the same in 2025. This is increased travel and fuel cost. Looking at conference and travel, $1,500 is what’s authorized. $5,000 is the request. And that’s a $3,500 difference. It’s the same in 2025. This is to attend national litter prevention and education awareness conferences and seminars. Next line is grants and aid. $20,000 is what’s authorized for that line item. There is no change in 2024. But in 2025, it’s $40,000. So it doubles. And this is increased opportunities for community grants. The last line item with a change is advertising expenses. $469,000 was authorized. $600,000 is the request. That’s a 28% increase. It’s the same in 2025. And this is due to the statewide marketing and advertising campaigns.
Bureau staff: The funding sources table, it shows the balance going into ’22 was $676,000. The fund collected conservation tax in the amount of $957,000. The division spent $690,000 in ’22. And that leaves a balance of $916,000 going into ’23. Next item is on page 291. This is the Tourism Promotion Special Revenue section. And this provides for the administration of that program. It’s supported by a special revenue fund. On page 292 is the summary. The total authorized in ’23 is $18 million. The request in 2024 is $28.4 million. That’s a 57% increase. And that’s carried over through the biennium. The executive recommendation is just for $6,000 less than the agency request. Change levels begin with regular salaries. $248,000 was authorized. The request is for $288,000. That’s a 16% increase for each year. Personal services matching with $99,000 authorized. $120,000 is the request in 2024. It’s $124,000 in 2025. That goes to a 20% increase in 2024, 2025% increase in 2025. These are mostly salary match adjustments. But the agency also requests a title change and upgrades. The executive recommendation provides for the adjustments but not for the position upgrades. And that accounts for that $6,469 difference from the agency request.
Bureau staff: The operating expenses line item shows $1.4 million was authorized. The request in 2024 is $3.1 million. So that doubles. And then in 2025, it goes up more to $3.2 million. These are improvements to welcome centers, uniforms, and staff trainings. Conference and travel is the next line item. $39,000 is what’s authorized. $40,000 is the request. It’s only a 3% change. And in 2025, it goes up to $41,000, so that’s a 6% change. And this is due to rising fuel costs. Professional fees is the next line item. $615,000 was the amount authorized. $2.2 million is what’s requested. And that’s a $1.6 million difference. It’s the same in 2025. This is due to a new vendor for publication orders, research projects, and marketing. Next line item is capital outlay. $70,000 is what’s authorized. The request is for $125,000. That’s a 79% change. And this is to replace aging vehicles. Tourist promotion is the next line item. $1.7 is what was authorized. $2.9 is what’s requested. So that’s a 65% increase. It’s the same in 2025. This is due to increased grant awards for regional tourist associations, meeting and sport incentives, and tourism promotional partnerships. The last line item is advertising expense. $13.6 is what is authorized. $19.3 is what’s requested. That’s a 41% increase. That carries over in 2025. This is for new attractions like the Cold War Museum, Sultana Museum, Arkansas Museum of Fine Arts, 2024 Eclipse, and additional projects needing advertising, marketing, and PR.
Bureau staff: Looking at funding sources at the bottom table, the balance going into ’22 was $6.5 million. The fund collected special revenue in the amount of $22.27 million. That’s from 2% gross receipts tax on tours and related businesses. And the division spent $15.8 million in ’22. That leaves a balance of $11.5 million going into ’23. The next page is the next request. This is Page 293, Wildlife Observation Trails. And this section provides for the administration of our program in partnership with Arkansas Game and Fish Commission to promote conservation and management of wildlife resources and to promote tourism and economic development through the enjoyment, use, protection, and improvement of natural resources in the state. It’s supported by a transfer from Game and Fish Commission. And that’s from royalties from oil and gas leases. On page 294 is the request. The agency requests discontinuing this appropriation, and the executive recommendation provides for that request. There are no fund balances, no revenues, and no expenses for fiscal year ’22.
Bureau staff: The next item is on page 297. So if you turn to page 297, this is Operations and Construction cash and treasury. And this provides for the staff and operational support to park and museum activities. It’s supported by a cash fund. On page 298 is their summary. What was authorized in ’23 is $37.1 million. And in 2024 they’re requesting $38.3. They’re requesting a little bit less in 2025, $37 million. So it’s a 3% increase for 2024. It’s a decrease of less than 1% in 2025. The executive recommendation is for $58,000 less than the agency requested each year. Looking at change levels, starts with regular salaries. $7.8 million was authorized. The request is for $8.5. That’s a 10% increase. It carries over in 2025. Extra help is $4.6 million was authorized. The request is for $5.3 million. That’s a 15% increase for each year. And personal services matching shows $3.4 was authorized. $3.9 is the request. That’s a 16% increase in 2024. It goes up to $4.1 million in 2025. That’s a 20% increase. Again, most of these are salary match adjustments. They do request to restore a growth pool position, add a new position, do reclassifications and upgrades. The executive recommendation provides for the adjustment, but not for the reclassifications, upgrades and new position. And that’s what accounts for that $58,000 difference. Looking at operating expenses. $9.9 million was authorized. $10.4 million was the request. That’s a $500,000 difference, or about a 5% increase. This is rising cost of operations due to inflation.
Bureau staff: Capital outlay is authorized at $250,000. For the first year, it goes up to $500,000. So it doubles and sustains in 2025. This is increased capital replacements that are anticipated. And the last change level is on debt service. $3,050,000 is what’s authorized. $1.5 million is what’s requested. So it goes down by half. And then in 2025, it’s zeroed out. And this is a decrease due to the reduction in required payments to Mount Magazine for their bond maturing in 2024. The funding sources table, it shows the balance going into ’22 is $7.59 million. The fund collected cash– the cash fund line shows $34.75 million, and that’s from fees, rentals, and sales from the state park system. The division spent $31.88 million in ’22. And that leaves a balance of $9.82 million going into ’23. On the next page is Retirement and Relocation Program. And this provides for the administration of that program. It’s supported by a trust fund. On page 300 is the request. The total authorized is $968,000. The request in 2024 is for the same, so this is a reallocation. And the executive recommendation provides for that request. The reallocation happens on the operating expenses line item. It goes from what was authorized in ’23 at $50,000 to $60,000. So that’s a $10,000 increase. And then for conference and travel, it goes from $10,000 to $0. So that’s where the change is coming from. And this is to allow for proper classification of travel expenditures.
Bureau staff: The next item is on the next– next change level is on the next page, 301. This is the Tourism cash and treasury. And this section provides for the operations of the gift shop in the central office. It’s supported by a cash fund. If you go to page 302, it shows their summary. The agency request is to discontinue this appropriation due to closure of the gift shop. And the executive recommendation provides for the agency request. The next item is on page 307, so if you move forward to page 307. This is the Walton Family Foundation Delta Heritage Trail Grant Cash Fund. This section spends the grant from the Walton Family Foundation on the development of the Delta Heritage Trail State Park. It’s supported by cash fund accounts. On page 308 is their summary. And $20 million is what was authorized in ’23. The request for the biennium is $40,482,000. So it doubles. And the executive recommendation provides for this request. This is due to– they received federal funding from the Rebuilding America RAISE Grant to complete the park. Mr. Chair, those are all of the change levels for this division.
Wardlaw: Thank you. Senator Stubblefield, you’re recognized.
Stubblefield: Thank you, Mr. Chair. Do you remember how much ARPA money you received?
Hurst: How much ARPA?
Hurst: We have received $3.6 million in ARPA money for connectivity. And I believe that’s all. Oh, the EDA money.
Stubblefield: And how much of that have you spent?
Hurst: We got an EDA grant for tourism. Yes.
Stubblefield: How much of that have you spent? How much of that money have you spent?
Stubblefield: What are your plans for the expenditure of the remaining balance?
Hurst: For the EDA grant, specifically?
Hurst: We are working now on a strategic plan. We have engaged a consultant. We’re working on that. We’re also doing a brand audit to make sure that our tourism brand is resonating well. So those are underway. We haven’t paid on those yet, but those projects are underway.
Stubblefield: So you have almost $3 million remaining?
Hurst: Yes, sir. We haven’t expended it. We have started the work on what that money will fund.
Stubblefield: Do you have any idea when that will be completed?
Hurst: The strategic plan will not be ready until the next fiscal year. The brand audit should be done very soon. We also are doing an analysis of our typical customer that travels to Arkansas. That is underway as well. That should be relatively soon as well.
Stubblefield: Can we get a breakdown of how you intend to spend that money?
Hurst: Yes, sir.
Stubblefield: All right. I would appreciate it. I’d like to see that.
Hurst: Yes, sir. We’re happy to do that.
Stubblefield: All right, thank you. Thank you, Mr. Chairman.
Wardlaw: If you would, send that to committee staff so they can get out to all the membership.
Hurst: We will.
Wardlaw: Representative Holcomb, you’re recognized.
Holcomb: Thank you, Mr. Chair. My question is on page 292, Operating Expense. Actual was 1, budgeted 1.4. We’re going to 3.1. Can you kind of give me an explanation on that? And also on professional fees, our actual was 394, budgeted 615. We’re going to 2.2 million on that. Those two are my questions on 292. If you could, give me a little explanation, please.
Dunlap: For the operational expenses, the M&O expenses, they are to allow for improvements to the welcome centers, for equipment needs that need to be replaced, and infrastructure and broadband and network connectivity in those areas. And also, the upgrading of our uniforms for our staff members there and for training. It’s various types of things that just need some more attention. And then for the professional fees, we have some new fulfillment vendors providing some services, and we have research projects that are going on and marketing opportunities that they’re going to be used for.
Holcomb: That just seemed like a lot, more than doubled and tripled on professional fees.
Hurst: One more thing I know that Arkansas tourism is doing is we have an opportunity to do more research than we have been doing, and so engaging more consultants and figuring out our best approach on Arkansas tourism. All of this work is funded through the 2% tourism tax, which we have seen a substantial increase in. And so we’re using it to create the best possible scenario for the future for Arkansas tourism. So we’re really trying to use this money in a wise way, and create a very firm foundation going forward.
Holcomb: Okay. Thank you, Mr. Chair.
Wardlaw: Representative Meeks, you’re recognized.
Meeks: Thank you, Mr. Chairman. So a couple of weeks ago I had the opportunity to do some camping in Petit Jean State Park. Beautiful park. Beautiful weekend. On the capital outlay, kind of a question that occurred to me, in these camping areas, are we putting any kind of plan in place or putting any emphasis on building storm shelters? Because I was walking through the camp site and see all these campers out there. And God forbid, a storm were to come through there, there would be nowhere for those people to go to seek shelter. And so that’s my first question, in these capital outlay increases, is that included in any of them? And then I’ve got one more question after that.
Hurst: Representative Meeks, can I get some feedback on that question from our State Parks Director who is here in the audience?
Meeks: The idea is, obviously, we want these people to come and enjoy our state parks, but at the same time, we want to make sure they’re safe while they’re here.
Parks Director: That’s right. Thank you. And thank you for visiting our state parks. We do provide shelters. Our bath houses are built to help provide shelter for that. Our park rangers live on staff in the event– they monitor weather conditions. In the event of emergency, they evacuate the campers to the nearest safe facilities, which typically are the bath houses that are built block construction for that protection. If that’s not the case, they have a plan in place for getting the visitors and guests to the right locations for safety in the parks.
Meeks: Okay. But at this time, there’s no plans to upgrade any of those? Because I went to the bath houses at Petit Jean and I was like, I don’t know if that would be– safer than a tent, obviously, but I don’t know how much protection against tornadoes. Just to make sure– but if not, please make sure that’s on your radar for potential upgrades to those going forward. My next question is both on 292 and on 298, on both of these sources of revenue– so on 292, your fund balance going into this year is $6.4 million. It looks like we’re looking at $11 million. But then when we get to 2024, 2025, it’s going to drop from $11 million to $6 million. And on page 298, and this one’s even more concerning to me, is the fund balance next year is $9 million, but by the time we get to 2024, 2025, it drops to $0. To me, that’s like we’re dipping into our savings and we’re going to exhaust our savings. Am I reading that correctly, that we’re planning on exhausting our entire savings in that area? And how are we going to– because then the following year, we’re in trouble, right? So how do we– A, am I reading that correct? And if so, what’s the plan to try to mitigate that?
Dunlap: To address the question on page 298, the calculation that’s in this funding section, if I’m not mistaken, is that it’s based on the assumption that you’re using all of your budget. And so when it’s projected out into 2025, in the PPAT system, it dropped it to a 0 balance. We are not projecting to expend all of our fund balance. Our certification of income does not drop that balance down to 0. It actually– hold on just a second. I can tell you what we project for fund balance in that account. We project the fund balance going forward into 2025 of $8.3 million.
Meeks: Okay. Kevin, can I have y’all look into that and maybe verify, double-check that for us? Because y’all are saying 0, or whoever put this together is saying 0, and they’re saying $8 million. That’s a huge discrepancy. So I’d kind of be curious as to– because what I don’t want to happen is I don’t want to get to 2025 and it actually be 0, and suddenly y’all are coming to us saying, hey, we’re broke. Y’all understand the concern there. So if that’s something that we could figure out, how to get that addressed, I’d–
Wardlaw: Representative, DFA, actually, the Budget Office, put these manuals together. And I see Mr. Brech’s ready to answer that if you want to hear from him at this time.
Meeks: Sure. That’d be great. But I just want the assurance that in two years we’re not going to be broke and having emergency meetings trying to figure out how we solve a problem that maybe we could have–
Wardlaw: If you would, Mr. Brech, introduce yourself for the record, and you’re welcome to answer Representative Meeks’ question.
Brech: Robert Brech, Budget Office. The way the manuals are set up, you have to go off of their appropriation. That’s what they’re authorized to spend. So when we put these manuals together, that’s what comes off of the top, and that’s where it looks like the fund balances are maybe depleting. If you look at where their actual expenses are, they will probably give you a true picture of where they would be. But the only way to– in the system, would be to restrict their appropriation to more align with what their expenses are. But that would also hamstring them in the event that they needed to spend money. So we’re kind of in a bind. I think that they’re correct and their fund balance probably will be closer to $8 million. But they do need that flexibility in their appropriation at times if there’s an emergency or they need to spend more funds. But that’s kind of one of the, I guess, pitfalls of the process or the program.
Meeks: So the numbers reflected in here would be sort of a worst case scenario?
Brech: Worst case. That’s correct.
Meeks: Okay. All right, thank you. Thank you, Mr. Chairman.
Wardlaw: Representative Cavenaugh.
Cavenaugh: Thank you, Mr. Chair. Just to follow up on page 292 real quick. On the small festival expenses, we’re showing that we only gave out $5,500 worth of, I guess, help to small festivals. How come we’re not doing more to the small festivals? Because I’ll be honest with you, that’s one of the biggest tourisms in rural Arkansas is these small festivals. And I know every one of us in our counties have multiple small festivals that could use assistance in this.
Hurst: Representative Cavenaugh, thank you. I agree with you. I think we should expend more of these funds. The rules are written in a way that are a little restrictive, and so we probably need to change our rules and promote this opportunity better. And so that will be in our plans going forward.
Cavenaugh: If we could do that, I mean, it is a– I’ll speak to the town I live in, Walnut Ridge, Beatles at the Ridge Festival. We’re a 5,000 population. We bring in 15,000 people for that. So it’s a huge opportunity and revenue source for these small rural communities. And if we could give them assistance, that really does help them. I would appreciate that. With that, I really do have a question on 282. This is the federal– from the statewide comprehensive outdoor recreation plan. My question is– it’s all federally funded, and we’re asking for $8.4 million appropriation, but historically, the most we’ve ever gotten in federal money is $2.3 million. Why do we keep asking for this over-appropriation when we’re not going to get the $8.2 million from the feds?
Dunlap: This program is a grant program. It’s based on grants. And so we asked for the appropriation to cover the commitments that we have. We make commitments for grant programs and they generally don’t end in as far as one year. They typically carry over from year to year. They could carry over multiple years. But because we do have a commitment there, then we keep the appropriation. We don’t actually receive the funds for that appropriation, those commitments, until the project is completed. And at that point, we ask for the funds from the feds to then pay. It’s a reimbursement program. So we have to have the ability to keep the commitments that we have made for the grant awards. And the funds are always available. They’re committed to this program, but we receive them at the time the grant project is completed.
Cavenaugh: Okay. When I was looking back in the A book on your historical money that you’ve gotten on this from the feds, the most you’ve ever gotten is $2.3 million. But we’re asking for 8.3 million. So are you saying that– or should I say, yeah, 8.3 in the grants. Are you saying that you’ve got $8.3 million worth of grants already committed, but we don’t project getting that money from the feds?
Hurst: Yeah. The appropriation reflects commitments, as well as additional funding. So it may be a two or even three year process that we actually from the time we actually make the grant until it actually comes in and goes out. And so it looks much more inflated than we’re actually granting out. But that’s because we have to have the appropriation in place to cover commitments.
Cavenaugh: Even though you’re not getting the federal dollars for them yet?
Hurst: Correct. Well, we do get some federal dollars during the course of the year, but we also have commitments on top of the money that we’re receiving.
Hurst: We have an accounting person who manages that specifically.
Cavenaugh: Okay, I appreciate that. And I have a follow-up question, but this is going to be on page 288. Thank you. On your construction, you had an appropriation for $26.8 million, but you only spent $3.1 million. What are going to be these construction needs? I mean, what are we constructing that we need?
Hurst: So, part of the challenge– Shay, if you’d like to come up to add to it. Part of the challenge is our ability to complete the projects. They are time-consuming and lengthy. And so we have over $100 million in minor maintenance. We have capital projects, and they frequently take longer than we think. But we do, with conservation tax, we have an opportunity to increase our spend on construction-related projects. Shay?
Bureau staff: That’s correct. Secretary Hurst is correct. We have two programs that fund and support our major maintenance program and our capital improvement program. We have a five-year plan laid out for the capital improvement program. It’s at total needs of $234 million and 670 total projects that are forecasted over the next five years. So there’s plenty of projects. But the Secretary is correct. It’s our ability to get those projects through the process done in a timely manner, so that’s the reason for the request for the increase.
Cavenaugh: Do you mind sharing those projects so we can kind of see with the staff so we can get it out to kind of see where that money is going to go? And then on 296, which is your outdoor recreation grant program, we do have a large fund balance in that also, and I guess the most we’ve given in grants is $3.4 million, it looks like, in 2018-19. Are you projecting more needs for grants? Are there more applicants than what you’re able to get? Because we authorized $9.7 million, but you only gave out $3 million. Now I realize you had the fund balance. You could have gave out all if they had applied. Are they not applying or–
Dunlap: These grants, some of the grants are reimbursement. A majority, a great many of them are reimbursement grants. So we only give out fund– we only pay when they complete a project and request the reimbursement. Some of the others are grants that if they qualify for them, they do get to receive the funds upfront. And so it depends on the applications and which grants are received, how much is actually expended out.
Hurst: Yes. This is funded through the real estate transfer tax, and we will have additional funds to grant out this year.
Cavenaugh: Okay. So we will be able to get more out?
Hurst: Yes, ma’am.
Cavenaugh: How do you advertise that process to the people looking for this money?
Hurst: Our staff has worked for many years with cities and unincorporated areas, but we could probably do a better job of promoting this opportunity. We do have a website, but it’s a committee that has been appointed by the governor, and it’s the same committee that’s done it for many years. But as far as I know, it’s just word of mouth right now. Shay, do you agree with that?
Bureau staff: Agreed. It’s promoted annually. The grant cycle takes place, closes in August on an annual basis. There are always more applications than there are funds. And so there is room here for the increase to support additional grants.
Cavenaugh: We’ve got the applications. It doesn’t show we’re funding near what we’re bringing in. So if there’s plenty of applications, I don’t know why we didn’t fund 100% of them. But, I mean, we just want to make sure, because somebody from a rural area, these types of grants can really, again, help these rural areas, as you are well aware of. And I do want to say I really do appreciate what you did for Powhattan. It turned out beautiful. I appreciate you all taking the interest in that because that’s a history. If we don’t do something, it’s lost. So I really do appreciate that. But I’m really trying to find a way on these fund balances that we can get them into the communities where they can do the most work because if we’re paying the taxes, we need to be using them for what they were designed for. So I appreciate it.
Wardlaw: Representative Wooten, you’re recognized.
Wooten: Thank you, Mr. Chairman. I want to follow up on page 288. You show three– under construction in your expenditures, you show $3 million actual last year. But in the next, 2024, it looks like you’re going to spend $32 million on construction. What will that be spent on?
Bureau staff: So there’s sort of a natural cycle that takes place with the planning and development section on an annual basis that you go through the design process and then you prepare for construction. And so on any given year, we kind of see this ebb and flow that happens versus design versus construction. So depending on the carryover balance and what large projects are taking place leads to a balance that affects the amount of projects that you can fund the next year. And so this year that we’re currently in and have expended is one of those years where it’s been less that has been expended than in years past. And so the projects going forward that are going to impact our budgets greatly, we’re currently constructing a $9 million visitor center at Pinnacle Mountain State Park. And then the projects that are going forward with Delta Heritage Trail State Park are large projects that are going to impact this. We have appropriation for it separate, but some of the funds that have been committed prior to this will allow us to do other projects.
Wooten: Okay, follow up, if I may. The more I look at the fund balances, and not only this one, you have $29 or $30 million. Of course, you’re going to use some of that to– my concern is where in any of your budgets, other than the one I pointed out a while ago, do you have interest income? Where is this money? And this may be a DFA question. How do we know that this money is being invested? Representative Cavenaugh pointed out the use of $3 million, but you got a $9 million balance. Where is that money invested and how much interest do you earn? I don’t see that in any of the budget items of income under funding sources.
Dunlap: These funds are invested by the– excuse me. These funds are invested by the treasury. We don’t invest these particular funds. We only invest those funds that are given to us as trust funds. All the rest of our funds are in the treasury, and they are invested through the treasury process. And we earn interest based on how those are invested.
Wooten: So. But you get the income, don’t you?
Dunlap: We do get the interest income. Yes.
Wooten: Okay, well, DFA, you do these reports, how come we don’t show an item here where they get $600,000 in interest as income? Where is that money going? How is it being spent?
Brech: Robert Brech, Budget Office. Representative, I’ll just have to look into that. I’m not exactly sure how the interest income is–
Wooten: You’re telling me we have $30 million, and you can’t tell me where the interest is coming from or going to or how it’s being spent?
Brech: The interest is going to Parks for their accounts, but I would have to check and see.
Wooten: How come we don’t show it? You said you all do the forms. How come you don’t show that as an income item? I mean, that’s a pretty good amount of money on just this one, and they’ve got several million dollars.
Brech: Yeah, I apologize, representative. I’ll just have to look into that and see–
Wooten: I’d like to have– I’d like, if I might, Mr. Chairman, I request that you give us a report showing the amount of funds, total amount of fund balances, number one. Second thing is, is all that money invested? How much of that money is invested? And third, how much is that money earning for the taxpayers of this state? And I think, this is just me, but I think there ought to be a line item in each of these fund balance accounts showing interest income. This is not the agency’s fault. You all do the forms. So, I mean, we need to know. I read in the paper where the treasurer says, “He’s made X amount of money,” but where was that money invested after that is the question.
Wardlaw: Representative Wooten.
Wooten: Thank you.
Wardlaw: Representative, if you’re wanting to hold number five until this afternoon to get a report on interest earnings and where that money goes, we can allow the agency and DFA to get that back in the afternoon session. And then we could take a vote on this budget if that satisfies your request.
Wooten: That’ll be fine, Mr. Chairman.
Wardlaw: But I think your point is overall, not just this budget, correct?
Wardlaw: Thank you. Clarifying for staff. With that, I’ll go to Senator Hammer for questions.
Hammer: Thank you. Mr. Chair, a couple of questions. One, do you all have any of the rest stops along the interstate under your umbrella?
Hurst: Senator Hammer, we have welcome centers but not rest stops. So the welcome centers are– for example, on I-40 as you’re leaving West Memphis, right there, there’s a new welcome center there. The structures are built by the Highway Department, and then they are operated by Arkansas Tourism. There are also rest centers and those are not part of our agency.
Hammer: Okay. Yours are the ones that have the facilities. And are yours all open? I’m trying to remember. It seemed like you all got some and maybe ARDOT’s got some. I can’t remember. Is that correct?
Hurst: Ours are all open. Yes, sir.
Hammer: Okay. And the ones that are closed are under ARDOT, is that correct, or do you know?
Hurst: I’m not aware, sir. I’m sorry.
Hammer: Okay. All right. And then the second one, in the parks, are you all still using hosts, and maybe this isn’t on your umbrella, but are you still using hosts at the campgrounds, or were they replaced during or after COVID?
Brech: Yes, we are continuing the camp host program. We have an agreement with Good Sam’s Club at, I believe, three locations: Bull Shoals, Petit Jean, Lake Ouachita and Lake Catherine, maybe Millwood as well. And we have just restarted an entire new volunteer camp host program for our state park system.
Hammer: Okay, and then a question on page 292. And maybe you gave the explanations a while ago, but let me ask you. On your professional fees, you’re budgeted to take a pretty significant jump from 2021 to 2023. That’s under your umbrella, is that correct?
Hurst: Yes, sir. That’s the 2% tourism tax. And for our professional services, professional fees, we have to replace our fulfillment vendor for the tourism guide that we produce annually. We have a lot of demand for that, thankfully, and we need a new vendor for that. We’re also doing some additional research and looking for ways that we can better partner with regional associations across the state.
Hammer: Okay, and who’s the new vendor going to be? Have you already been through the selection process on that?
Hurst: Yes, sir, we have, but we don’t recall the name, and we can get that to you.
Hammer: Okay, if you don’t mind. And that’s it. Thanks.
Wardlaw: Representative Holcomb, you’re recognized.
Holcomb: Yes, Mr. Chair. Thank you. My question is just about the budgeting process. Does the Parks and Tourism have any input in the budgeting process or do they just see it when it comes out? How does that work?
Hurst: Yes, sir, they do have extensive input into the individual agency budgets. Heritage does, parks, tourism, KAB, capital zoning, even. They all work with Cynthia and her team to–
Holcomb: No, I’m talking about the commission.
Hurst: Oh, the commission. No, sir. We keep them aware, but they are not involved in the creation of the budget.
Holcomb: So they just see it when it comes out?
Hurst: No, sir. We have conversations with them about when we have surpluses. We do an overall orientation where we talk about the budget. Cynthia has done extensive work with the SPRTC to educate them on shared services. So we have a monthly financial report that they see of expenditures within Parks and Tourism. So they are very well informed throughout the year on our revenue and our expenses.
Holcomb: Okay, so they really don’t have much to do then, do they?
Hurst: Oh, yes, sir, they do. They have real authority that is provided in the law.
Holcomb: Okay. All right. Thank you, ma’am. Thank you, Mr. Chair.
Wardlaw: Okay, members, seeing no further questions, this budget is being held to this afternoon for that additional information. So we’ll move on to the Capitol Zoning Commission. Billy, you are recognized.
Capitol Zoning Commission
Bureau staff: Thank you, Mr. Chair. We’re on Capitol Zoning Commission. This is towards the beginning of the manual, page 216. So we’re going back to page 216. The commission regulates zoning, development and design within the capital zoning district pursuant to a master plan formulated and maintained by the commission. Page 216 shows state contracts awarded to minority-owned businesses, employment summary, and publications. On page 217 is their Department appropriation summary. The division has two appropriation requests. One has a change level. The total authorized budget in ’23 is $256,000 in spending authority. The commission requests a 1% change level for personal services matching in the second year of the biennium. The executive recommendation provides for that request. The commission is funded from general revenue and cash funds in the form of civil fines. On page 218 is their operations appropriation, and it provides for the administration of the commission. It’s supported by the general revenue fund. On page 219 is their summary. $254,000 was authorized. There is no change in 2024, but in 2025 is that 1% bump for personal services matching. And that’s just to carry forward the adjustments made in the current biennium. The funding sources table shows that the commission collected $145,000 from general revenue. And the next page is page 220. This is the Zoning District Cash Fund, and this allows the commission to spend from the assessment of civil fines. It’s supported by a cash fund account. On page 221 is their appropriation summary, and there is no change level. $2,000 was authorized in ’23, and that is requested for the biennium. And the executive provides for this request. Mr. Chair, that is the Capital Zoning Commission.
Wardlaw: Seeing no questions, do I have a motion? I have a motion from Representative Jean and a second by Representative Fortner. All those in favor say aye. All opposed? Ayes have it. So with that, committee, we are done till after lunch. Thank you, guys.
Parks and Tourism continued (Item held from a.m.)
Wardlaw: We’re going to go ahead and get started. We’re going to start off the afternoon with where we held this morning. And I think Mr. Paul Lothian and DFA have an explanation on the interest and how the interest is accrued and spent. So, if we would, we’ll recognize Mr. Paul Lothian.
Lothian: Thank you, Mr. Chair. Paul Lothian, DFA, Office of Accounting. There was a question earlier this morning or earlier today about the cash or investments earnings. At a thousand-foot level, it breaks down this way. General revenue and special revenue generally go into the Securities Reserve Fund, and that fund is used to fund separate items within the state’s budget. It’s not specific when it goes into that pot back to an agency. It’s distributed on a monthly basis according to a formula, and I’ll go through that more in just a minute. Trust funds specifically earn their interest back and it’s credited back to them. And there are cash funds that are designated with an end. They’re called end funds. And those cash funds held by agencies get their interest earnings back on a monthly basis also. So that’s the basic way that the interest is put out there. The Securities Reserve Fund has the interest earnings from federal funds, general revenue, some miscellaneous, and as I said, most of the special revenue funds. A monthly distribution is made and that comes out to the cash and treasury funds. The end funds get their distribution each month. The State Highway and Transportation Fund gets the earnings from their funds each month. Game Protection Fund of the Game and Fish Commission gets their funds each month. And then specific federal funds, Help America Vote, Intergovernmental Services, and the CARES Act Funds got their interest each month. At the end of the year, there is a $5 million transfer from that Securities Reserve Fund to the Budget Stabilization Trust Fund. There’s $20 million that goes to the Highway Department, and then there are reimbursements that are eligible from those earnings also. The Correction Farm Fund is one of those reimbursement funds. The Department of Military Call-Up Account, Disaster Assistance Fund, State Central Services, and the Board of Election Commissioners funds. That fund, the Securities Reserve Fund, is taken down to a $100,000 balance at year end, and that starts the next year’s fund balance. Any remaining funds then go to the Catastrophic Reserve Fund at the end of the year. If you’ll bear with me just a moment, I’ll give you an idea of what happened in 2022. In fiscal year 2022, it was just shy of $70 million earned in interest. The Highway Department received a little over $6 million in interest. Game and Fish Protection Fund got just under $700,000. The end funds, the cash funds of the agencies got right at $1.4 million. Federal funds are $992,000. County Aid and Municipal Aid each received $752,000, almost $753,000. And that is a percentage of what goes to the Highway Department on their earnings. State Central Services got $179 million– I’m sorry, $179,000. Constitutional Officers got $86,000. Budget stabilization Trust Fund was repaid $17,850,000. And along with it got the $5 million annual transfer. Catastrophic Reserve Fund was transferred– was given $9.9 million at year end.
Rice: Okay, have the report. And I’ve got Representative Wooten first.
Wooten: Thank you for coming. Thank you for putting that information together, which you probably knew that off the top of your head. But my question is, I got a report here. You’re talking about several million dollars for the Highway Department, Game and Fish. I’ve got a report here that the Parks and Tourism invested or had a fund balance of $22– well, $23 million, and they made $13,000 on that. And I’ve got another example here of an investment of $1.15 million, and they made almost $100,000. Then I’ve got another one on this page from Parks and Tourism or from y’all– I’m not sure you all put it together. They got $29 million, but no interest is shown. Now, I understand it’s $29,536,593. Now, I understand that interest on all these funds could be used in different places, but we never see that. We never see or understand or comprehend. I don’t understand. Maybe you can answer the question why we don’t have– if an agency pays interest during the year, why isn’t that a line item in their budget? And if they have funding sources in every budget, and I went through every one of DFA’s and any of them that had a fund balance, there was no interest income shown anywhere. And I just think when you’ve got $2 million, $3 million, $20 million, or $40 million invested, you’re making interest on it, it ought to be shown as income wherever it shows up. If that agency does not get that money back and some other agency does, then they ought to show interest income because that’s a line item, a funding source to them. They’re using that money. Does that make sense?
Lothian: Yes, sir.
Wooten: Why don’t we do that?
Lothian: I’ll argue with you here in a minute if you give something I could argue with you here on. Here’s what this boils back to, though. Let’s go through the three accounts you just spoke of, okay? Can we do that?
Wooten: That’s fine.
Lothian: All right. The $29 million, the SPT fund, that is not a fund that specifically gets its interest back. It’s not a trust fund.
Wooten: You didn’t hear what I said. Where did that money go?
Lothian: It’s back into that big pot that I spoke of at first. It is a special revenue. And so it goes into that big pot that I spoke about. And I talked to you just a second ago about where that money went.
Wooten: So it goes into that big pot now that’s divided up among other agencies?
Wooten: Okay. Can you show me any budget in here other than what we went through today that shows interest income under funding sources?
Lothian: I’d have to go through the budget. Sorry, I’m not–
Wooten: There’s not many of them. Why is that? Who draws the rules of what’s going to be in there?
Lothian: It should have been listed as an other funding source–
Wooten: Okay. I looked at one that had a $10 million fund balance and showed $1,312 in other funding. So that don’t fly. What we’re trying to find is where is that money going?
Lothian: Again, it depends on whether that fund receives interest back directly to the fund or not because what you’re going to find is most of these funds do not receive their interest back.
Wooten: Okay, but it’s going somewhere. Here’s the point. Y’all won’t listen.
Lothian: I’m trying, sir.
Wooten: Here’s the point. The money is going somewhere and it needs to be reported as income so the taxpayers of this state know that we’re being– I don’t call managing– I don’t call $13,000 on a $22 million investment as much of a return. Something is not right, and it has to be safe return, low risk. But why can we not have in our budgets, if an agency pays interest out on borrowed money, show it as a line item expenditure, and then showing funding sources because they ought to make more than $13,000 on $23 million?
Lothian: I will go back and look at these specific accounts to see what the issue is. There’s obviously an issue. When you look at the–
Wooten: What I want to hear you say–
Lothian: I’m sorry.
Wooten: What I want to hear you say– and I know you’ve been over there a long time, and I have a great deal of respect for you.
Lothian: Thank you, sir.
Wooten: But the problem is we’re not showing it as it should be shown, at least in my opinion. And several others have expressed the same thing. If an agency pays– why can’t you answer this? Why can’t you have a line item if they pay interest out? I budgeted in my business. I knew exactly what my interest outflow was going to be in a year, and I knew exactly what my income was going to be from funds I had invested. So why can’t we do that? Why can’t we have that on these budgets?
Lothian: Okay. If the fund that we’re looking at had interest income, it should have been listed under ‘other’ on that fund. If it’s paid out, it would show as an expense, okay? And it will be grouped in those accounts that are categorized as–
Wooten: Is it shown as interest expense?
Lothian: Well, it is when you look at the GL detail. When you start looking at the budgets, they roll those numbers up to the categories of operational expenses, capital items.
Wooten: Well, we need to change that. We need to break that out.
Lothian: Well, it should be in here.
Wooten: It’s going to take a law? Am I going to have to introduce–
Lothian: No, sir. It should be in that manual broken–
Wooten: –legislation to ask y’all to please show interest expenses and interest income? If I have to, I will.
Lothian: Again, and I’m just going to be honest with you. I haven’t looked at the budget manual in three or four years. But when I did that, when you looked at those, there’s a page that rolls it up to the commitment item level. The twos, threes, 00’s, those commitment items that are salaries, benefits, and stuff. Behind that, there is another page that has general ledger detail. And if there’s an interest expense item, it should be listed in that general ledger detail number, okay?
Wooten: But we don’t see that.
Lothian: Well, again, I’d have to look at the budget manual that you were handed. But that’s what I used to see when I looked at it.
Wooten: It’s not showing that any of these as budget– as interest expense or interest income. That’s the point. That’s simple to me. You’ve got the number anyway, every agency should have it.
Lothian: We have it.
Wooten: And if they get interest income, even though they have nothing to do with the money that raised the interest, they still get that income and interest. And that should be a category unto itself.
Lothian: Well, if they receive interest, we have that on the general ledger as interest income. And if they expend it, we have it on the general ledger as interest expense. I have to do the state’s financial statements. That then is transferred over to your budget manuals. And as I said, I’ll go back and look, take an agency and go through it and look at it after we get through here today. But that information is in there somewhere because it has to be the balance back to the general ledger that we–
Wooten: I’m sure it does. I’m not questioning the system. I’m just questioning that it’s not showing up here. And you’re talking about a pretty good amounts of money when you look at the fund balances. And then none of them show interest income. And they’re not being included in the fund balance. So all I’m asking is just to break it out, interest income, interest expense. And that’s all. Mr. Chairman and committee, I thank you for your forbearance. But I feel like it’s something that we need to look at in more detail. Thank you very much. Thank you for your time and effort.
Lothian: Yes, sir.
Rice: Thank you, Representative Wooten. And Kevin said he would work with him to get the breakout on that. Not seeing any more questions, we covered this this morning. We are ready for a motion for number five, State Parks and Tourism division for executive rec. Have a motion from Senator Leding. Have a second? Second from Representative Richmond. All in favor, aye. Opposed. Thank you, Mr. Lothian, for your report. And we will now go to– Legislative audit has a report, if you will come on up. If you’ll introduce yourself, and we’re ready for your report.
White: Kevin White, Legislative Audit.
Welch: Matthew Welch, Arkansas Legislative Audit.
Rice: Thank you. You can proceed.
DFA Audit Report
Welch: I’m going to present the audit findings for the 2020 DFA Departmental Audit. There were two findings that year. The first finding was a situation in which three Revenue Office employees were circumventing controls when processing the registrations on both new and used vehicles, preventing the state from collecting any sales tax due. These employees processed over 400 improper transactions in which they allowed owners to register their vehicles by either paying an amount below the sales tax due or nothing at all. One of the employees actually processed registrations on two of his personal vehicles in this manner. The total amount the three employees benefited from the improper transactions cannot be determined based on how the situation was carried out. The amount assessed to the registered owners totaled over $890,000. This amount includes $553,000 in sales tax due and the rest being penalties and interest. All the registrations processed in this manner were suspended in the system until each vehicle owner contacted DFA to have the issue resolved. One employee was terminated from their employment, while the other two resigned. The employee who processed transactions on his personal vehicles was charged with two counts of forgery and two counts of attempt to evade or defeat a tax. The second finding involved a Springdale Revenue Office employee circumventing controls surrounding the deposits of daily collections. On five separate occasions, the employee did not deposit the entire day’s collection, causing the bank account to be in overdraft status. The deposits retained by the employee range from $4,000 to over $11,000. However, the employee did end up depositing the rest of the misappropriated funds the very next day after each collection should have been deposited, resulting in no loss to the state. When questioned by DFA officials, the employee acknowledged delaying the portions of each deposit and resigned. Now Kevin will present the single audit findings.
White: Thank you, Mr. Chair. While Mr. Matt Welch presented the findings for DFA related to the financial audit. I’m going to present the findings under the Federal Single Audit that relate to DFA. These findings are for the fiscal year ending June 30, 2021. The DFA had three findings under the single audit. All three findings relate to the Coronavirus Relief Fund. These findings are included on pages 7 through 12 of the agenda attachment. The first finding relates to the cities, towns, and counties project. The finding relates to the supporting documentation on hand with the DFA for funds dispersed to local entities. Based upon Legislative Audit’s review of the support, we identified exceptions with expenses incurred outside the allowed time period for the federal grant. Also, an exception was noted relating to expenses already reimbursed to the local entity by a different federal grant. The second finding relates to known or likely fraud affecting the federal award. Legislative Audit became aware during the course of the audit of certain payments by DFA to vendors for products never received. Furthermore, a civil lawsuit against various companies and individuals was filed by the Arkansas Attorney General alleging actual or constructive fraud in October of 2021. Due to the federal reporting requirements, we have included this as a finding in our report. The third finding relates to the reporting of the expenditures under the Coronavirus Relief Fund to the federal government. Based upon Legislative Audit’s testing, we identified various instances of reporting errors as detailed in the finding on pages 11 through 12 of the agenda attachment. Thank you, Mr. Chair, and thank you, committee. That concludes my presentation of the fiscal year 2021 single audit findings related to DFA.
Rice: Thank you. And these have been through the audit subcommittees, is that correct?
White: Yes, sir.
Rice: A couple of them I recognized. So anyway, they have had some legislative overview. And I have a question from Representative Wooten. You’re recognized.
Wooten: On page 9, is this the $10 million that was paid before we ever got the merchandise, before we ever received it?
White: Yes, sir, that’s correct.
Wooten: This is it. Do you know where that litigation stands?
White: Sir, I’ve tried to keep up some with the filings in court. I believe that some of the entities have gotten maybe default judgment. Maybe some of the entities they were still looking for. I think possibly one had some money they were looking to turn to the court. DFA is going to be better informed of the current status of that case though.
Wooten: Okay, can we hear from them?
Rice: Yes, they will be coming up.
Wooten: Okay, thank you.
Rice: Not seeing any more questions, thank you gentlemen for your report. Yes. Paul, if you come up and go ahead and address that, that’d be great. You heard Representative Wooten’s question?
Gehring: I did. Thank you, Mr. Chair. Paul Gehring, Department of Finance Administration. Representative Wooten, you had inquired about the ongoing civil litigation that the DFA is involved with, along with UAMS. We, through a number of meetings that we had with the Attorney General’s Office, the Attorney General commenced a civil action against a number of different companies and individuals that entered into agreements with the State of Arkansas to provide personal protective equipment as well as ventilators. We’ve had a number of hearings in the case. The case is pending here in Pulaski County. There are a few individuals in that litigation that have been unable to be physically served with litigation due to being unable to be located by the Attorney General’s process servers. But certainly, at this time, there is one individual that is down in– that serves as an escrow agent that has approximately $4 or $5 million held in escrow for one of those transactions. We’re making efforts to see if we can get that money to be paid to the registry of the court. But currently, that’s where that litigation stands. We have not yet got a full recovery of those funds, but the Attorney General is actively working on the case.
Wooten: Question, if I may, Mr. Chair. Can you explain how this happened? I mean, I know it was urgent. I understand the medical emergency and all that, but why did we pay $10 million to a firm over in China before we ever got the merchandise? I think I know where the money went.
Gehring: Well sir, those funds were paid to escrow agents here in Arkansas. But of course, the product was originating, at least somewhat of the product ordered from outside of the United States. But certainly, I think you hit it right on the point is that it was urgent. We were dealing with the pandemic. And certainly, there was also a scarcity of these items being needed that were crucial to providing care for patients here in Arkansas as well as the caregivers in Arkansas. But certainly, under normal circumstances, you would have a much more– you’d have a different process in place for obtaining these items that were being purchased.
Wooten: I don’t like having to do this, but I just don’t understand paying out $10 million ahead of time. I could understand making a deposit upon delivery. We’d pay the balance. Did this go through procurement? And was this for UAMS or was it for the Health Department? Who was this for?
Gehring: DFA worked in conjunction with UAMS for purposes and their procurement team. This did not go through ordinary procurement because of the state of emergency due to the pandemic. But as I stated earlier, these funds were paid to escrow agents that were located here in the United States and that the funds would not be released to the vendors until they had fulfilled their– the vendors had fulfilled their obligations under the agreement.
Wooten: Well, did we know this firm? Did we know them? Tell me how this all came about, can you? Or do we need to get someone in from UAMS, too? Paul, can you shed any light on it?
Lothian: Yes, sir. Paul Lothian, DFA. What was happening at the time, we were using a buyer at UAMS who was working with escrow agents along with other brokers to secure the products that we needed. And like in this case, we were giving money to them, and it was going to an escrow agent for safekeeping until such time as the product was delivered. They would not schedule production and put the state’s name on what was going to be made until the receipt was acknowledged by that escrow agent, or they would not make the product, just that simple. Two or three times, even after we did that, we got outbid for it after the production was made and left China, and it was then sold to somebody else at a higher pRice than what we had originally agreed to purchase for. Just to be honest with you, it was the wild, wild west. There were all kinds of things going on. We had to do what we had to do to make the purchases we needed. And as it turned out, three or four of them didn’t work out as well as we hoped. The rest of them we got the product. We got it in and was able to distribute it to the people we needed to. A good example of that’s the ventilators. We had an order coming in and New York State outbid us on this one. And they were transferred from delivery to us to delivery to the New York State. It’s unfortunate it happened, I understand that. But we did what we could to safeguard the money at that time thinking that an escrow agent would be a reputable business and do their business in a reputable manner, and it simply did not happen.
Wooten: Okay. One more question. Do you know of any other state that has ended up like we have? Has any other states filed a suit that you’re aware of?
White: Representative Wooten, I’m certainly aware that, and we keep informed of the active cases that are involved, there are cases like this both of a civil nature and a criminal nature very widespread in the United States. So I wouldn’t say that we are uniquely experiencing this situation. But certainly, as Mr. Lothian pointed out, the far majority of the matters that we were ordering product, the vendors and the brokers, they worked appropriately. These particular transactions at issue, we did not get performance from the vendors and the brokers, unfortunately. But we’re working very actively with the Attorney General to get this money returned to the State of Arkansas.
Wooten: Okay. Thank you, Mr. Chairman. Thank y’all.
Rice: Thank you. Representative Cavenaugh, is your question for these gentlemen?
Cavenaugh: Thank you, Mr. Chair. My question is if we gave the money to the escrow agents, why don’t we get the money from the escrow agents?
White: They are parties to that litigation and we have sued those escrow agents as a part of the litigation. We’ve made every effort to get those escrow agents to pay those monies into the registry of the court here in Arkansas. They have not agreed to do so but we’re certainly making every effort to have the court compel those escrow agents to pay the money into the registry of the court.
Cavenaugh: Okay. When we checked out these escrow agents, did we do due diligence in finding out if there were any claims against them for some similar action by other people?
Lothian: No, ma’am, we did not.
Cavenaugh: Okay. The other question I have– that’s very telling. The other question I have is will we be required to pay this money back to the Feds if they audit us?
Lothian: I would think so, yes.
Cavenaugh: Okay, thank you.
Rice: Representative Tosh, you’re recognized.
Tosh: Thank you, Mr. Chair. You said a while ago that the process server has not been able to serve some of these individuals with, I guess, this civil litigation that is pending. I guess what I’m curious about is, are these individuals or is it an attempt by them to avoid the serving of these civil papers? Or is it just a lack of effort on the process server? Or do you really know at this point?
Gehring: I would say that for certain defendants in the action, it’s being unavailable for service within the United States, that some of these entities are located on the western part of the United States. And they have been unable to be found physically within our borders of the United States. The far majority of the defendants have been served though.
Tosh: Okay, thank you.
Gehring: Yes, sir.
Rice: Senator Elliott, you’re recognized.
Elliott: Thank you, Mr. Chair. I remember well the chaos of the emergency that we were in. That’s the best word I can think of for it. It was really chaotic. And the Wild West idiom that we went through, I remember reading a great deal about. We thought we had something then we don’t, because New York has more money than we do and so forth. And from several years of serving on the Review Committee, I know there can be different ways, such as sole source, that we go through the procurement process. And in this case, was there something in the state of the emergency that we used some other process that’s in place? Since we did not use a regular process, exactly what was the process that was used?
Lothian: It boiled down to the fact that we had a gentleman at UAMS that had years of experience procuring these type of products, had knowledge of brokers that could help us. And he was assigned to go out and find what he could, where he could, at the best price. And we used whatever leads he came up with to purchase the product at that time.
Elliott: And I don’t remember. Was that ever reported to the Review Committee, or was it just totally a standalone process?
Lothian: My best guess is no. If you remember, there’s a law that says that in an emergency, we can waive those processes and procedures. And we put that notice out. It was made public. And we did the best we could.
Elliott: There’s a big difference in that and a sole source contract, which gives some of us heartburn sometimes. The big difference is time. We have the time to go through the process for our sole source. Emergencies don’t respect our timelines. And so I would guess, good, bad or ugly, that’s the position we were in, not time for sole source, which it would have been had we been able to follow that timeline. But it was just a matter of time that we had to do something. And under the emergency procedures that we have, this is how we were able to do it. And it does stand to reason to me that when you do that, you don’t have time to do all of the background checking you need to do. You do what you can to do the best you can and hope we have folks who are legitimate and will do what they’re supposed to do. But it’s just like loaning your, I’ll just say, son-in-law some money. You hope things work out because that’s somebody you know, somebody you might respect. But there is no guarantee in an emergency. That’s how I see, in essence, why we’re in the position that we’re in. You’re doing what you had to do. Would that be a fair characterization of what happened?
Lothian: Yes, ma’am. There was times when I had 15 minutes to make a decision, yes or no, knowing that if I said no–
Elliott: You’re not going to get–
Lothian: –would not have an opportunity to buy that product.
Elliott: That’s right. Yeah.
Lothian: And we had to find others, so.
Elliott: I remember that well. Okay, thank you.
Lothian: Thank you.
Rice: Also, even when you said yes, they still stole it for somebody who paid more. Yeah. Representative Beck, you’re recognized.
Beck: Thank you, Mr. Chair. Two questions. And I’ll just ask them both, and then y’all can decide who wants to answer. The number one question is, what would prevent this from happening again? Then the number two question is, I understand that– I hear terms like, well, many of these people we’ve been served, some of them haven’t. But I don’t hear any numbers. So in terms of the dollar numbers, how many of these things have actually been served? So in other words, of the $20 million, $15 of them have been– $15 million worth of this or whatever. So give me some numbers as to really how well we’ve got this captured, how we could possibly get some of this back. And then the other thing is, what’s going to prevent this from happening again?
Gehring: Representative Beck, I’ll be happy to give you the number of the defendants, as well as the number when they were served and any remaining defendants that have not yet been physically served with the litigation. Would it be all right if I provide that information to you later today?
Beck: In terms of the dollars, is over half of that money just gone and we can’t find these people that are out of the country and it’s not going to happen? Is it 2025%, or– that’s kind of the number I’m looking for there.
Gehring: I understand now, Representative Beck. Yes, I’d be happy to provide you. The escrow agent that’s located in the state of Florida has approximately, I believe, $4 to $5 million in that escrow agent’s account. I’ll be happy to check on the other escrow to determine exactly where those funds are at for purposes– we certainly don’t have a feeling that this money is just gone and not going to be recovered. We’re actively working with the Attorney General to get all of it returned back to the state of Arkansas, but I’d be happy to get you the exact figures here later today. I’ll work with my staff and my office and get that to you.
Beck: Thank you.
Gehring: Yes, sir.
Rice: Representative Cavenaugh, you are the last one I’ve got on the screen.
Cavenaugh: Thank you.
Beck: And my second question?
Lothian: We have a good process in place for standard operations that we have. Just to be honest with you, if you we get back in the same situation we found ourselves in during that time period where there’s a worldwide shortage of supplies, you might have a couple more people trying to help the person doing it, but when you’re given 15 minutes, 20 minutes to make a decision, you ask, can we get the money in escrow, can we do anything to protect the money as best we can. As we saw, sometimes that doesn’t work. You get the scheduling set up and you hope to get the product paid for at the time it hits the airplane. And that’s about the best you can do. And it worked in a lot of cases. We were successful in a lot of ways, but these stand out like a sore thumb, sir. And I understand that. But I think, given what was going on and the amount of time period we had to operate in and who we were dealing with, understanding where most of the product was coming from, I don’t think we did too bad. I don’t like it, but I don’t think we did too bad.
Rice: Thank you. And I just throw out, if you want some stories from private business, I can give you a name or two to call, because even in non emergency times there’s a lot of stories because that stuff is paid for when it hits the water. Of course, you know if it sinks, you got to have insurance. If it doesn’t get there, you better have a deal. But there’s a lot of things happen that wasn’t in this emergency situation. We do appreciate the questions because it is a considerable amount of money, but we appreciate you handling that. Representative Cavenaugh, now you are my last one on the board.
Cavenaugh: Thank you, Mr. Chair. Who recommended the escrow agent?
Lothian: I would have to assume that it was the gentleman that was working at UAMS. The broker he was dealing with, I’m sure, said, here’s the escrow agent we’re using. We’re brokering this product. Here’s who you’ll be able to put the money to.
Cavenaugh: Okay. If we’re successful in getting this money back or some portion of it, we will have to turn that over to the feds, will we not, because we passed the deadline for spending? Is that correct?
Lothian: No, the money was spent in time and purchased the product that was eligible. I don’t think we have a problem if we get the money– well, if we get the money back, you’re right. It’ll be part of what we send back, but it will be their money that we’re sending back to them.
Cavenaugh: Right. But I mean–
Lothian: It will not be state money.
Cavenaugh: Yeah. I think yesterday you said that there were going to be $8 million that was being turned over in COVID funding back to the government. If we collect this, this has to be turned back over also because it’s past the time.
Lothian: That’s correct.
Cavenaugh: Okay, thank you.
Rice: Okay. Not seeing any more questions. Thank you, gentlemen, for answering questions.
Lothian: Thank you.
Gehring: Thank you, Mr. Chair. Thank you, committee.
Rice: Next up we’ve got DFA. Secretary Walther is coming and whoever you have with you. And we’re going to have a presentation first by Adam Penman. Appreciate you all being here today. And we’ll let you identify yourself. And then Mr. Penman, you’re recognized to give your report.
Hayslip: Melanie Hayslip, Department of Finance and Administration.
McVay: Alan McVay, Chief of Staff for the Department of Finance Administration.
Walther: Larry Walther, Secretary, Department of Finance and Administration.
Rice: Thank you.
DFA Shared Services
Penman: Thank you Mr. Chair. Can everyone hear me? Okay. All right. I’m Adam Penman, analyst with the Bureau of Legislative Research. We are starting this– today, we’re looking at– in your binders, it’s going to be under your second tab. We’re starting with page 2 with the Department of Finance and Administration, page 2 in your binder under your second tab. This is the Department of Finance and Administration, Administration and Shared Services’ Division appropriation. On page 2, you see the department summary. And there are nine total appropriations here, but these are also split between DFA Administration and Shared Services and DFA Regulatory Division because they both share a 9906 business area. There are nine total appropriations. In DFA Administration, that’s the second appropriation on the summary, that has a change level. They’re requesting $4.3 million for FY 2024 and 2025, and the Executive provides for the agency request, except for various personnel changes. And then the rest of the appropriations are related to DFA Regulatory Division. We have two there with change levels, and the Executive provides for the agency request. They’re requesting $5.7 million for FY 2024 and $5.8 million for FY 2025.
Penman: So let’s go through the appropriations that have changes. We’ll flip the page. On page 3 and 4, this is untaxed tobacco revenue. This is a new appropriation that funding is provided by the Tobacco Forfeiture Fund, which comes from the Director of Arkansas Tobacco Control’s ability to seize and hold for disposition of the courts or Tobacco Control Board all tobacco products found in the possession of a person dealing or a consumer of these products under certain circumstances. The agency is requesting $100,000 in each year of the biennium for tobacco enforcement, and the executive recommendation provides for the agency request. The next appropriation, this is on the summary on page 5 and the summary on page 6. This is for the Department of Finance and Administration, Administration and Shared Services Appropriation. This is funded by State Central Services and provides for operations of the Shared Services Division within DFA. The agency is requesting appropriation of $4.3 million for FY 2024 and FY 2025. As you can see on the summary, they’re asking for including the following change request of various personnel changes, and the executive recommendation provides for the agency request with the exception of various personnel changes.
Penman: Next one. Next page is going to be page 13 for the summary and then page 14 for the appropriation summary. This is for the Tobacco Inspection Program. This was from a grant first awarded in fiscal year 2010, which allows Arkansas Tobacco Control to assist FDA in inspecting retail establishments and is federally funded. The agency is requesting appropriation in the amount of $714,000 for FY 2024 and $720,000 for FY 2025, and the request includes the following personnel changes as noted on the summary page, and the Executive recommendation provides for the agency request. Our next appropriation with change levels is going to be the summary on page 17 and the appropriation on page 18. This is for the Arkansas Tobacco Control revenue enforcement. This is utilized for operating expenses of Tobacco Control Board enforcement and is funded by Arkansas Tobacco Control Revenue Fund. The agency is requesting appropriation in the amount of $347,000 for FY 2024 and $349,000 for FY 2025, which includes a continuation of capital outlay, and the executive recommendation provides for the agency request. And Mr. Chair, this concludes my presentation for DFA Admin.
Rice: Thank you. Representative Cavenaugh, you’re recognized.
Cavenaugh: Thank you, Mr. Chair. Over at your right. I’m just going to ask you about your excess funding because that’s the theme of the budget this year. So if you’ll notice on page 18, there shows to be quite a bit of a fund balance, $2.1 million, and your expenditures are $349,350. What’s the plan for the fund balance?
Hayslip: Yes. I actually spoke with Tobacco Control today. This is money that they do receive. The money that goes into this fund is their fees and licenses. So what we’re going to look at doing and what the plan is that we’re going to look at better allocating some staff cost. So the enforcement officers, a lot of them right now are being charged to general revenue. This is a perfect fund source for the work that they do on tobacco. So we’re going to redirect some of those costs over to this fund to better utilize those fees.
Cavenaugh: Okay. One thing I just want to make sure is that we’re not just going to move expenses around to use this fund when we could in turn give refunds back to the people who have paid that. Because if we’re taking the funds from them, that’s who deserves it. It’s not for us to allocate our other expenses to use a fund because we’ve over collected fees.
Hayslip: Understood. Right now, the retail permit fee is $100 yearly, and they’ve got about 4,000 of those. The wholesale permit is $1,000 yearly. They’ve got about 1,000 of those permits. Yes, looking at fees is definitely something that we will also do. But in moving that money around, we’re also saving general revenue. So that’s also a good thing, although we will look at the fees. And if there’s an opportunity to reduce, then that is there as well.
Cavenaugh: Right. Yes, because they’re the ones that are paying this. And this is a special revenue, and it’s supposed to be used for just certain things. And I don’t really like the idea of reallocating expenses somewhere else if we can actually give the money back to the people that it belongs to.
Hayslip: Yes, ma’am.
Walther: Yeah, it needs to be appropriate use of the fees that we’re receiving. No doubt about that.
Cavenaugh: Okay, thank you.
Rice: Thank you. Representative Dotson, you’re recognized.
Dotson: Thank you, Mr. Chair. Just along that line of general revenue, how much do you anticipate actually reducing the general revenue request in the future once you’ve made that allocation change?
Hayslip: I don’t have that number right now, but we can work on getting you that number.
Dotson: Okay. Thank you.
Rice: Okay. Not seeing any more questions, do I have a motion for executive rec on number 7 on tobacco forfeiture? I didn’t hear. Sorry. Need a motion. Have a motion. Have a second. All in favor, aye. Opposed? Number 7 passes. If you will, proceed on number 8 for DFA disbursing officer.
DFA Disbursing Officer
Penman: Thank you, Mr. Chair. Next, we are going to DFA disbursing. This begins on page 36 for disbursing officer. Their appropriation summary begins on page 36 and goes to page 38. As you see, they have dozens of appropriations. There are 12 that have change levels. And as you’ll see on page 38, there are 11 that are not requested to continue into the biennium. Those are related to ARPA and CARES funding. And in total the agency is requesting $9.8 billion for 2024 and 2025, and the executive recommendation provides for the agency request. And our first appropriation that is going to have change levels begins on page 44 with appropriation summary on page 45. This is for the unemployment compensation claims appropriation. It’s utilized for providing reimbursements to Department of Commerce Division of Workforce Services for unemployment compensation claims. And the fund comes from, state agencies are assessed a percentage of payroll totals to provide funding. The agency is requesting to continue appropriation in the amount of $16 million in appropriation for each year. The executive recommendation is to reduce the appropriation by $8 million each year of the biennium to a new level of appropriation of $8 million for each year. In conversation with the agency, this was to bring the appropriation down to historic spending levels. Our next appropriation with change levels starts on page 58 and 59. This is for drug enforcement and education. This is funded by monies deposited in the Special State Assets Forfeiture Fund, and they are distributed by the Arkansas Alcohol and Drug Abuse Coordinating Council for drug interdiction, eradication, education, rehabilitation, the state crime lab, and to drug courts. The agency is requesting to continue appropriation in the amount of $5 million for each year of the biennium. But the executive recommendation is to reduce the appropriation by $3 million each year of the biennium to bring the total appropriation to $2 million for each year.
Penman: Our next appropriation with change levels is going to begin on page 66 and onto page 67. This is for fire protection services. This is paid for by a premium tax of a half of 1% collected by the Insurance Commissioner on certain policies. And these funds are distributed to counties to be used by fire departments to upgrade fire protection services. The agency is requesting appropriation in the amount of $20 million for each year of the biennium, which is a $4 million increase in their grants and aid appropriation, as you’ll see on page 67. This would allow for a full disbursement of insurance premium funds to local fire departments, and the executive recommendation provides for the agency request. Our next appropriation with change levels we’re going to go to page 74 and 75. This is for Indigent Patient Emergency Medical Services Program. This provides disbursement of funds to defray the cost of hospitalization and other medical services in five Arkansas counties in the Delta, and the revenue is derived from 15 additional days of greyhound dog racing. The agency is requesting to discontinue this appropriation in the biennium due to ceased funding related to dog track racing ending in December of this year. And the executive recommendation provides for the agency request.
Penman: Our next appropriation with change levels, this is page 86 with appropriation on page 87. This is the Pregnancy Resource Center’s appropriation. This was from Act 187 of 2022 for the establishment of appropriation to pregnancy resource center grants, where funding was provided by a one-time transfer of $1 million from the Rainy Day Fund where funds would then be disbursed directly to the pregnancy resource centers by DFA. As this was a one-time transfer, the agency is requesting to discontinue this appropriation into the coming biennium, and the executive recommendation provides for the agency request. Our next appropriation with change levels, we’re on page 90 for the description and 91 for the appropriation summary. This is the Law Enforcement Stipend Grant. This is from Act2024 of 2022, and like the previous Pregnancy Resources Grant, this was established by a one-time transfer of– this was $50 million from general revenue allotment reserve for appropriation of law enforcement stipend grants. And as before, this was intended for a one-time transfer. So the agency is requesting to discontinue this appropriation into the coming biennium, and the executive recommendation provides for the agency request.
Penman: Our next appropriation with change levels is going to begin on page 100 with the appropriation summary on page 101. This is the state’s contributions appropriations section. This provides disbursements on an annual basis for Arkansas dues to various interstate organizations, and funding is provided by general revenue. The agency is requesting appropriation in the amount of $1.6 million for 2024 and 2025, and the agency request includes, as you’ll see on the summary page on page 100, the following appropriation and funding changes asking for increased funding across 2024 and 2025 for these four line items with the net increase of $8,800 for 2024 and $36,000 for FY 2025. The agency was also requesting an increase in general revenue funding to fully fund their requested appropriation levels, and the executive recommendation provides for the agency request and appropriation only.
Penman: Our next appropriation with change levels is going to begin on page 110 with the appropriation summary on page 111. This is the CARES holding account appropriation. It is similar to the next appropriation. This CARES appropriation provides for transfers of appropriations to state agencies, constitutional offices and institutions of higher education for expenses associated with the CARES Act. The agency is requesting appropriation in the amount of $10 million for each year, which is a decrease from the previous level of $1.25 billion dollars. The agency is requesting the change due to expiring funds, and the executive recommendation provides for the agency request. On the next page, 112 and 113, this is the COVID-19 CARES reimbursement. This is different from the previous appropriation because this appropriation provides for transfers of CARES funding for entities like local governments with fund accounts outside of the state treasury. These are for entities outside of the state treasury and outside of state government. Like the previous, funding is provided by federal funds, and the agency is requesting to discontinue this appropriation in each year due to expiring funds. And the executive recommendation provides for the agency request. And then next we have the discontinuations, which as stated before due to ARPA and CARES funding. And Mr. Chair, that concludes my presentation for DFA disbursing officer.
Rice: Thank you, Mr. Penman. Representative Cavenaugh, you’re recognized.
Cavenaugh: Thank you, Mr. Chair. My first question is going to be on page 43, which is Disaster Assistance grants. Can someone explain to me exactly what these funds can be used for?
Hayslip: I’m trying to figure out how to say it. These are disasters declared by the Governor. And so he does a proclamation which releases funding for whatever those disasters are at certain amounts. So it could be tornadoes; it could be the flooding. This was also used originally dealing with the PPE purchases that was discussed earlier. Part of this money was used for that. What else–?
Cavenaugh: Does it have to be a federal disaster? Or is it just declared a state?
Hayslip: No, it can be state.
Cavenaugh: Okay. Then with our cattlemen who have requested money because of the drought disaster, if memory serves me correctly, the Governor has declared that some counties are a disaster because of the drought. Could we not use money to help those cattlemen out of this disaster fund?
Hayslip: I would say yes.
Cavenaugh: But it would be up to the executive branch to ask for it, but this is what those funds were designed for?
Hayslip: That would be my understanding. Yes, ma’am.
Cavenaugh: Okay. And Mr. Chair, if there’s anybody else in the queue, I can quit, or I’ve got other questions.
Rice: We do have two more.
Cavenaugh: Okay, I’ll get back in. Thank you.
Rice: Thank you. Representative Dotson, you’re recognized.
Dotson: Thank you, Mr. Chair. Page 95, the American Rescue Plan Appropriation, you’re asking to continue $6.2 billion in appropriation, but this is for the next fiscal year, I believe. Haven’t we spent quite a bit of these funds already to where– I don’t anticipate we’re going to be getting any more from this particular act or this particular appropriation. How much appropriation do you actually need to cover this particular fiscal year?
Hayslip: Okay. So there’s a combination of items there. You have the federal direct appropriation, which is what’s going directly to colleges, universities, and state agencies. I do not know how much more they have that they will get. So that was one of the reasons for leaving it. Now, the federal appropriation of the $1.6 billion, we could potentially reduce that. Yes, sir.
Dotson: If I recall, we’ve already authorized a significant portion of that, but I don’t know how much has been spent or will be spent by the next fiscal year. Can you get an actual number that we can possibly get this down to that’s more in line with what’s– will be spent during that fiscal year?
Hayslip: Yes, sir, we can do that.
Dotson: And if we can do that before we wrap up this section, I’d like to get that number so we can slot it in here before we approve this. Thank you.
Hayslip: Not a problem. Thank you.
Rice: Representative Wooten, you’re recognized.
Wooten: Thank you, Mr. Chairman. My question is on page– questions, on page 36 about the fifth item down, personnel service overtime. The actual expenditure is $0. And then we got $6 million in there and we carry that all the way through 2025. What’s that about? And why would it– is that a new item?
Hayslip: Representative Wooten, that is not a new item. That is something that has been there. That is actually a holding appropriation for all state agencies to come to Peer and ALC for approval to use. So if a state agency runs short of overtime appropriation, they can come to Peer and ALC and request money out of that holding. It’s just a holding. There is no appropriation ever spent out of there directly.
Wooten: So why do we have it?
Hayslip: DFA has various–.
Wooten: I mean, are we tying that $6 million up? I mean, it’s there. It’s in the budget.
Hayslip: It’s in the budget, but it is only used if an agency requests it through Peer and ALC.
Wooten: But if they never request it?
Hayslip: If they don’t request it–
Wooten: Would you know when the last time was they requested it?
Hayslip: Actually, DFA requested some this fiscal year.
Wooten: This fiscal year?
Hayslip: Yes, sir.
Wooten: Okay. Next question is on– I understand miscellaneous grants. The next one is on the Administration of Justice Fund, $25 million and they spent $1.8 million.
Hayslip: Two things going on there, sir. One is the funding that’s received on the AOJ, Administration of Justice fund has decreased over the years. Where it used to be a rather substantial amount, it has dropped. The second part of that conversation is a lot of the money that comes into the AOJ fund is moved out via a transfer versus an expense. So we’re not hitting this appropriation for that because we’re doing it through a legal fund transfer, just moving the agency the money. So there’s money that goes to Admin Office of the Courts. There’s money that goes to Department of Public Safety. Those items are done via transfer of funds instead of issuing a check.
Wooten: On the next page, we have miscellaneous workforce investment programs, $100 million, no expenses. Is that new or–?
Hayslip: No, sir. Again, that’s not new. That’s another holding appropriation.
Wooten: For what?
Hayslip: Hold on just one second. Okay. I’m sorry, sir. It is the same thing, Representative Wooten. It’s a holding appropriation. I’m being told that it’s used by DWS for workforce investment. I am so sorry.
Wooten: When do they use it?
Hayslip: It’s when they receive federal grants.
Wooten: Oh, so this is some of that Washington money still coming down here. It’s got us in the fiscal mess we’re in, right? Because we’re not spending it. So do we need it? And I know the old saying. I know what everybody says. Well, if we don’t, somebody else will. But that’s why we’re in the mess we’re in. And that’s my final question of the day, Mr. Chairman, I think.
Rice: Thank you, Representative Wooten.
Hayslip: Thank you.
Rice: Representative Cavenaugh, you are recognized.
Cavenaugh: Thank you, Mr. Chair. I’m going to be looking at page 111, which is the CARES holding. You’re asking for an appropriation for $10 million in2024 and 2025. But why do we need this when we’re done with that funding? We’re done with it. You’re giving back $8 million. So why do we need this appropriation?
Hayslip: We’re done and not done. The $7.5 million or $8 million that we are requesting through Peer is for current money on hand that was returned. Earlier, you all discussed the court case going on. That is primarily what this would be used for, as well as any additional items that we may receive back in the meantime that need to be refunded. The intent with going ahead and getting this appropriation now is so that when we get that money, we can get it back to the Feds as quickly as possible in order to potentially alleviate any interest they might want back on that if we hold it too long.
Cavenaugh: Do we have an indication of how much of the lost PPP money really is and when is the last time that they can actually have to spend this and give it back?
Hayslip: All the money that has been spent– that can be spent has been spent. So at this time, this could be potentially companies returning money because they figure out they weren’t due that money. It would also be that court case when it gets settled and we get a return of those funds.
Cavenaugh: Okay. I’m assuming that you monitor the monies that you give to someone in their project to see if it met the requirements and that they spend it all. So how do you know if somebody owes us this money?
Hayslip: That would be an audit finding, ma’am.
Hayslip: We do monitor giving the money to the state agencies. It is up to the state agencies on those programs to determine the monitoring on the recipients.
Cavenaugh: Okay. Can I continue, Mr. Chair? Or is there somebody else in the– thank you. I’m going to go to page 43, which is– well, I’ve already talked about that one. Let’s go to 49. Nope, we’ve already covered that one. Sorry about that. 53, which is the Information Network of Arkansas. Just what does this actually do? Because it’s funded through fees. So what is this actual program? What does it do?
Hayslip: Currently, we are in an agreement with INA. They are building a licensing tool for state agencies to use, and we are paying them monthly for those services. That’s the primary thing that it’s being used for.
Cavenaugh: Okay, so how much a month are we paying them for them to develop this licensing tool?
Hayslip: Can you hold on just one second?
Hayslip: I can get that information for you, ma’am. I don’t have it on hand.
Cavenaugh: Okay, and how long is this agreement to pay them monthly for development of a tool?
Hayslip: One year.
Cavenaugh: And how long– what is that contract?
Hayslip: I apologize. I have not been deeply involved in the INA. We are paying the bills, but I’m looking for assistance.
Cavenaugh: No problem.
Lothian: Paul Lothian, DFA. There’s more to it than just this contract and just this license agreement program. These folks work with us to host the state network and the state web pages. There’s been an agreement with them at least 20 years. They’re a partner that’s worked with us for years and years. They do work for all the state agencies. We give them some funding on an annual basis. They also then do resources for us to do the other work. And then at times when there’s a special project that an agency wants, then they will contract directly with them to provide that service to them and say right, like you said, a licensing program or a collection of the fees program. But this is a situation where we have a board that administers this at a state level. There’s 10 or 12 people at the state agency level that are on that board. And this contract has been in place maybe as long as 15 years.
Cavenaugh: Okay, but this appropriation is just for your portion of the funding? Is that correct?
Lothian: DFA has provided funding for them for a couple of resources for us. They don’t work on just one thing. They work on multiple things for DFA and have over the years. In this case, they may be working on one particular thing. But this is a long-term history that we’ve had with these folks working with them because they started this program when the website first came up back in the early 2000s.
Cavenaugh: Okay. Because I’m just looking at the excess funding, what we’ve got there. So, I mean, right now it’s $2.2 million. I don’t know what we’re expecting to do with that. So that’s why I’m asking. Because it is collected from fees.
Lothian: Yes, that’s a piece of it. If you don’t mind, let me give you a written document–
Lothian: –that explains this whole process and how long it’s been in place.
Cavenaugh: That would be great.
Lothian: It’s worth reading and understanding.
Cavenaugh: Okay, that would be great. Still nobody else, Mr. Chair?
Cavenaugh: Thank you. So I’m going to talk about, just a real quick question on 67, which is the fire protection services. Is that available to volunteer fire departments or does that have to be department departments?
Hayslip: No, ma’am. That is available to rural and city municipal fire department.
Cavenaugh: So it’s available for both of them?
Hayslip: Yes, ma’am. And that is handled through the quorum courts.
Hayslip: We have to have a quorum court resolution on who receives that money.
Cavenaugh: Okay. And then on– let’s go to 81. This is the purchase of vehicles. And we’re asking for appropriation of $15 million each year for the purchase of vehicles. Can you tell me how many vehicles that the state actually owns?
Hayslip: I can get you that number. Yes, ma’am.
Cavenaugh: If you can get me that number, what I’d also like to know in that is what your average cost of the vehicles are? And if you can also tell me what the approximation of the life cycle of the vehicle is, meaning how often do we expect to have to replace those vehicles. Because I’m assuming in your pool, you’ve got so many every year that you’re going to try to allocate to replace. And that’s what I’m trying to see if we need the full $15 million to be able to replace what you anticipate, or is the $15 million to replace the whole fleet at one time? So that’s kind of what I’m asking about on that one. And on 85, this is dealing with Arkansas Children’s Hospital. It says hospital payments. Can you explain–what is hospital payments? I understand the intensive care, reproductive, and the burn. But what is hospital payments?
Hayslip: That money is given to DHS, and DHS gives that money to Children’s Hospital.
Cavenaugh: But we don’t know what the hospital payments are?
Hayslip: No, ma’am. I do not right offhand. I can see what I can find out and get it back to you.
Cavenaugh: If you could send that to me, I’m just kind of curious.
Hayslip: Yes, ma’am.
Cavenaugh: And Mr. Chair, I’ll get out and let somebody else in, and then I’ll get back in.
Rice: Thank you. Representative Dotson, you’re recognized.
Dotson: Thank you, Mr. Chair. Again, I appreciate Representative Cavenaugh just taking almost all the questions. I just– following back up on the last thing you asked with regards to the ARPA fund deal, can you also get the amount of that $4.6 billion appropriation that you– is there a way to find out what that number that’s already been used and how much is left for that fiscal year as well?
Hayslip: Yes, sir.
Dotson: So we can kind of slot as close a guess as we can in there. And I’m sure it’ll change by time we get to session and we may not need quite as much. But for the placeholder of this appropriation, I’d like to get that modified while we’re here.
Hayslip: Yes, sir.
Dotson: Thank you.
Wardlaw: Representative Wooten, you’re recognized.
Wooten: Let’s talk personnel. We’ve talked about cars and Children’s. And as a side note for Representative Cavenaugh, I believe that’s an annual payment that started many, many, many years ago to give Children’s. And we used to pay some to Le Bonheur in Memphis when I was at DFA, Larry. I don’t know if that’s the same fund or not, but that’s a payment that we just agreed to make to them to have a children’s pediatric operation. A lot of it started with neonatal, just as some background. But on the personnel side, I noticed you have 483 positions over there that are vacant. 283 of them are in the revenue services. Is that the local office vacancies?
McVay: Representative Wooten, I’m not sure I understand exactly what your question is.
Wooten: Well, the question is revenue– under item 630, it’s DFA Revenue Services Division, 283 vacant positions and only– well, 25 of them are over two-years-old. What I was asking, is that local service revenue offices?
McVay: It’s a combination across all of DFA Revenue Division, which would include–
Wooten: Throughout the– not only local offices but here.
McVay: –the revenue offices and– yes, sir. But also, our audit offices, our different divisions across DFA Revenue.
Wooten: Okay. Do you know the age of those 25 that have been vacant for two years? Some of them three, four, five, or less or two?
McVay: No, I certainly can get those numbers to you. And a number of those are slated to be, that we’ve marked those to be eliminated in the upcoming–
McVay: Yes, sir.
Wooten: Okay. If you get that, I would appreciate it. Same question goes down to child support. You’ve got 119 vacancies. Hardly a week goes by, I don’t get a phone call from a mother for a sorry, derelict dad that’s not taking care of his responsibilities. And we’ve got 119 positions vacant. The salary is not up to par or with market value or can you not get people?
McVay: Representative Wooten, we do have challenges in hiring. Some of those positions are– we’ve worked to try to upgrade those positions to be able to attract and to be able to compete with the private sector market. It has been challenging, but we’ve got a number of those positions that are currently in process that we’ve requested to have filled that we’re constantly trying to retain employees but also recruit and backfill vacancies there.
Wooten: One more follow up on the– do we need a– I guess we’re at a point, I know you all don’t have personnel over there anymore, but are we at a point that we need to look at the total pay schedule for the entire state? All employees relative to the market value?
McVay: I think that is a proposal that we have planned for the next session.
Wooten: Okay, good deal. That’s great. Thank you. Thank you.
Wardlaw: Representative Cavenaugh, I will say that we’re in sort of a time crunch. So if you could keep the questions simple and let’s hit them offline if possible. We need to get through two more of the budgets pretty quickly. Representative Cavenaugh.
Cavenaugh: Thank you. This is on the Infrastructure Investment Job Act. You’re asking for $550 million. How much are we really expecting? For some reason I thought we were expecting more than that. That’s why I was asking. It’s on page 89.
Hayslip: I’m being told that that will be over– those will be multiple year projects. I apologize.
Walther: And another comment, I’m not sure if it’s in here, but there’s a lot of unknown with regard to what will come to Arkansas. Some will have to be applied for and get grants from the federal government. So it’ll depend on our ability to make those grants and then receive the money. So we’re trying to be prepared for whatever we might encounter over the next three years.
Cavenaugh: Yeah, I just didn’t know if $550 million was going to be enough. For some reason, I thought we were going to get like $1 billion or something and I didn’t know. But if you’re saying $550 million this time, $550 the next time.
Walther: Yes. That’s right.
Cavenaugh: Okay. That’s why I just wanted to make sure because I knew we couldn’t use another appropriation for that.
Walther: These are like at ARPA and CARES, these are one time dollars.
Cavenaugh: Okay. Okay. All right. Thank you.
Wardlaw: Representative Dotson, I’m recognizing you for a motion, right? Okay.
Dotson: Thank you, Mr. Chair. But I kind of need a number if you guys got that yet.
Wardlaw: Representative Dotson, if you wanted to hold page 95 appropriation until tomorrow first thing–
Wardlaw: –and we could give you that number. That would allow us to move on through this budget.
Wardlaw: And we would hold that one like we did for the interest rates, and they can get that to you. And we’ll put that on first in the morning.
Dotson: That works for me. Then if–
Wardlaw: Does that work for the department?
Dotson: If you need a motion then, I’ll make a motion then to hold that and executive rec on the rest of it.
Wardlaw: That’s a proper motion. Do I have a second? A second. All those in favor, say, aye. All opposed? Ayes have it. So with that, we’ll move on to number 9, Management Services Division. Secretary Walther, you’re recognized. Adam, I’m sorry.
DFA Management Services
Walther: We’ll entertain any questions you might have.
Penman: Thank you, Mr. Chair. It’s all right. It’s okay. It happens. Okay. Our next appropriation– division appropriation, sorry, is going to begin– the summary is on page 127. This is for the Department of Finance and Administration Management Services Division. As you can see, they have 19 appropriations within the division. There are four that have change levels other than carrying forward the salary and match from the current biennium. And there is also– as you’ll see at the bottom, there is one that has not requested to continue. That has the ones from DFA disbursing as related to CARES or ARPA funding. In summary, the agency and the executive recommendation are requesting $115 million for both FY 2024 and FY 2025. And the executive recommendation provides for the agency request, with the exception of one requested new position and increases in salary matching related to various personnel changes. And as before, I’ll focus on those appropriations that have change levels. So first, turn to page 136– I’m sorry, 137. This is the agency’s operation appropriation. This is funded by State Central Services, and it provides for operations of the Management Services Division that provides state agencies with assistance in accounting, budgeting, and administering statutorily required controls. The agency is requesting appropriation in the amount of $21 million for FY 2024 and FY 2025. And on page 135 for their budget summary, you’ll see a breakdown of the changes. Their request includes the following various personnel changes, and they’re asking for a continuation of $100,000 in capital outlay. And the executive recommendation provides for the agency request, with the exception of a new position they’re requesting and the various personnel changes in associate appropriation.
Penman: Our next appropriation with change levels, we’re starting on page 138 and 139. This is their information technology appropriation. This is also funded by Central Services and provides for data processing, development, implementation, enhancement, and operation of automated systems within DFA. Agencies requesting appropriation in the amount of $39.5 million for both FY 2024 and FY 2025, which includes an increase of $5 million in their information technology services line item and $5 million in their ASIS billings appropriation line item to support current infrastructure. And the executive recommendation provides for the agency request. Our next appropriation with change levels is going to begin on page 156 with the appropriation summary on page 157. This is for the Federal Justice Reinvestment Initiative that was a data-driven approach to reduce correction spending and reinvest savings and strategies to decrease recidivism and increase public safety. This began in August 2017 with an agreement with the Council of State Governments where we received federal funding granted by the Bureau of Justice Assistance and the US Department of Justice, where DFA Office of Intergovernmental Services was designated as the entity for managing the activities.
Penman: And due to an expiring federal grant award, the agency is requesting to discontinue this appropriation into the biennium. And the executive recommendation provides for the agency request. Our next appropriation with change levels, this is beginning on page 162, appropriation summary on page 163. This is for Coronavirus Emergency Supplemental funds. That was where Intergovernmental Services was responsible for managing a federal grant program to provide assistance to state, local, and tribal governments that responded to COVID-19. The source of funding, as noted before, is federal revenue. And due to an expiring federal grant award, the agency is requesting to discontinue this appropriation into the biennium. And the executive recommendation provides for the agency request. And Mr. Chair, that concludes my presentation for DFA Management Services.
Wardlaw: Representative Cavenaugh, you are recognized.
Cavenaugh: Thank you, Mr. Chair. I’m going to deal on page number 137 on the management services, State Central Services. On your increase on your regular salaries, you’re actually decreasing the number of employees but raising the amount of your salary request. So you’re taking as an average of $57,000 a year, taking it to $70,538 as an increase per employee for $13,296. Are we giving those types of raises?
Hayslip: No, ma’am.
Cavenaugh: Then why do we need the increase?
Hayslip: That is based upon changes in the pay grid that were done, the 01’s to the 05’s. That is also inclusive of pay plan, merits, that increase. But no, ma’am, we are not giving raises. I can tell you that.
Cavenaugh: Well, whether you’re giving raises or you’re increasing through merit or whatever it is, there is an increase per employee of $13,296 based on your request. So if we’re not giving that, why do we need that request is what I’m asking. And I’m getting that based on your spend was $11.8 for 207 employees. But then your executive is for $14,254 for 202 employees. You’re actually reducing your employees and raising your cost.
McVay: Representative Cavenaugh, the increased amount of money does include– it does have some measure of pay increases in it, but then it also includes additional money for a 27th pay period that we will have to provide in the coming biennium.
Cavenaugh: Okay. Like every business does. And so you’re going to be paying every employee an additional $13,296?
McVay: No, ma’am, we’ll have to work– I’ll get you the number to answer your question.
Cavenaugh: If you could get that because that’s what it’s showing. And then I have one question on page 147. If I could get that information because it doesn’t work out is what I’m– my math doesn’t work out. And I’m a little confused on the agency request down where it says funding. It says that we’re going to do general revenue of $2.3 million. And it says general revenue $2.3, total funding $2.3, excess of $2.9. So you get your total funding of $5.2 [million]. Where does that excess come from? Because it doesn’t show it. I’m confused on that math. That’s page 147. I’m sorry. And it may just be a misprint, but I couldn’t get it.
Hayslip: The general revenue allocation is the $2.3 million. And so they’re going to get general revenue at $2.3. The appropriation balance is $5.2. It is short– it’s excess appropriation, so we’re not going to have funded the $2.9. And then that goes back to the $5.2. So we’re only going to have the $2.3 in funding. So–
Cavenaugh: So the $2.9, where are you expecting it to come from? So I guess that’s why I’m asking, we’re asking for that appropriation, why are we needing it if you’re not expecting it?
Hayslip: We’ll have to get you an answer back on that one.
Cavenaugh: Okay, if you could. And one final question, and this is very similar to the last question on salaries. It’s page 153. On the Developmental Disability Council, you’re increasing your per salary, which currently shows to be $36.8 to 56,478. You’re not really changing the number of employees you’ve got. It shows that we’re raising everybody by $19,000 plus. Can I get an explanation on that one, too?
Hayslip: Yes, ma’am. We’ll include that in our explanation.
Cavenaugh: All right. Thank you.
Wardlaw: Representative Wooten, you’re recognized.
Wooten: Yeah, did you say a while ago, when I mentioned the market value and the attention, did you indicate– and when you answered the $13,000 increase, that you all were just going to increase that, or are you going to bring those positions to personnel to reclassify them in order to give them that additional money? And I didn’t understand what your response was.
Hayslip: Representative Wooten, we have no personnel changes for that appropriation at this time. That’s why we’ve got to figure out where that $13,000 is coming from in the calculations.
Wooten: Oh, okay. All right. Well, yeah, thank you.
Hayslip: The intent is not for that to happen.
Wooten: Oh, okay. Well, thank you.
Wardlaw: I got a motion for executive rec. Do I have a second? I have a second. Representative Fortner. All those in favor, say aye. All opposed? Ayes have it. So, with that, we’ll move on to number 10 to the Racing Commission. Adam, you are recognized.
Penman: Thank you, Mr. Chair.
Wardlaw: Please don’t let the secretary interfere.
Penman: It’s okay. All right. Department appropriation summary here. It begins on page 170. This is for DFA Racing Commission. Although, if you see on page 167, it’s titled DFA Regulatory Division because Racing Commission, Alcoholic Beverage Control, these are all part of the Regulatory Division appropriation. So, on page 170, with the division summary, there are five appropriations. Four of them have change levels. The agency is requesting $28 million for both 2024 and FY 2025, and the executive recommendation provides for the agency request with the exception of various personnel changes. So we’ll start on page– this is 172. This is their operations appropriation and is funded by general revenue. And this is to effectively supervise, regulate, and control the sport of racing in Arkansas. And, as of 2005, they also provided for oversight of expanded electronic gaming at the racetracks in Arkansas. The agency is requesting appropriation in the amount of $1.9 million for 2024 and FY 2025 and general revenue funding in the amount of $1.8 million for 2024 and 2025 with various personnel changes listed on page 171 in the summary. And the executive recommendation provides for the agency request with the exception of the various personnel changes.
Penman: Our next appropriation begins on page 173 and 174. This is for their license applications appropriation. This is a cash-funded appropriation that comes from license fees that are deposited into the cash fund and provides for the application process and background investigation for issuing licenses to individuals and industries in the electronic games of skill areas at Oaklawn and Southland. The agency is requesting appropriation in the amount of $980,000 for each year of the biennium, which includes increases in their extra help, personal services matching, operating expenses, and professional fees line item. You can see those broken out on page 173. The agency says this is to support Racing Commission operations. And the executive recommendation provides for the agency request. Turning the page to 175 and 176, this is also a cash and treasury appropriation. This is for compulsive gambling disorder programs. This is to comply with Arkansas Constitutional Amendment 100 that established a requirement that the Arkansas Racing Commission would provide an annual amount of at least $200,000 for compulsive gambling disorder treatment and gambling disorder educational programs. This was funded by a one-time transfer of rainy day funds approved by ALC in December 2022.
Penman: The agency is asking to continue this appropriation in the amount of $200,000 each year in the biennium, and the executive recommendation provides for the agency request. Our next appropriation with change levels is going to be on page 177. This is compulsive gambling addictions. This is funded by general revenue and would also– pursuant to Constitutional Amendment 100. Racing Commission has been tasked with that responsibility for providing $200,000 for compulsive gambling disorder treatment and educational programs. The previous appropriation was for an initial contract that would be awarded for an entity that would handle this gambling disorder treatment. The one on page 177, 178, this is for once that one-time-use money has been used, the agency will continue this treatment and educational programs through general revenue. And, Mr. Chair, that concludes my presentation for the Racing Commission.
Wardlaw: Representative Vaught, you’re recognized– Representative Flowers, you’re recognized.
Flowers: Thank you, Mr. Chair. With regard to the dollars that are spent on compulsive gambling, how are those dollars expended? Is it programmatic from the agency, or is it done in grants across the state? How is that expended?
Hayslip: We recently worked with the Office of State Procurement and did a request for proposal, an RFP process. And that contract is with Arkansas– yes, Arkansas Problem Gambling Council. It is for the full $200,000. They do have expectations that they have to meet to get payment. That contract is actually on review and will be in ALC Friday for approval. If you want more details on it, we can definitely provide you more details.
Flowers: Yes. Thank you so much.
Hayslip: Yes, ma’am.
Wardlaw: Representative Cavenaugh.
Cavenaugh: Thank you, Mr. Chair. This is going to go with pages 176 and 178. The $200,000 appropriation. Why do we need both of them? If one is for rainy day funds, it’s going to be used up. Why do we need to carry that appropriation into 2024-25 when we’re going to be using general revenue at that time, too?
Hayslip: In all honesty, that could be removed in 2024-25. We will definitely use that by 2024.
Cavenaugh: Okay. Mr. Chair, I’d like to make that motion at the proper time to reduce that.
Wardlaw: Yes, ma’am. But I would hope that every answer is in all honesty, correct?
Hayslip: In all honesty. I am sorry. And we will use the rainy day before we use the general revenue. This year’s general revenue will go back, will be reclaimed, because we will use the rainy day funds first.
Cavenaugh: Okay. And with that, one final question on this, on page number 180, it’s the actual racing cash. So I just want to make sure. So this is the money that is collected from casinos to go into the purses for the racing, whether it’s greyhound or horse racing. Greyhound is going away, so it’ll be horse racing only. Now, is anything taken out of that fund beyond purse money? I mean, is there anything taken out there, like for work comp, for exercise riders, for jockeys, for people on the backside?
Hayslip: That money is paid to the tracks. I do not know– we could get the Racing Commission, Smokey and Byron, up here to see if they have knowledge of what the tracks do. I can tell you that what we receive in general revenue in the purse and awards fund is what is sent to the tracks for the purse and awards funds.
Cavenaugh: Okay. There’s no need to get them up. If you can just– if they can just get that information, Mr. Chair, to me, I’d like to know if anything is coming out of those funds beyond purse money. Thank you. And I have a motion at the proper time.
Wardlaw: Representative Jean, I believe it is.
Jean: Thank you, Mr. Chairman. My question also is on the holding money for the racing. And it looks like we budget $25 million. And I guess since we enacted all this, it’s stair-stepped its way up. Looked like last year we spent a little over $14 million. What do we do with the excess, just put it back in? Or is that just the authority to spend up to $25 million?
Hayslip: Yes, sir, it is just the authority to spend up to $25 million. You are correct. So, in 2020, there was $7.8 million that went through that fund. In 2021, there was $12.5. Last year, as you stated, it was $14.5. So we’re not sure what those collections are going to be, but we also don’t want to be in a situation where we cannot disburse it timely. So that’s why we put up to $25 million. Again, that is the authority to spend. If the money’s not there to spend it, it’s not going to be spent, and the authority dies on June 30.
Jean: Okay. Thank you.
Wardlaw: Representative Wooten.
Wooten: Yes. On page 172, they had 14 positions this year at $50,000, and they’re going to have 14 next year, but they’re going to be $800,000, which is $57,000. Is that a $7,000 raise per employee?
Hayslip: Again, Representative Wooten, that is something we want to go back and analyze and figure out why those numbers have jumped so that we can give you a better explanation of that increase.
Wooten: Okay. Similar to that other one?
Hayslip: Yes, sir.
Wooten: Thank you. Thank you. ma’am.
Hayslip: We need to better understand those numbers.
Wooten: Thank you, Mr. Chair.
Hayslip: Oh, we’re going to let Mr. Brech speak to that.
Wooten: This will be good.
Brech: I believe where the confusion is, and also with the previous questions from Representative Cavenaugh, when you look at those position numbers and divide those into the actuals, it may be, and it likely is, that many of those positions were unfilled for part of the year. So it shows up that there are 14 positions that were filled at any time during the year. They wouldn’t have filled– they wouldn’t have been filled for the entire year. So you end up with a much lower average. When we’re doing the budget and we do the appropriation, we do that number as if it will be filled for the entire year. So you’ve got two or three things going on. You’ve got the cost of living increase, you’ve got the merit increases, you’ve got the 27th pay period. But I think what’s confusing many is the simple fact that many of those positions are unfilled, and you’re looking at actual expenditures for the entire year, if that makes sense. And then–
Wooten: So that’s the reason– so that’s the reason we budgeted for $851 and only spent $704?
Brech: Right. That’s what’s needed to budget those positions because–
Wooten: But when you divide that, it’s going to be much more per position. So I think we need to look deeper.
Brech: Well, that is if that position is filled at the current level for the entire year. Plus, this 27th pay period is on top of that. But when you’re looking at the actuals for last year, one or some of those positions could have been filled for just a day and it will show up as a position for that entire year. But that will bring the average down, if that makes sense.
Wooten: Okay. Well, yeah, it would. Well, on $851, that’s $56,000 and at $798, it’s $57,000.
Wooten: So, okay, thank you.
Wardlaw: Representative Cavenaugh, you’re recognized.
Cavenaugh: Are you ready for a motion? Okay. I’d like to make a motion that we accept executive recommendation with the exception on page 176 for 2024-25, that we take that down to 0.
Wardlaw: Okay. That’s proper motion. Do I have a second? I have a second. Representative Fortner. All those in favor say aye. All opposed? Ayes have it. So, with that, we’ll move on to the Alcohol Control Beverage. Adam, you are recognized.
Alcoholic Beverage Control Division
Penman: Thank you, Mr. Chair. Our next appropriation. Let’s see. There we go. It begins on page 182 with the appropriation summary for Alcoholic Beverage Control Administration Division. And, as I’ve said previously, this is part of the Regulatory Division operations bill. As you can see, there are two appropriations, one with change requests. The agency is requesting $3.6 million for 2024 and 2025, with the executive recommendation for $3.5 million for both 2024 and 2025. And the executive recommendation provides for the agency requests except for new positions and various personnel changes. Flipping to page 183, 184, this is the operations appropriation for the division. This is funded by general revenue, along with contingency transfers from the Medical Marijuana Implementation and Operations Fund for administering regulation, supervision, and control of manufacture, distribution, and sale of all alcohol beverages in Arkansas. And with the passing of the Marijuana Amendment, it also expanded to include oversight of medical marijuana cultivation facilities and dispensaries. Page 184, you’ll see their summary. The agency is requesting appropriation in the amount of $1.1 million for 2024 and FY 2025 and general revenue funding in the amount of $859,000 for both years of biennium.
Penman: The agency requests include the following various personnel changes that are shown on page 183 in detail. And the executive recommendation provides for the agency request with the exception of new positions and various personnel changes in associated appropriation. On page 185 and 186, the agency is requesting we continue appropriation here in the amount of $2.5 million. This is the Medical Marijuana Commission appropriation that was created due to Amendment 98 of the Constitution of the State of Arkansas, which is funded by cultivation and dispensary application and license fees. And then this is supported by special language. They have a contingency line item that allows authorizing the CFO of the state to transfer appropriation as needed to agencies that incur expenses for the implementation, administration, or enforcement of laws related to the Arkansas Medical Marijuana Amendment of 2016. The Agency is requesting to continue appropriation in the amount of $2.5 million each year of the biennium. And the executive recommendation provides for the agency request. Mr. Chair, that concludes my presentation for ABC Administration.
Wardlaw: Representative Cavenaugh.
Cavenaugh: Thank you, Mr. Chair. This is going to be on 186, and it is a question about the contingency for $2 million. Just what is that contingency? What is that really going to be? In case somebody needs it, I mean, why would they– I guess I’m asking, what is the contingency that they would come to you asking for this $2 million?
Hayslip: For instance, DFA-ABC administration and ABC enforcement, we did not include appropriation or ask for funding for medical marijuana operations for the investigation, the licensing and all the processes that we handle. What we use is we use this contingency appropriation, either in this section or in the DFA disbursing officer section, and we pull from that appropriation to run those operations. So that’s what it’s for is that contingency.
Cavenaugh: Okay. And another something to staff, can you send to us what that’s costing you to run that operation? Because you can’t really tell the way it is. So if we can tell exactly what it’s costing to run that operation.
Hayslip: Are you wanting it just for DFA or are you wanting it for all agencies who have pulled from it?
Cavenaugh: For all agencies if we can get it.
Hayslip: Yes, ma’am. What time period would you like that for?
Cavenaugh: Just before we start session, so we know.
Hayslip: Do you just want prior fiscal year, so last fiscal year?
Cavenaugh: Yes, yes.
Hayslip: Yes, ma’am. We will get that information.
Cavenaugh: All right. Thank you.
Wardlaw: Representative Wooten.
Wooten: Yes, sir. Thank you. On page 184, you have 12 positions. You’re asking for, well, two more. But my question is, are your enforcement officers in those?
Hayslip: No, sir, they are not.
Wooten: Where are they?
Hayslip: They are in the 9906 section that Adam went over first. They are a part of the regulatory section, but they’re a part of the 9906 appropriation.
Wooten: Why are they not included?
Hayslip: Page seven. I’m sorry.
Wooten: Why are they not included here?
Hayslip: Because this is specifically for ABC Administration, not for ABC Enforcement.
Wooten: For the administration?
Hayslip: Yes, sir.
Wooten: Well, let me ask the question anyway. How many of those enforcement officers are there?
Hayslip: I’m sorry. I’m looking to staff for answer.
Wooten: Oh, yeah. That’s fine.
Hayslip: 42 currently.
Wooten: How many permits do you have on and off premise?
Hayslip: Doralee is coming up to answer that question.
Chandler: Doralee Chandler, director of Alcoholic Beverage Control. Currently, we have a little over 6,000 on and off-premise permits.
Wooten: 6,000 and 42 people looking after them. Thank you. Thank you, Mr. Chairman.
Wardlaw: Members, I would entertain a motion for the ABC. I have a motion executive rec. Do I have a second? All those in favor say aye. All opposed? Ayes have it. With that, we’ll move on to the Revenue Services Division. Adam, you are recognized.
DFA Revenue Services Division
Penman: Thank you, Mr. Chair. Next division we’re looking at, this begins on page 192 with the appropriation summary for Revenue Services Division. And this division has nine total appropriations, three of which have change levels aside from salary and match adjustments they’re asking to carry forward from the current biennium into the next one. And if it pleases the chair, I will focus only on those appropriations that have change levels. In total, the agency is asking for $1.4 billion for 2024 and 2025. And the executive recommendation provides for the agency request with the exception of various personnel changes and reduced appropriation in their revenue miscellaneous cash appropriation you’ll see at the bottom of that department summary on page 192. Our first appropriation with change levels is going to on page 193 with the appropriation summary on 194. This is for the Commercial Driver’s License Program. This is funded by fees collected for licenses issued that are dedicated to special revenue, and it provides for operating expenses of the Arkansas Commercial Driver’s License Program, and for other related purposes. The agency is requesting appropriation in the amount of $4.8 million for 2024 and FY 2025. And, on page 193, you’ll see there includes the following changes, various personnel changes, and an increase in overtime appropriation to compensate employees with overtime payments versus accruing comp time, which includes an increase in personal services matching as well. And the executive recommendation provides for the agency request, with the exception of various personnel changes.
Penman: Our next appropriation with change levels is going to be on page 207. This is for the Operations appropriation. This is funded by State Central Services and provides for operation of DFA Revenue Services Division. The agency is requesting appropriation in the amount of $123 million in 2024 and $124 million in FY25. The agency request includes changes. They’re listed on page 205 and 206, including various personnel changes and an increase of $455,000 in overtime appropriation. As stated before, they’re asking to compensate employees with overtime payments instead of accruing comp time, which would include an increase in personal services matching. And they’re asking to continue $600,000 in capital outlay. And the executive recommendation provides for this agency request, with the exception of the various personnel changes. Our last appropriation that has change levels is on page 211. This is revenue, miscellaneous cash. This is funded by fees receiving collected from International Registration Plan, Unified Carrier Registration, and the E911 service charge, which are distributed to other entities for distribution and other purposes. And the agency is requesting to continue appropriation in the amount of $24 million for each year of the biennium. But the executive recommendation provides for a reduction of appropriation in the amount of $12 million. So the new appropriation level would be $12 million for each year of the biennium. And, Mr. Chair, that concludes my presentation for Revenue Services Division.
Wardlaw: Representative Cavanaugh, you got a question?
Cavenaugh: Yes, sir. Thank you, Mr. Chair. This is going to be on 204. It’s the miscellaneous tax refunds from the revolving fund. We’re requesting $260 million on this. Historically, the most that you’ve ever given out was actually in 2021, which is $127 million. Why do we need such an over-appropriation? Are we expecting to give out that much refunds?
Hayslip: No. Yes. We don’t know, I guess, is a better answer. The refunds that are in our appropriation bill for DFA Revenue Services are all contingent upon our taxpayers and our companies and them paying taxes and us having to refund an overpayment. We don’t know how much we’re going to refund. Now, that being said, could it be reduced? Yes, potentially. We do have special language that allows us to move appropriation between our refund line items. So it’s what’s been there for years. If there’s an opportunity that you so wish to change that, I don’t know that we would have any basis to say, don’t.
Cavenaugh: Okay, so if your most historic has been $127 million, if we drop that to $175, that would still give you all plenty of opportunity, would it not?
Hayslip: Yes, ma’am.
Cavenaugh: Okay. I’ll have that motion at the proper time, Mr. Chair, and–
Wardlaw: It looks like we got another issue. Mr. Brech’s coming to the table.
Brech: Thank you. I just wanted to point out that next year could be an anomaly. Because of the retroactive tax decreases that we’ve passed or what you passed, we’re going to have potentially higher refunds than normal because those taxes are going to go back all the way to January 1. And so it’s very possible, depending on withholding, especially for the higher incomes, they’re going to get higher refunds. And if companies do not use the new tax tables, that’s also going to– the low income tax credit, if they don’t receive that in income tax deductions from their checks, they’re going to get that next year. So next year is sort of an anomaly that could–
Cavenaugh: Okay, so if your most historic has only been $127, what are your true projections you think it might be? Do you think you need the real $260 because of the upcoming or can it be less?
Brech: My only caution would be we’re reducing taxes by $500 million. If the tax tables don’t take care of that or if companies don’t use the new tax tables that came out, actually, this month for the low income tax credit, there’s just a potential for having much larger tax refunds just in 2024, to be honest.
Cavenaugh: Okay. Then would you feel better if we left it for 2024 and then 2025 reduced it to the $175?
Brech: Yes. Yes, ma’am.
Cavenaugh: Okay. All right. And follow up. This is on another funding issue. It’s going to be on 211, which is the cash and treasuries. The excess funding, you’re asking for $24 million, but the most historical that we’ve paid out on that has been $6.5. Do we need the full $24– I’m sorry, he reduced it to $12. I’m looking for what you all asked. Never mind, because the executive is for $12 million. You all asked for $24. Okay. Thank you.
Wardlaw: Representative Wooten.
Wooten: Thank you, Mr. Chairman. Let’s talk about personnel for them. I don’t understand. You had 1,495 actual positions. You’re authorized 1,556. You got 283 vacant positions now and 2025 of those vacant. 283 have been vacant for two years and they’re asking for 9 more. Why? Why not use some of the 280? Why are we adding and increasing our budget to cover nine employees when we’ve got 283 vacancies over there?
Collins: This is Charlie Collins, the Revenue Commissioner with DFA. Representative Wooten, we have a lot of vacant positions, as you pointed out. Most of those are termed the GS-3 positions. The entry level positions. So we’ve done some things. Actually, the legislature has helped us by upgrading some of our GS-2s to GS-3s. You also made an improvement in the GS-1 to -5 pay table. So that has really helped us in terms of filling more of the roles at those entry levels. In terms of most of the changes that we’re asking for, they’re in that agency recommendation. They’re not about adding roles. They’re about upgrading some of the roles to properly reflect the work that’s done. That’s going to be on hold until the new governor comes in. That’s the difference between the agency and the executive. And you’re saying there’s nine additional positions that we’re asking for in here that are not on hold?
Wooten: 1,565 versus 1,556 now under the agency. And I understand about holding. Hopefully, if the committee agrees, we’re going to hold all positions until the new governor upgrades, changes the new ones.
Collins: Yes, sir. Let me–
Wooten: This shows nine new positions.
Collins: Yes, sir. Let me identify those nine that are not in the hold off period. Yes, sir. Let me do that.
Wardlaw: Representative Wooten?
Wardlaw: They will address that in the Personnel Subcommittee, and you chair that, so you’ll be able to handle that there.
Wooten: Mr. Collins, we’ll just wait on that until Personnel Committee, but I was curious. I hope you all understand why. Like I’ve said many times, we’re not trying to penalize anyone, but we’re just trying to be sure. And here we found four or five mistakes today, not just in yours, with others, but we’ll just hold this to Personnel Committee, and we’ll work it out in there.
Collins: Yes, sir. And it looks like some of those have gone through the ALC–
Wooten: Thank you, Mr. Chairman.
Wardlaw: Representative Cavenaugh. Representative Wooten, just to clarify, we will not have to hold it for Personnel. It’s going to Personnel anyway.
Cavenaugh: Thank you, Mr. Chair. I was going to ask about 202– I mean– sorry. Yes, 202, which is the Interstate Motor Fuel refund. You’re asking for a $20 million allocation– that’s page 202– but the biggest that you’ve given out in 10 years is $522,000. Why would we need $20 million appropriation if the highest we’ve given out in 10 years is half a million?
Collins: Representative Cavenaugh, that’s another one that’s historical. It’s based on multi states. As you’ve just noted, the past trends don’t indicate that we would need that much. So it seems like it would be a low risk to reduce that amount, but it’s one of those things that it depends on where the trucks drive and how the states share that money based on where the trucks are. As you’re pointing out, historically, we can’t control what that’s going to be, but it looks like it has not been at that level. That just covers to ensure.
Cavenaugh: Would you be comfortable with taking it to $10 million?
Collins: Yes. Yes, ma’am.
Cavenaugh: Okay. Thank you. I’ll have the motion at the proper time, Mr. Chair.
Wardlaw: You’re recognized.
Cavenaugh: Thank you. I make a motion that we accept the executive recommendation with the exception of page 202. That we change that to $10 million. And then on page 204 for the year 2025, that we change that to $175 million.
Wardlaw: That’s a proper motion. Do I have a second? I have a second. All those in favor say aye. All opposed. Ayes have it. So with that, we’ll move on to the Assessment Coordination Division. Adam, you are recognized.
DFA Assessment Coordination Division
Collins: Thank you very much, Mr. Chair, and committee.
Penman: Thank you, Mr. Chair. Our next appropriation summary, we’re going to go back in your manuals to page 21. This is for DFA Assessment Coordination Division that exercises general and complete supervision over valuation, assessment, and equalization of all locally accessed ad valorem taxes in Arkansas. On page 21, see their division summary. There are four total appropriations, and there is one with change levels. We’ll begin with page 22, and then summary on page 23. This is for their real property reappraisal program. In this one, the market value of real property located within the 75 Arkansas counties is reappraised every three to five years for taxation purposes, as mandated by Arkansas code. And the agency has special language that provides for funding of this program by proportional transfers, as you’ll see from the Public School Fund, County Aid Fund, and the Municipal Aid Fund up to $14.25 million dollars, and also allows for transfer of funds from Miscellaneous Agencies Fund Account for up to $1.5 million. The agency is requesting appropriation for that total of $15,750,000 each year of the biennium, and the executive recommendation provides for the agency request.
Penman: Going to page 24 and appropriation summary on page 25, this is for the County Assessors Continuing Education. This is funded by $600 assessments collected annually from counties, and these proceeds are used exclusively for operation of the Continuing Education Program for local assessment personnel. The agency is requesting to continue appropriation in the amount of $60,000 for each year of the biennium, and the executive recommendation provides for the agency request. On page 27, you’ll see the appropriation summary for their state operations appropriation. This is funded by general revenue and transfers from the Ad Valorem Tax Fund and is utilized for personal services and operating expenses of the division. The agency is requesting appropriation in the amount of $3.7 million for 2024 and 2025, and the various changes include various personnel changes and an increase of $250,000 in their operating expenses line item due to increased contract-related costs associated with the National Automobile Dealers Association. And the executive recommendation provides for the agency request, with the exception of various personnel changes. On page 29 we’ll see the last appropriation in this section. This is for the cash operations appropriation. This is funded by proceeds from the sales of property assessment and appraisal publications and is also collected from private citizens who enroll in assessment and appraisal courses conducted by the division. And these are utilized to purchase educational materials, defraying printing costs, and pay for evaluations of agency methods and procedures. The agency is requesting to continue appropriation in the amount of $550,000 for each year, and the executive recommendation provides for the agency request. Mr. Chair, that concludes my presentation for Assessment Coordination Division.
Wardlaw: Representative Cavenaugh, you’re recognized.
Cavenaugh: Thank you, Mr. Chair. This is going to be page 23 for the Reappraisal Program. Can someone explain to me what this program actually– this $14.6 million? We’re asking for $15.7. What happens with this money?
Cawyer: Thank you, Representative. I’m Sandra Cawyer. I’m the Director of Assessment Coordination. The Property Reappraisal Fund was established by Act 1185 of 1999, when all counties were mandated to do the 3- or 5-year reappraisal cycles. We oversee those property reappraisals. The counties, based on their parcel count that we provide to them that we allow for, they are reimbursed on a monthly basis, and the reimbursement is based on $7 per parcel per year.
Cavenaugh: Okay. What do you do for this $15 million?
Cawyer: This is the money that they use towards doing their mandated reappraisals, their county-wide reappraisals that the valuations are due. This year we had 17 counties that completed, and next year I think that there’s 12 scheduled. They’re on a various cycle and depending on their growth is whether they stay on a 5-year or they move to a 3-year.
Cavenaugh: Okay. And what does the Assessor Coordination Board have to do with this? Why do you get the money?
Cawyer: Well, we are tasked with overseeing those reappraisals, auditing the work to make sure that they are in compliance with the rules of the reappraisal.
Cavenaugh: Okay. And those rules were set by–?
Cawyer: Those rules were set as mandated by Act 1185 of 1999.
Cavenaugh: Okay. So we need to look in the Act, but y’all haven’t promulgated any rules around those as the Assessor Coordination Board? You haven’t come and set up any rules around those?
Cawyer: We have rules that were done back two decades ago. I–
Cavenaugh: So they’ve not been updated in two decades plus.
Cavenaugh: Okay. Other question I have is on your– which is going to be page 2025 on your Continuing Education Fund. You have enough in your fund balance based on your current spend for 72 years. So what are you going to do with that excess fund?
Cawyer: Thank you for the question. Two things. One, we are showing that we did not spend that much. Due to COVID, we were not able to do in person reimbursements. Also, prior administration before me– I think were not clear on what all expenses they are allowed to use that money for. And we have since worked with Melanie very closely and we have devised that– and in fact, we have spent more this year, and we have plans to use that for what its purpose is.
Cavenaugh: Okay. Your most historic spend was $41,000, okay, and that was in 18-19. So when the pandemic hit, you were able to do it, but you didn’t have to do it in person. If you can save money and not do it in person and still get the job done, why do we have to spend the money to go out and do it in person?
Cawyer: We did what was– the minimum required was done by Zoom. We did not have as good of pass rates on our test. It’s really hard for appraisal classes. They’re very hands-on, and it was just a lot more difficult to do it by Zoom. And the county assessors and their staffs were asking when we were going to go back in person, and they are excited that we now are back in person.
Cavenaugh: Okay. Even if you go back and spend up to your historic spend of $41,000, you still have a lot in that reserve fund.
Cawyer: I believe that we will be spending more of that now that Melanie and I have worked on that.
Cavenaugh: Okay. Are you going to find a way to give it back to the people that you got it from, or are you just going to spend it?
Cawyer: Well, each county association is required to contribute to their continuing ed. Our part is just for the assessors. All county associations do that, and there’s legislation on the books that they’re required to submit that.
Cavenaugh: Okay. That’s one that we could look at reducing. And then that’s my final question. Thank you, sir.
Wardlaw: So if I heard you correctly, you reimburse the counties at $7 per parcel. Would it not save the state some money if the counties consolidated those parcels into the single ownership that some of them reside in?
Cawyer: Yes, sir. We have actually encouraged the counties over the years to do so. Again, we are dealing with locally elected officials, and they do have the authority in their office to not want to do that. As I said, there were 17 counties that finished this year. We receive a file of all of their acreage with ownership, and we do a combine by spreadsheet, and then we give them the parcel count that we’re willing to reimburse them for. Anything that is on their books above that, that they want to stay on their books as such, then they’re responsible for that money.
Wardlaw: So the taxpayer requesting that combination down to one parcel, that’s not happening either, by the way. I know that from experience. How do we encourage them to do this even more?
Cawyer: Every time we have them in a room, we are constantly encouraging them to do so. Now, we do have an exception. Sometimes a landowner who has 40 acres, they build a house on two, and they only mortgage the two, and they have it surveyed off. And they will come in and ask the county assessor to please make that a separate parcel, and all county assessors oblige that.
Wardlaw: Yeah. That’s logical. Thank you. Representative Wooten, you’re recognized.
Wooten: Thank you, Mr. Chairman. The Assistant Coordination Division used to do the railroads, utilities, and who does that now?
Cawyer: Public Service Commission is responsible for that.
Wooten: The Public Service has that now?
Cawyer: Yes, sir. They’re responsible for that, for utilities and railways.
Wooten: All right. Thank you, Mr. Chairman.
Wardlaw: Members, do we have a motion? I have a motion from Representative Wooten. Do I have a second? S bunch of seconds. All those in favor, say aye. All opposed? Ayes have it. So with that, Adam, we recognize you for number 14, Child Support Enforcement.
Child Support Enforcement
Penman: Thank you, Mr. Chair. Our last DFA division for today is going to be Child Support Enforcement. Their single appropriation is on page 34. The description summary is on page 32. This is a combined federal and state effort to collect child support from noncustodial parents, and funding for this appropriation consists of a combination of federal funds, general revenue, fees, federal incentive payments, and state share of Temporary Assistance for Needy Families collections. The agency is requesting appropriation in the amount of $74 million for 2024, and $75 million for FY 2025, and general revenue in the amount of $13.2 million for 2024 and 2025. The agency request includes various personnel changes, continuation of $100,000 in capital outlay, and an increase of $2 million in their data processing and equipment expense line item due to an anticipated increase in cost of services for a new contract that would be effective July 1, 2023, for both years of the biennium. And the executive recommendation provides for the agency request, with the exception of the various personnel changes. And, Mr. Chair, that concludes my presentation for DFA Child Support Enforcement.
Wardlaw: Seeing no questions from the members, do I have a motion? Have a motion for executive rec. Do I have a second? I have a second. All those in favor, say aye. All opposed? Ayes have it. Seeing that, members, we have no further business. We stand adjourned. We will start again at 9 a.m. in the morning.