Joint Budget

November 2, 2022

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Department of Commerce

Rep Dotson: We’re going to call this meeting to order. First up, we have Department of Commerce. It had some audit findings, so we’ll start with that. You are recognized to begin the audit findings.

Audit findings 

Webb (Leg Audit): Thank you, Mr. Chairman. My name is David Webb. I’m an audit supervisor with Arkansas Legislative Audit. Recent audit findings for the Department of Commerce are included in the materials at your seat. There were three findings for the departmental audit for the year ended June 30, 2020. These dealt with financial misstatements due to inaccurate journal entries, undisclosed related party transactions, and improper payments to a vendor for services which were not performed. Multiple findings involving the department were noted during the statewide financial and federal audits for the year ended June 30, 2021. These included financial misstatements due to inaccurate journal entries, improper or unsupported benefit payments to recipients of both the regular unemployment insurance program, as well as pandemic-related programs, noncompliance with federal reporting and special program requirements, and duplicate, inaccurate, or unsupported expenditures for sub-recipients of various Coronavirus Relief Fund programs. Thank you, Mr. Chairman. That concludes the findings for this agency.


Rep Dotson: Thank you. It looks like we have a few questions. Representative Wooten, you are recognized to begin.


Rep Wooten: Thank you. On the first page under the operating revenues where there was a $52 million problem, who corrected it and then made another mistake? Was that done by the audit people, or was it done by the agency?


Webb (Leg Audit): We detected the error while we were performing our audit work. What happened was funds that had been received for one type of, for example, federal revenues, it was recorded as operating revenue. But it should have been recorded as non-operating revenue. Because of standards of how the financial statements are supposed to appear, it should have been recorded or classified in a certain way. That was detected in our audit work. We made the recommendation to the agency that they correct the financial statements, and the agency, along with the Department of Finance and Administration, did make the correction before the financial statements were issued so that the report would be accurate at the time of release. The agency did correct those misstatements.


Rep Wooten: Well, if I’m reading it correctly, the entry to make the correction was wrong. So who made that? So in other words, you found the misplacement of the funds. I understand that part. And you called the correction to their attention. Did y’all make the correction or DFA make the correction or the agency? Who made the second correction that was wrong that led to the $72 million?


Webb (Leg Audit): I think those were–


Rep Wooten: Just say it. Was it DFA or was it y’all or was it the agency?


Webb (Leg Audit): I don’t know if it was– I don’t recall if it was the agency or DFA who made the improper correction entry. But DFA and the agency will work in conjunction in making the journal entries. And so in the process of recording transactions for the agency, yes, there was an improper classification originally. An attempt at correcting the improper classification was made, but the attempt was incorrect. When we were doing our audit work, we noticed that the attempt to correct it was wrong, so we advised and recommended that they would make a correcting correcting entry to where we could get the financial statements to be accurate at the time of release.


Rep Wooten: Okay. Follow up, if I may?


Rep Dotson: Go ahead.


Rep Wooten: There’s so many findings. If I’m looking at it correctly, half of it involves Workforce Services. Is it just unwieldy down there? I mean, because of the federal involvement and all the transferring of the funds, what can be done down there to correct the problems? I mean, there’s just millions of dollars that are changing hands between us, between their customers, and between federal governments. So can it not be managed? I mean, y’all can–


Rep Dotson: Representative Wooten, I’m not sure that Legislative Audit can answer that question, but would you like to hear from the agency?


Rep Wooten: Well, I’m asking the agency, Mr. Chairm. What’s wrong with that?


Rep Dotson: Well, he’s not the agency. He’s Legislative Audit.


Webb (Leg Audit): I am with the Audit.


Rep Dotson: So we can get somebody up here from the agency if you want to ask that question.


Rep Wooten: All right. Thank you.


Rep Dotson: I think they’re here. If someone from the agency could come and speak to that question, it might be– if you would state your name for the record, whoever is going to begin.


Preston (Commerce): Mike Preston, secretary of Commerce.


Bell (Commerce): David Bell, CFO, Department of Commerce.


Childers (Commerce): Charisse Childers, Director of the Division of Workforce Services.


Rep Dotson: Thank you. Did you hear Representative Wooten’s question there?


Pandemic unemployment


Preston (Commerce): We did, and I think, Representative Wooten, your analysis is good that, yes, we had literally billions of dollars, especially through the pandemic, the course of the pandemic, that was transferred between federal government into DWS and then out to those who were in need of assistance and funding. And I’ll let Dr. Childers dive into a little bit more, but if you recall, when we went through the transformation and DWS became a part of the Department of Commerce, it was about six months in when we got hit with the pandemic. So we were in the process of learning and uncovering a lot of information and setting up new checks and balances when the pandemic hit, and we kind of shifted to an all-hands-on-deck of getting unemployment compensation out the door, setting up several new federal programs that were passed by Congress to get money out. So a lot of it was as-we-go, and the federal government was throwing new guidelines and recommendations at us literally daily as we went through it. But now we’re past that. The workload is somewhat alleviated. We’re down to about, I think, 3,000 people per week still receiving some type of unemployment benefits. So those numbers are coming undone. We’re in a lot better position, and Dr. Childers and her team have really worked diligently over the last couple of years to get these checks and balances better in place. And I’ll let Dr. Childers get into a little bit more specifics of some of the budgeting items that they’ve set up over the last couple of months.


Childers (Commerce): Secretary Preston, thank you. And that is correct. Representative Wooten, as you know, during the pandemic, the funding per individual and the funds that were coming out to pay those individuals from the federal government was unlike anything we had seen before, obviously. We didn’t have systems set up for that. We did set up a new system for a Pandemic Unemployment Assistance Program that was set up in approximately 30 days to distribute benefits to individuals that had never received unemployment benefits in the past. So as Secretary Preston said, we had rules coming and guidance coming at us and changes on almost a daily basis. So we would put something in place, it would be very broad, then the next week, we would get more guidance from US DoL. We would then implement that guidance. I mean, initially, anyone that filled out an application received benefits, and we were encouraged to pay those benefits as quickly as possible, and we did. And so then what happens is then you pay benefits to people who are not eligible, and so then we have to go back, we have audit findings because of that, and we have to go back and try to collect those benefits to, a lot of times, people who don’t even exist because it was fraudulent or they filed on someone else, like many of us in this room were victims of that, including myself. So that’s what was happening. Things were changing so rapidly, and we were doing our best with what we had and going from normal– or, actually, less than normal benefits, about where we are today in filings for unemployment, to an astronomical amount of individuals, which was evident by the number of people just standing in line at our offices. So as Secretary Preston said, we have done a lot since this time last year. When all the benefits stopped, the federal benefits, in the summer of 2021 and we were able to start trying to get everything pulled back together, report all that information, and further assess what we needed to do within our operations as we were doing prior to the pandemic.


Rep Dotson: Thank you. Representative Speaks, you are recognized for a question.


Rep Speaks: Thank you, Mr. Chair. I’m over here. Good morning. I understand what all you have gone through, but bottom line, how much did we actually lose money-wise during all of this?


Childers (Commerce): Well, we are still collecting on the individuals that we know that we can identify. I did not bring those numbers up here with me, but I will have that later in our budget hearing, if that’s acceptable.


Rep Speaks: Thank you.


Childers (Commerce): Thank you.


Rep Speaks: Appreciate it. Thank you, Mr. Chair.


Rep Dotson: Thank you. Representative Cavenaugh, you’re recognized.


Rep Cavenaugh: Thank you, Mr. Chair. Mine is not going to be dealing with DWS. Mine is going to be dealing with the secretary, so.


Rep Dotson: Is this in related to the audit–


Rep Cavenaugh: Yes, sir.


Rep Dotson: –findings itself? Okay. Go ahead.


Board membership


Rep Cavenaugh: So mine is going to be dealing with the finding in number 2 on where Secretary had failed to report on your report about your directorship of a nonprofit. Can you tell me what the name of that nonprofit was?


Preston (Commerce): Thank you, Mr. Chair. Representative Cavenaugh, it’s the Arkansas Center for Data Sciences.


Rep Cavenaugh: Okay. And how long have you served on that board?


Preston (Commerce): 2019, 2020, whenever it was created, somewhere thereabouts.


Rep Cavenaugh: Okay. Prior to this audit finding, did you report any of that on your financial report? They found this in 2020. In 2019-2018, had you reported that?


Preston (Commerce): It wasn’t in existence back then.


Rep Cavenaugh: You said 2019. Did you report–?


Preston (Commerce): I don’t remember exactly what year. Yeah. I think it was 2019– or David–


Bell (Commerce): It was very early. I think it was in 2019. It was a group that was created with four board members, and it only existed probably two years up until that point of the finding.


Rep Cavenaugh: Okay. So did you report in 2019 then?


Bell (Commerce): No.


Rep Cavenaugh: Okay. Did you go back and amend that report in 2019?


Bell (Commerce): Honestly, I don’t remember. I know we updated the current disclosure, but I don’t know. I would assume that we did, but I don’t actually know.


Rep Cavenaugh: Well, should you not go back and amend that since now you know that it should have been reported?


Bell (Commerce): Yes. So I wasn’t involved in the process, but I would say it was probably done that way. I can’t personally say it was.


Rep Cavenaugh: Okay. Secretary, can you tell whether or not you actually reported that in 2019?


Preston (Commerce): I can double-check, but I think we went back after it was found on there. Yeah.


Bell (Commerce): We fixed it the way that we were instructed to. Correct.


Rep Cavenaugh: Okay. And you reported it the year since?


Preston (Commerce): That’s correct.


Rep Cavenaugh: Okay. The $986,000 that was paid to them, what is it paid to them for?


Preston (Commerce): It’s for their apprenticeship program.


Rep Cavenaugh: Okay. What do they do for that?


Preston (Commerce): It’s an IT apprenticeship program. They find IT apprentices and place them in programs of companies around the state.


Rep Cavenaugh: Okay. Are there any other nonprofits that you’re members of that have not been reported? Okay. The reason I ask is because I know on prior financial reporting, you’ve reported where you actually sit on the board that actually pays you the $50,000 bonus that you actually sat on that board for some time. You reported that. So I don’t understand why you didn’t know that you had to report this.


Bell (Commerce): This was a group that had been set up rather quickly with just the four board members. There was no compensation to any of the board members. It was merely a group that went through the process of giving out grants. They weren’t compensated, and they didn’t receive any payment for any of those services. It was an oversight in terms of– yes, I’m a member of this board. That was essentially what the finding was. We just forgot to do that disclosure.


Rep Cavenaugh: Okay. Thank you, Mr. Chair.


Rep Dotson: Thank you. Senator Hammer, you are recognized.


Sen Hammer: Thank you, Mr. Chair. This is going to be for Dr. Childers, if I could, please.


Rep Dotson: Go ahead.


Sen Hammer: And if not the appropriate time, I’ll hold to their budget, but.


Rep Dotson: Is this related to the audit findings? We haven’t started the budget yet.


Sen Hammer: No. I’ll hold to the budget portion of it then.


Rep Dotson: All right. I’ll let you get back into queue for that then. As has been the case during these findings or these hearings so far, we’ve asked the department to come to the table while we’re presenting the budget. So without objection, we’ll consider this audit filing finding reviewed. Thank you, Mr. Auditor, and if we can have–


Webb (Leg Audit): Thank you, Mr. Chair.


Rep Dotson: Ms. Hamilton, are you available to begin? Oh, there you are. If you guys want to move down, you can stay at the table for this presentation. Ms. Hamilton, you’re recognized to begin whenever you’re ready.


Department of Commerce Budget


Hamilton (BLR): Good morning, members. I’m Mildred Hamilton. I work in the fiscal division of the Bureau. I apologize for my absence. I had a sidebar. We’ll be going over the Department of Commerce’s budget today. All of the items on the agenda will be presented by me. We are going to be in volume two of your manual, and the first item is Department of Commerce. Mr. Chair, if it’s all right, I’m just going to go over the appropriations that have change levels. If there are any questions of appropriations without change levels, I can go over those also. We’re going to start on page 50. This is the Administration and Shared Services Division. On page 151, you will see their department appropriation summary. There are seven appropriations within this division, four of which have changes in their line items. There are 48 positions that were authorized in the 2023 bill. Moving forward, the agency and the executive recommendation is a decrease of one position. So it will be 47 total positions. And overall, there’s an increase from the authorized level of $78,000 in year one– that’s 2024– and $33,000 in year two– that’s 2025. Most of the changes are for salary and matching rate adjustments that occurred in the previous biennium. The first appropriation with changes is on page 152. This is the Office of Skills Development Apprenticeship Expansion Program. This is a relatively new appropriation. It was established in 2021, and it provides for the personal services operating expenses of that division. And it is designed to expand opportunities relating to apprenticeship programs in the state. It is funded by federal revenue. With the exception of personal services matching, which is going to be a slight change in their budget, they’re requesting continuation of their 2023 authorized appropriations. So on page 153, you’ll see their appropriation summary. As I mentioned before, both the agency request and the executive recommendation is for an increase in personal services matching only. You’ll notice that the regular salaries line item is the same from the authorized in 2023 going through 2024 and 2025. So the increase is about $5,400 in year one and then $660 in year two. Again, this is in matching only.


Hamilton (BLR): The next appropriation with changes is on page 154. This is the Office of Skills Development. This is their operating appropriation. It is used to award grants to private and public organizations for the development and implementation of workforce training programs. They are also responsible for reviewing the criteria for the awarding of the grants. And before October 1 of each year, they are required to submit a report to the Governor and the Co-chairs of Legislative Council to report the activities and expenditures of the previous calendar year. Funding is from General Revenue, a $2.5 million transfer from Division of Workforce Services, and if needed, a transfer from the Workforce 2000 Development fund. You’ll see that funding on the next page. With changes in regular salaries, personal services matching, and capital outlay– excuse me– the agency is requesting general revenue funding of $1 million in 2024 and in 2025. The executive recommendation does allow for the agency’s request. So on page 155, you will see the changes that were requested by the agency being implemented. On this page, I do want to note, though, I had had a conversation with the agency. There is an error in the operating expenses line item. You’ll see there’s a $1,300 increase that was not meant to be there. So the request that they are having for their appropriation totals for 2024 and 2025 are going to change. So for 2024, instead of the $23,504,461, they will actually be requesting $23,503,161. That’s also the executive recommendation. And in the year 2025, with a reduction of that $1,300, the request will be $23,505,141. 156 is their next appropriation.


Hamilton (BLR): We’re still in volume two. This is another appropriation for the Office of Skills Development. It provides for the personal services and operating expenses for the administration of the program and apprenticeship programs. All the funding is general revenue. They are asking for changes in personal services matching and general revenue of about $2.5 million going into fiscal year 2024 and 2025. The executive recommendation does allow for the agency’s request. So on page 157, once again, in the regular salaries line item, you’ll see there are no changes. The only change is an increase in personal services matching, about $9,300 in year one and $5,200 in year two. The last appropriation with changes is on page 164. This is their shared services paying appropriation that provides for their personal services and operating expenses for the cabinet-level staff. So this includes their human resources, their IT, their fiscal, and their communications teams. The appropriation funding consists of a mix of revenue sources, and they are transferred from divisions that utilize the shared services, which includes general revenue and cash revenues. The agency, in addition to requesting regular salaries and personal services increases due to the salary and rate matching adjustments, they are asking for the transfer of one position to the Arkansas Economic Development Commission state operations appropriation. This is a general revenue appropriation. This is just so they can budget the position in the correct division during the biennium. The executive recommendation provides for the request, and you’ll see the changes on page 165. So there’s a net increase of about $84,000 in fiscal year one, which is over the 23 authorized, and then $25,000 in year two. Those are the only changes requested. Mr. Chairman, that’s the conclusion of our presentation for this division.


Skills Development


Rep Dotson: Thank you. On page 155, in the Industry Training program and the Workforce Improvement Grants line items, both of those appropriation requests that you have and the executive has recommended are significantly more than what you spent in the last year. Are you anticipating a lot of additional funds in those two line items that is not reflected here?


Bell (Commerce): We’ve got somebody here from Skills Development that can answer that specific question. It may be related to this project that we’re getting ready to start, but director Cody Waites can answer that question.


Waites (Commerce): Cody Waites, director of Office of Skills Development. Representative, would you mind repeating the question?


Rep Dotson: So on page 155 if you’re following along, the Industry Training program, it shows that you spent $2.2 million last year, but you’re requesting $15 million. And then, Workforce Improvement Grants, $1.6 million last year, but you’re requesting $3.5 million. Are you anticipating a lot of additional revenue coming in in the next two years that you’ll be spending each of those years?


Waites (Commerce): So just a lot of the spending happens in arrears. So last year, we actually awarded closer to about $17 to $18 million, right? But as we expend against it, it’s billed against it. So this is what we actually expended last year versus what we awarded. So I mean, we’re going to continue to award grants. We awarded somewhere around 350 grants last year for workforce development training. Some of that, obviously, has been awarded but hasn’t been expended yet.


Rep Dotson: Excellent. Thank you. Senator Chesterfield, you’re recognized for a question.


Sen Chesterfield: Thank you. Thank you, Mr. Chair. Mr. Secretary, I’ve asked that this part of the budget, the Office of Skills Development, be held. Ordinarily, when it’s held, someone gets with the Senator or the Representative and visits with them about concerns. That has not happened. I asked Mr. Anderson some time ago to put a hold on it, and I have yet to have a response from your director. So if you could speed that up, I would certainly appreciate it. Thank you so much.


Preston (Commerce): Absolutely, Senator.


Rep Dotson: All right. Not sure who’s in Representative– I’m guessing Ladyman?


Rep Ladyman: Yeah. I’m in the wrong seat here. On page 153, I have a question just for my understanding here, but the line there for operating expenses shows that you spent $320,000, and you were over budget $505,000, and then you have 0 for the upcoming years. Can you explain what that is?


Waites (Commerce): Yes. So when we first– thank you, Representative. When we first were awarded this grant, we actually drew down the full amount of funds from the Department of Labor, which was not what we were supposed to do. So what we had to do is we had to come back here and ask for additional appropriation above and beyond what we were actually going to expend, so we could send the funds back to DOL and then begin expending against it. So that’s why you see that significant increase there and not throughout the remainder of the grant opportunity.


Rep Ladyman: Thank you.


Rep Dotson: Alright. Representative Cavenaugh.


Rep Cavenaugh: Thank you. I have a request. If you could provide some information to the staff to get out to the whole committee, and this is going to be for every division inside the Department of Commerce, if you can just do this so I ask it just once instead of one at a time. I would like to see if you could provide us for a report that shows each and every fund balance you have, where that fund balance originates from– Is it special revenue? Is it cash? Is it one-time money? Is it federal money?– where it comes from, if there’s any restrictions upon that balance of where it may be used, so if it can only be used for a certain project because they got ties to the feds or whatever. If we can get that report, I’d appreciate that.


Preston (Commerce): Thank you, Representative. We’ll get you that.


Rep Dotson: All right. Senator Hammer, you’re recognized.


Apprenticeship program


Sen Hammer: Thank you, Mr. Chair. Good morning, Cody. Would you talk about the vision of the apprenticeship program for the next year with the budget that you’re asking for?


Waites (Commerce): Sure. So thank you, Senator Hammer. Apprenticeship expansion is obviously one of our big focal points. We’ve had about a 128% increase in apprenticeships since 2015. So it’s something that’s been beneficial, obviously, to the state, to employers, and to apprentices themselves. What we do with that funding is, essentially, we award grants to apprenticeship schools that are either for profit, not for profit, two-year community colleges, four-year universities, kind of all across the board. And so we award funds to help benefit and keep the cost down of tuition for apprentices in the state of Arkansas. Typically, that’s either paid by an employer of an apprentice or apprentice themselves. And so the funds that we award to those schools help keep that tuition down. And it goes towards things like purchasing code books for electricians and plumbers, equipment grants so that they have state-of-the-art equipment to utilize when they’re in their training programs in the evenings. It also goes to fund curriculum. And it also goes to help offset instructor costs that schools incur in hiring these individuals. Most of the time when you’re talking about an apprentice instructor, it’s someone who’s a journeyman or a master plumber or electrician, especially in the construction trades. And so they’re working all day, and then they’re taking time to give back in the evenings, and so we award funds for that as well.


Sen Hammer: And it may not be appropriate to this portion of your budget, and if I’m in the wrong area, just say so, but there was a question of funding in the past that’s going out to CTE centers just for the general funding or for the equipment purchases and such as that. Is that in this portion of your budget, or is that going to be covered somewhere else?


Waites (Commerce): If you’re referring to the secondary career centers, that is actually Department of Ed funds through public school funds, we help administer that in a MOU in a relationship with Department of Ed. But that’s not on our budget.


Sen Hammer: But you administer it?


Waites (Commerce): Yes, sir.


Sen Hammer: Okay. All right. Thank you.


Rep Dotson: Thank you, Senator. Representative Speaks.


Wine tourism


Rep Speaks: Thank you, Mr. Chair. On page 151 in our white book where it’s the Arkansas Wine Center expenses, can you enlighten me on that?


Bell (Commerce): So in this budget, there’s a couple of different subdivisions. One of them is the Arkansas Wine Producers Council, which is in the process of trying to build a Wine Tourism Center. So that appropriation was set up with the idea of a Wine Tourism Center operating and running using special revenue that’s generated for the Wine Producers Council. It just hasn’t been built, so there’s not been any expenses to it.


Rep Speaks: So to fund this, is this coming from the general fund right now?


Bell (Commerce): They get a very small amount, about $5,000, of appropriation that comes from state general revenue. The rest of it is all special revenue that comes from an excise tax on grocery stores that are selling wine. So it’s special revenue to them.


Rep Speaks: Okay, thank you. Thank you, Mr. Chair.


Rep Dotson: Thank you, Representative Berry. You’re recognized.


Rep Berry: Thank you, Mr. Chairman. And I’m kind of following up on Representative Speaks here, but where are we in the process of this Wine Center? Franklin County is in my district, and I haven’t seen any movement on it. Can you tell me?


Bell (Commerce): So, kind of referencing the previous question, the way the appropriation was originally set up, it was only for operating expenses. So in the fiscal session, you guys allowed us to put appropriation in to actually do a capital project. So we’ve been kind of moving along, trying to get that done. Unfortunately, it’s a pretty lengthy process. What we’ve done is we’ve set up a method of finance which we’ve got to send over here, but we’ve at least done the beginning part of it with the idea of trying to set up a– doing a bid for a design professional and engineering professional because they have a site. But it’s all very preliminary. And I think, as we’re kind of working with the Wine Council, it’s a project that’s a little bit more involved than they had anticipated. And so the last conversation I had with them, we were thinking about trying to do a different approach for that, but right now it’s kind of teed up to start hiring an architect and a design professional to kind of come up with a drawing and an idea for the Wine Tourism Center. But, I mean, we’ve made some progress, but the capital project is a pretty involved process. That’s where we are right now.


Rep Berry: It seems like it’s been going pretty slow. But if you would keep me involved in that process, I’d appreciate it. Thank you.


Bell (Commerce): Yes, sir.


Rep Berry: Thank you, Mr. Chairman.


Rep Dotson: Thank you. Senator Elliott, you’re recognized.


Secondary career centers


Sen Elliott: Thank you, Mr. Chair. Mr. Waites, I was trying to figure out from the website, and I can’t do it, how much money– if you could tell me how much money that’s been spent on the career centers thus far. Do you have any idea how much that’s been contributed from Office of Skills Development?


Waites (Commerce): So the Office of Skills– thank you, Senator– the Office of Skills Development doesn’t necessarily directly spend Office of Skills Development funds in the secondary career centers around the state. We use public school funds, which is a $20.4 million appropriation that we administer in coordination with the Department of Education. And so that goes out to cover a lot of their expenses in terms of direct program expenses, in terms of faculty salaries, things of that nature, as well as equipment upgrades and things like that. At the end of the fiscal year or towards the end of the fiscal year, when we know if we have a budget surplus or if we don’t have any money to spend, we’ll open on a project where we’ll award grants with the remaining balance to those career centers, and they can apply for that for any type of equipment funds. And there’s a process by which they do that, and we award those funds towards the end of the year, but they’re not tied to our budget specifically.


Sen Elliott: Is there some kind of process where the schools, the areas, some of them work together, are notified that there is a surplus and there’s money? What’s that process?


Waites (Commerce): Yes. So we run enrollment reports twice a year, once in the fall, once in the spring, with ADE pools October 1 and then at sometime in the 1st of February. Once we have gone through and made the payments out to the career centers– we do that directly to the career centers now. We changed that formula a couple of years ago. Once we know what that delta is, we will obviously notify all the districts– not necessarily the school districts, but we’ll notify all the career–


Sen Elliott: The centers.


Waites (Commerce): –centers of what that balance looks like and what the application timeframe is to submit. And so they can obviously submit grants to that, and then we award them sometime late March, early April, so they can expend those funds before the fiscal year ends.


Sen Elliott: Are there any areas where, from your standpoint, that you see we have a deficit of career centers or something else we might call it where students have the opportunity or young people or whoever’s going to be trained have those opportunities– I guess the big question is, do we have any geographical deficits where we need this opportunity?


Waites (Commerce): No, Senator. And thank you for the question. Back in 2015, we actually had 50-plus school districts who lacked access to a career center, which is defined as outside of 25 miles or 30 minutes of driving time. Since that time frame, we’ve been very strategic in where we’ve awarded pilot satellite locations and things of that nature, both under the Department of Career Education prior to transformation and then post-transformation here within the Office of Skills Development. And so now we’re able to say that we proudly serve all school districts in the state of Arkansas. Now, saying that we serve everybody is one thing. I think we do know that we need to make some additional investments there and make some high-quality CTE program everywhere because it’s not the same. But I think that’s our next phase of this project is, now that we served everybody, now we look at the program in itself and figure out where investments need to be made.


Sen Elliott: And lastly, I was trying to find the Board of Directors so I can know who’s on the board now. Is that on your website somewhere and I’m not–?


Waites (Commerce): For Career Education Workforce? Yes, ma’am.


Sen Elliott: Yes.


Waites (Commerce): It is on the website. We can send that to you. It should be easily accessible. If it’s not, then that’s a takeaway for me to go back and–


Sen Elliott: No, I can find it. If it’s there, I’ll find it. You don’t need to send anything to me if it’s there. If not, then I’ll call you. Okay. Alright. Thank you.


Waites (Commerce): Thank you, Senator.


Rep Dotson: Thank you. Senator– I mean, Representative Wooten.


Interest income


Rep Wooten: Thank you, Mr. Chairman. I’m noticed in all your– and I will ask this question that applies to all your agencies, but since it’s shared services, where do you show your interest income on all your fund balances? I don’t see it shown as a funding source anywhere on any of the budgets.


Bell (Commerce): So in shared services, we don’t receive any sort of investment income from the Treasurer. Some of our divisions do have larger fund balances for different various reasons. And if that money is invested with the Treasurer in some sort of investment instrument, then they are receiving some income from that, and we’ve got that information. But at least with this one, we don’t. There is no investment income.


Rep Wooten: Mr. Chairman, I’d like–


Bell (Commerce): There could be some from OSD though. I’d have to double-check on there. Anywhere that you see what they call a trust fund, it’s over with the Treasurer. The Treasurer has a group of investment officers that goes out and invests that money, usually, like a certificate of deposit with local banks. It’s overseen by the State Board of Finance, so it’s pretty safe.


Rep Wooten: Well, I understand that, but I’m talking about the interest income on investments and agencies that you all oversee under your umbrella. You’re telling me you don’t know how much interest they’re receiving?


Bell (Commerce): That’s typically controlled by whoever the CFO or controller for that division is. I don’t see a roll-up for the entire department, but I know that it’s there at the division level. We’ve got our CFOs and controllers that are watching that for the few that do do investment.


Rep Wooten: Mr. Chairman, I’d like to request from the agency that they give us a report, going along with the request of Representative Cavenaugh, and on that report, if it’s permissible by Representative Cavenaugh, that we include interest earned on any investment that you all make. I don’t care whether it’s under your umbrella, whether it’s the Department of Finance. I just want a number.


Bell (Commerce): Actually, I’ve got that report somewhere. Probably here in–


Preston (Commerce): We’ll compile thatinformation with–


Bell (Commerce): We’ve got that information. It comes from DFA.


Rep Wooten: Is it not a pretty good amount of money?


Bell (Commerce): On some of them it is.


Rep Wooten: On some of them it is?


Bell (Commerce): Yes.


Rep Wooten: Well, how come you don’t treat it as a funding source? Where does that money– where are you using that money? Is it just piled back in that fund balance?


Bell (Commerce): Well it typically rolls back into the trust. If you want to spend it, you would typically have to come to Peer and ask for temporary appropriation depending on what you want to do.


Rep Wooten: But it is a substantial amount of money that comes into the agency that can be used even if you have to go through the process of coming back to Peer. Is that not correct?


Bell (Commerce): Yes, sir. Yes, sir. The issues we’ve had recently because the interest rates have been so low, I mean, you have to have a pretty big fund balance to get a significant– I would call it significant.


Rep Wooten: Is that request permissible, Mr. Chairman?


Rep Dotson: Can you state that again? What was the request?


Rep Wooten: That I wanted to have a report go along with Representative Cavenaugh’s request that would show the interest– on each account that they show fund balances on, that they would show the interest income. I know we’ve received– I got one–


Rep Dotson: Staff has that noted down.


Rep Wooten: –report from DFA, but this is an individual agency or individual fund balances. Would that be permissible?


Bell (Commerce): Yes, we can get that. We can get that.


Preston: No problem.


Rep Dotson: Staff has that noted, and they’re good with that. Senator Chesterfield– or Senator Elliot. You are recognized.


Board diversity


Sen Elliott: Thank you, Mr. Chair. I did find the– on the website where the board members– and so I just had a question about that because I don’t want to assume by looking at people I know who and what they are. But there are six men, two women, and is anybody in that group a person of color?


Waites (Commerce): To my knowledge, no, ma’am.


Sen Elliott: Is that a concern or should it be a concern for us that we don’t have representation here across the board?


Waites (Commerce): Yes, Senator. I mean, I think one of the things that we’re trying to do right now in identifying board members to serve on the board, we do have some vacancies, and so we’re trying to be cognizant of the fact that diversity is something that we’re focused on. And so I think as we obviously work with the Governor’s office and try to fill those open slots that that’s something we’re going to be intentional about.


Sen Elliott: Were we not intentional before?


Waites (Commerce): Sure we were, but I don’t think we’ve had a vacancy on that board in six years.


Sen Elliott: In six years. At what point were we being intentional?


Waites (Commerce): We’ve been intentional since I’ve taken, and since we’ve been here, Senator.


Sen Elliott: And while this may not seem like a budgetary matter, it is because we know that it matters, people’s experiences, when it comes to deciding what priorities are. So in the six years– we’ve had six years where there’s not been a person of color, but we are trying. Is there something in the criteria that’s causing a problem in having representation in spending these millions and millions of dollars?


Waites (Commerce): Senator, we don’t make the– obviously, we don’t make the appointments to those boards or commissions. We actually have had diversity on the board. Adam Arroyos was a member of that board for a number of years.


Sen Elliott: I remember. I remember that. And we’re just going backward.


Waites (Commerce): So his term expired. So again, that’s something we’re cognizant of and we’re working to address, but obviously, we don’t make those appointments.


Sen Elliott: Have we ever had an African American on the board at all?


Waites (Commerce): I would not be able to answer that. Not since I’ve been involved in the agency, no.


Sen Elliott: Okay. Mr. Chair, just one more question. Could you describe to me what the intentionality it is that you’re applying to the process of getting people on the board? How are you being intentional– I don’t mean you– whoever is making recommendations to the Governor?


Waites (Commerce): I think it’s just taking stakeholder input from parties involved in the business and industry sector around the state. Obviously, membership of that board is industry-driven in nature, so it’s representative of 11 different industries, so to speak. Right? And so I just think that as recommendations come in, we pass those along, and that’s addressed.


Sen Elliott: And it’s that last part that I think is maybe something we should take a look at, and I might even ask your opinion about it because we set up this board, it’s so industry-driven, which can involve a lot of, I guess, personal self-interest. Do you think– or I think, Mr. Chair, we need to think about if we keep ending up with boards that are in charge of millions of dollars that we are appropriating and spending, do we need to look at the criteria for who can be on this board? Because if we understand the way things work systemically, we’re going to forever most likely end up with this kind of situation. So if we set up the same criteria that we always have, unless we have had our heads in the sand, we know who’s likely going to end up on this board. And whether you wanted to do better or not, there may be no way you can because of what we’ve done. So that’s something we ought to look at and really think seriously about changing that criteria because being an owner should not be the only reason or the prevailing reason that you get a chance to serve on this board because we’re going to keep getting what we’ve got. And as somebody who is working with this program, I would think that would be important for you to support, should somebody bring that forward of changing that criteria. If we don’t do that, we just keep slipping backward and saying we’re working intentionally to go forward when we’re not. And I don’t want people to misunderstand. This is not just something that’s a bit of sociology. This is about this budget, who makes decisions about how this money is spent matters a great deal. So I will talk with you fellas or whoever I need to offline about this, but–


Waites (Commerce): Thank you, Senator.


Sen Elliott: Thank you, Mr. Chair.


Rep Dotson: Senator Hammer, you’re recognized.


Sen Hammer: Thank you, Mr. Chair. Just a couple of quick follow-up questions. The names for the individuals that are on the boards are referred from the industry themselves, is that correct?


Waites (Commerce): I mean, yes, Senator, it can be. I mean, individuals have the opportunity to apply for, my understanding is, any board or commission there. There’s an application process online they can go apply for. So it’s not necessarily that they’re referred to from a specific industry, but people have a tendency to talk amongst themselves and speak about whether or not they’d be a good fit to serve on a board or a commission.


Sen Hammer: Okay. And then those are referred up to the Governor’s office for final appointment, is that correct?


Waites (Commerce): That’s my understanding, yes, sir.


Sen Hammer: Okay. But it all originates at the source of whatever industry, whatever area it is that a board needs to have somebody appointed to it.


Waites (Commerce): Yes, sir.


Sen Hammer: Okay, thanks.


Rep Dotson: All right, seeing no further questions, we’re going to move this section to the end of the agenda today. If you could, get with Senator Chesterfield. We’ll just hold this one till the end, and hopefully, you can talk by the time we get to you. Ms. Hamilton, you are recognized for your presentation on number two, Economic Development Commission.


Economic Development Commission


Hamilton (BLR): Members, the appropriations summary for this department starts on page 167. They have 21 appropriations. There are 9 with changes. Overall, there is an increase of one position being requested by the agency, also recommended by the Executive, and an increase in both fiscal years 24 and 25. The first appropriation that we have with changes starts on page 171. This is their State Operations appropriation, and it provides for the personal services and operating expenses for the agency. There are three groups within the agency that are funded by this appropriation, their Administration and Finance division, their Global Business division, and their Marketing and Communications division. This is a 100% general revenue-funded appropriation. The agency is requesting increased appropriation and general revenue, about $12.3 million in both fiscal years 24 and 25. They are also requesting the transfer of the one position that we mentioned before from shared services to this appropriation. They’re asking for position reclassifications with no change in appropriation and then a restoration of $100,000 in capital outlay so they can make some purchases. The executive recommendation does allow for the agency’s request with the exception of the position reclassifications, and you can see those changes on page 172. So overall, as I mentioned, there’s going to be an increase in year one of about $252,000. Both the agency request and executive recommendation is for that amount, and then year two an increase in about $40,000. And this you’ll see in your regular salaries and your personal services matching line items. The general revenue request is going to be about $750,000 over the budgeted amount that you see in the budget.


Hamilton (BLR): Next appropriation with changes is on page 173. This is their community assistance federal appropriation. It’s used to operate their Community Development Block grant program, and it’s funded by the US Department of Housing and Urban Development. And through repayments of previous loans, they are asking for slight increases in regular salaries and personal services matching to account for those adjustments we’ve mentioned before. And the agency is requesting that this continue into the next biennium, which is the executive recommendation. On page 174, you’ll see the changes. Both the agency request and the executive recommendation is for an increase in one position and then an increase in regular salary and match only of $80,000. First year, over 23 authorized, and in year two, it’ll be an increase of $4,500 over year 2024. Moving on to page 175, you’ll see their Disaster Recovery appropriation, which is also a federal appropriation. This department was chosen to administer the State of Arkansas action plan for community development block grants and recovery efforts for their disasters. The agency is requesting restoration of about $8.9 million in those block grant funds in disaster recovery, and this was originally approved by Legislative Council in February 2022. This was a transfer from a miscellaneous federal grant holding account. The executive recommendation allows for the agency’s request, and you’ll see that appropriation on page 176. The 23 authorized is zero, but you’ll see that the $8.9 million has been added each year of the upcoming biennium in fiscal years 24 and 25.


Hamilton (BLR): Next appropriation with changes is the Rural Service Division state operations. It’s on page 179. This provides for the personal services and operating expenses of the division. It’s 100% general revenue funded, and they provide rural grant programs and information sharing and educational opportunities through regional forums through their conferences. There are slight increases asking in personal services matching and to continue their appropriation and general revenue funding of $839,000 each year of the biennium, which you will see on page 180. So overall, you’ll see that the agency request and the executive recommendation is for an increase of about $9,100 in year one. That’s over the 23 authorized appropriated level and personal services matching, and in year two you’ll see an increase of about $1,300. Next appropriation with changes is going to be on page 185. This is the Science and Technology Division. This is their state operations appropriation.


Hamilton (BLR): They use this appropriation to encourage the use of advanced technology in states businesses and agricultural communities. They emphasize three areas, project financing, company financing, and technology extension development. It also provides for the personal services and operating expenses of the division. The agency is requesting appropriation of about $13.7 million in each fiscal year and general revenue funding of about $7.8 million. The executive recommendation does provide for this request, and you will see those changes on page 186. Once again, looking at the personal services line item, you’ll see a slight increase of about $23,000 in year one. That’s over the 23 authorized, and about $3,300 in year two. There’s no change to the regular salaries line item. Next appropriation with changes is on page 191. This is for their manufacturing extension network. This is a federal appropriation. They utilize this to provide third-party reimbursements for field services and technical support for manufacturers that are supported under the grant. Funding comes from a grant from the National Institute of Standards and Technologies National Program. So it’s 100% federally funded. They are asking for slight increases in regular salaries and personal services matching and an increase of about $128,000 in operating expenses each year of the upcoming biennium to allow for increase in federal grant funding. The executive recommendation does provide for the agency’s request. You’ll see on page 192 that in addition to these increases, they are also asking for one position.


Hamilton (BLR): Next appropriation, members, with changes, we’re going to go to their EPSCoR program. It’s on page 201. This is an appropriation that’s funded by the National Science Foundation and they use it to strengthen their research and education in science and engineering programs in the state. 100% federally funded. They are asking to reallocate appropriation of about $5 million both in fiscal year 2024 and 25 to a new appropriation. You’ll see it on page 209. This also includes the reallocation of three position and their associated appropriation and personal services matching and regular salaries. There’s $120,000 in operating expenses. They would also like to reallocate as well as in their grants an A9 item and their external evaluators line items. The executive recommendation provides for this request, so on page 202, you’ll note that the authorized appropriation is about $5 million, but then in fiscal years 24 and 25, you’ll see that those items have been zeroed out.


Hamilton (BLR): Moving to page 209, this will be our last appropriation with changes. This is the new EPSCoR appropriation. It’s also a federal appropriation. And this provides 20% match. This is an 80% federally funded program. The agency, as I mentioned before, has positions that they’d like to be reallocated and their associated appropriation, as well as the changes in those line items that were mentioned before. They did get a transfer from the miscellaneous federal grant holding account back in 2021 for this program. It was approximately $20 million to start the program. And so they would just like to continue their appropriation into the next fiscal years. On page 210, you’ll see the changes that are being requested. So there’s nothing in the authorized column for 2023, but you’ll see the additions that are being requested in fiscal years 24 and 25. As a note, there’s a restoration of $11 million in both fiscal year 2024 and 25 that was also originally approved by Legislative Council. So even though the appropriation we saw on previous pages was $5 million, you’ll see that the total appropriation moving forward is going to be about $16 million. That concludes my presentation for this division, Mr. Chair.


Rep Dotson: Thank you. Looks like we’ve got some questions. Representative Cavenaugh, you’re recognized to start us off.


Rep Cavenaugh: Thank you, Mr. Chair. My first question is going to be on page 172. I’m going to be looking at your line item on grants and aid. This is your state operations. You’re requesting an appropriation of $1 million. The last time any money was given out of that line item was 2018 and 2019, and that was for $330,000. Prior to that, the next time it was given was in 2014-2015 for $215,000. Why do we need $1 million there?


Bell (Commerce): Let me get our division CFO up here to kind of address some of the more specific questions like that.


Rep Cavenaugh: Thank you.


Rep Dotson: Please identify yourself for the record, and you’re recognized.


Williams (Commerce): Tammy Williams, Arkansas Economic Development Commission.


Rep Cavenaugh: Yes, I’m over here.


Williams (Commerce): Good morning. Could you please restate your question?


Rep Cavenaugh: Okay. On 172, under state operations, you have a line item for grant and aids. You’re asking for a $1 million appropriation. The last time that you spent anything under that line item was 2018-2019, and it was for $330,000. Prior to that, the next time you spend any money in there was 2014-2015 for just $215,000. So why are you needing $1 million in that line item?


Williams (Commerce): Yes, ma’am. Thank you for the question. This supports economic infrastructure grants, and that appropriation will be utilized in the event that there are sufficient balances available to fund projects.


Rep Cavenaugh: Well, according to this, there were sufficient funds to do projects in 2021, 2022. But it shows zero were funded.


Commerce staff: So, as you well know, during the pandemic, a lot of things kind of just ground to a halt. And so in terms of economic development, a lot of our projects just kind of stopped, and so we were not able to expend funds or initiate projects or complete projects during that time. So I think what this is is a request to restore the appropriation in anticipation of being able to use existing funds for projects. There’s no expenditures simply because there were no projects that were done, unfortunately.


Rep Cavenaugh: Okay. But your history shows that you don’t need a million, that you don’t fund a million. So could you not reduce that to 500,000? That’s closer to what you’re actually been giving out historically. Actually, more than what you give out historically.


Preston (Commerce): We’re hoping for a big year.


Rep Cavenaugh: That’s not an appropriate answer. I mean, I’m looking back at a 10-year history.


Preston (Commerce): If the projects are there, we’d certainly love the ability to do them and work with them, but if they don’t, then that’s certainly somewhere we could reduce. I just hate to miss out on an opportunity.


Rep Cavenaugh: Well, your projection is your general revenue is $12.3 million, but you’re showing that you want appropriations for $13.5. So you’re asking for appropriation over what you think your GR is going to be. So why can we not put these into a better perspective of what we really think we’re going to get and what we’re going to use?


Commerce staff: I think from a philosophical standpoint, it’s more of an anticipation– well, I think from a business perspective, I would tend to agree with you. I mean, from an economic development perspective, because it’s not a linear process, it tends to be pretty lumpy. You have good years, you have bad years. And I think that’s in there in anticipation of being able to do a project if it were to come along. That’s–


Rep Cavenaugh: Since 2015, you’ve only awarded two awards. So, Mr. Chair, I’m going to have a motion at the proper time. But I’d also like to ask you about page 210, which is going to be your EPSCoR, technology in the federal. You’re asking for, under your grants in that line item, you’re asking for $14.2 million. But we’re only showing that we’re not even projecting any federal revenue that we’re only going to be using, I guess, a fund balance of $6.8 million. So why do we need that much in that appropriation if we don’t see anywhere near getting that money?


Commerce staff: And so with federal funding, you can do it one of two ways. And again, it maybe somewhat of a philosophical discussion. You can bake it into your ongoing budget, which is kind of what this is doing, saying if we get a grant, if we get incoming federal funds for a project or something, the appropriation is there. The other option would be to come in and come to Peer and ask for a temporary one-time appropriation for federal funds. And so either mechanism would work.


Rep Cavenaugh: Right. But you can come to Peer and you come to ALC and ask. I’m also going to have a motion at the proper time for that one, Mr. Chair, and I’ll get back into the queue.


Rep Dotson: Thank you, Senator Hammer.


Sen Hammer: Thank you, Mr. Chair. What are you anticipating coming down from the feds in the next year that would justify you needing to keep your appropriation? Or do you have any insight right now with the discussion, knowing that elections may change things here in a little bit?


Preston (Commerce): As it relates to the EPSCoR grant?


Sen Hammer: It could be either that or any of your appropriation balances. Going back to the previous conversation before the EPSCoR conversation.


Preston (Commerce): We don’t have any reason to believe that it will be any different than what it is. Most of them usually end up in a continuing resolution through Congress is where they get passed.


Sen Hammer: Okay. And then on the EPSCoR and the science and technology. Help me understand how that ties in with what Higher Ed does or any of the other efforts to increase science technology. Is there a blended approach to where this money is being used to help what’s going on in other areas, or what’s the difference?


Preston (Commerce): It is a blended approach. Our EPSCoR team works very closely with higher education and looking at the grants and where research grants and dollars are most needed in the state. And perhaps there’s not an availability through our normal funding sources through higher education to receive a grant. So we’ll coordinate with higher education and look at those areas that are in need of additional research funding.


Sen Hammer: Okay. All right. Thank you. Thank you, Mr. Chair.


Rep Dotson: Thank you. Representative Tosh, you are recognized.


Law enforcement grants


Rep Tosh: Thank you, Mr. Chair. Let me direct your attention to page 208, rural services for law enforcement grants. And I just need you to help me understand it. I see where you’ve been authorized $5 million, but when looking at the total number that was spent for law enforcement through rural services– in these rural areas, I’m just not understanding this. I’m showing $595 out of $5 million is all that was dispersed to rural law enforcement. What am I missing here?


Preston (Commerce): This is one Representative that’s actually never been funded. It was amended by the legislature a couple of years ago.


Rep Tosh: Okay. You say it’s never been funded?


Preston (Commerce): That’s correct. Not in our operating budget.


Rep Tosh: Say that again, please.


Preston (Commerce): Not in our operating budget.


Rep Tosh: Okay. All right. I’ll get back with you. It kind of caught me off guard. It not being funded, because that’s not the way this reads. It’s showing that agency request and executive recommendation. I thought it had $5 million in it to be used for law enforcement across the state, especially in these rural areas. And so I guess I need a further explanation from someone as to why it’s even in here in the capital outlay, especially if it hadn’t been funded. And what are we looking at in the future as far as trying to fund this, and what’s your plan?


Commerce staff: So, to some extent, we carry appropriation for projects that are created but are not necessarily funded. And this is probably not a great example of that, but we’ve got several like this. Like for rural broadband, we have a pretty hefty appropriation. It’s never been funded because it has to come from state general revenue. That’s kind of what you’re seeing here is ideas and projects put together, but not necessarily funding following later. So you see appropriation, but you don’t see the funding.


Rep Dotson: David, this actually shows it’s a cash fund. Where did the $596 come from?


Commerce staff: I don’t know.


Rep Dotson: Okay.


Commerce staff: Interest. Yeah. Generally, I mean, it would have to come from-


Rep Tosh: Okay, Mr. Chair, I don’t know the answer to this, but obviously, you’re looking at it as well, and I think probably other colleagues. It’s really confusing to try to understand what they’re doing here with this. And I’m not sure where we need to go to get an answer or how we need to pursue it, but it’s before this committee to review it. And here we’re finding out now that $595 is all that’s been spent out of a $5 million request for law enforcement across the state. And now I’ve been told that it was never funded.


Rep Dotson: Do you all know the history on it, on why it was originally-


Preston (Commerce): I think it was added by the Attorney General in a project that was anticipated that actually never happened.


Rep Dotson: So the cash funds would have come from the AG’s office, but they were never awarded?


Preston (Commerce): Right.


Rep Dotson: Okay. Is that cleared up, Representative Tosh?


Rep Tosh: Well, I wouldn’t say it cleared it up, but it was a step in the right direction. So I’ll visit with you further about this, and I’ll look into it. Thank you, Mr. Chair.


Rep Dotson: All right. Representative Beatty, you are recognized for a question.


Rep Beatty: Thank you, Mr. Chair. First, I would like to thank the department, Mr. Secretary, and the job that you do in the state of Arkansas to offer job creation, especially in the rural areas of the state. One thing I would want to point out to my colleagues, back in 1992, when I was a younger banker and I got involved in economic development, the hardest thing for me to wrap my head around was looking at economic development the same way I looked at making a loan or prudent banking. Two different worlds of looking at. So sometimes it’s a little difficult to look at a project the same way as someone that’s coming in that you’re going to be loaning money to and making repayment. It is an investment and there is risk involved, but I think the department does a great job of that. So a couple of things while we’re looking at this budget, I would encourage this body to provide all the resources that Department of Commerce and Economic Development would need to take care of what’s coming through the state. A lot of times it’s feast or famine. I know we work on projects in South Arkansas that sometimes 18 months, two years on that project and we anticipate that closing immediately. Everything looks good and it goes away, and then two months later, bang, it’s back on the table. And usually when you’ve got two or three other projects going. So I would encourage this body not to– I don’t want to use the word nickel and dime, but to cut any resources that are in these budgets that may need to be utilized for economic development in the state. It’s very vital that they have these resources without having to come back to this body for extra money and extra coin. They do a good job. They’re very prudent at what they do. And so I would encourage this body to take that into consideration when we look at these budgets and be proud of the work that we’ve accomplished in the state. And I want to thank you again, Mr. Secretary.


Preston (Commerce): Thank you, Representatives. I appreciate it. I appreciate you representing South Arkansas. We’ve got a lot of good projects down there.


Rep Dotson: All right. Thank you. Members, we’ve got a very long agenda and Special Language has a long agenda this afternoon, so we can’t meet this afternoon. So we’re going to press through on this as quickly as possible. So please keep that in mind as you’re asking your questions as we’re going forward. Representative Wooten.


Rep Wooten: Thank you, Mr. Chairman. I want to follow up on Representative Tosh and Dotson’s comments. I know we’re, out of $6 billion, we’re talking about $595. But I’d like to know, you used the word interest. How did you earn interest to go in that account when you didn’t have 5 million to invest?


Commerce staff: Well, I think in this particular account, it was set up with the anticipation of the Attorney General possibly sending funding over from one of their accounts. So much like what we were just discussing, we have appropriation that could be funded from different sources outside of our division or even outside of Commerce. It could come through rainy day, it could come through Attorney General, it could come through federal granting, number of different things, or even potentially through dividend income– excuse me, interest income from a treasury account or something. But in the case of this, this is specific to the Attorney General would provide the funding if they felt like that was something that they could do or support.


Rep Wooten: You’re co-mingling money then without an appropriate– I don’t care how much authorization you got, if you don’t have any money in there, there’s no funding because that could be $5 million with what you just described instead of $595.


Commerce staff: So the $595 is the expenditure, and this is just the appropriation.


Williams (Commerce): Thank you, Representative Wooten. When this appropriation was initially added to the act, it was for $5 million with anticipation that there would be a transfer of funds from the Attorney General’s office.


Rep Wooten: I’m not talking about this. I’m talking about the $595.


Williams (Commerce): Yes, sir. But there was a transfer made for $50,000 in an expense in fiscal year 2020. You don’t see that in this budget manual. And those interest funds was the interest earned off of that cash and treasury balance.


Rep Wooten: Okay. Mr. Chairman, one more question.


Rep Dotson: Go ahead.


Rep Wooten: You’ve got 166 vacant positions that have been vacant for two years. Workforce Services has 86 and Career Education has 42. Do you all know the age of those positions? Are they three years, four years, five years?


Preston (Commerce): I’m sure we have that somewhere.


Commerce staff: We do. I mean, that report comes from that piece of legislation that you ran. All I see is just two–


Rep Wooten: How many positions have you given up, have you relinquished?


Commerce staff: I don’t know.


Rep Wooten: Okay. Can you give me a report? Age of those positions?


Commerce staff: Yes, it’s in there. I’ve seen those.


Rep Wooten: I don’t want them individually. I just want to know five years, four years, two years. And then I’d like a list of those that you’ve given Personnel, given back.


Commerce staff: And we’ve got that.


Rep Wooten: Thank you, Mr. Chairman.


Rep Dotson: All right. Representative Cavenaugh, do you have a motion for us?


Rep Cavenaugh: No, I have a question. And then I’ll have–


Rep Dotson: Okay. What’s your question?


Claw backs


Rep Cavenaugh: Okay. So this is going to be dealing with on number 204, which is going to be– I don’t think it’s 204. Yes, which is the quick action closing. And I just have a question. This is where we give money to projects, to an incentive to actually bring a project to Arkansas? Correct? What happens when we give money to someone to bring a project to Arkansas and that person fails– a company, I should say– fails to live up to their obligations? How do we get that money back if they file bankruptcy?


Preston (Commerce): They are claw backs that we set up in the contract that we do with the company before execution. A lot of times it’s performance-based. So a company is going to come in and actually make the investment and create the jobs and then they’ll get paid or a reimbursement on. If it was for a rail spur to extend the rail to their project or road, whatever the case might be. But if funds are not– excuse me, if the project parameters are not met and kept for a certain amount of period as specified in the contract, then there are typically claw backs set up in place.


Rep Cavenaugh: When a company files bankruptcy, it’s practically impossible to get that money back from them. Do we have in our claw back that we go back after the directors that might have been the ones running those companies?


Hudson (Commerce): If I may, Mr. Chairman?


Rep Dotson: Yeah. If you would state your name for the record.


Hudson (Commerce): Yes, sir. Jim Hudson, Chief of Staff, Department of Commerce. Also, General Counsel for AEDC. Representative Cavenaugh, it depends on the deal structure, the size of the amount of money. One of the things that we try to do first and foremost is take a first position lien on any real property that may be there, on any equipment that may be there. So if we can do that then we can liquidate any property as any bank would do in bankruptcy proceedings. If we are not a secured creditor, then we’ll be an unsecured creditor. And in bankruptcy proceedings, you’re just taking your place in the line there, as you well know. We will ask for personal guarantees from time to time depending upon the size of the company. Obviously, if it’s a small company that is closely held, then it’s conventional to ask for personal guarantees on things like that. And we have done that in the past.


Rep Cavenaugh: Okay. The reason I ask is we did give some money to a company called Carvana in West Memphis. Carvana now is experiencing financial difficulties throughout the whole country. Many states have pulled their license because of their business practices, and we gave tax dollars to Carvana. And if we’re reading the tea leaves on what’s happening to Carvana that may be one that if you gave money to and my understanding is they had to meet some guidelines to meet those. They had some goals that we’re going to have to look if there’s a way to get that money back. And with the history of the people that started this company from their last operation that they did, nobody got their money back. So are we keeping an eye on things like this and watching what’s progressing with other companies so they don’t come back with a handout to us saying, “I’m going to do this,” but throughout the country, they’re getting their license pulled and their stock is tanking and it looks like it’s going to be bankruptcy.


Preston (Commerce): Yes, ma’am, we do keep a close eye on that, and they’re required to report to us. And yeah, we keep an eye on that. And so when we are doing deals and new deals or someone’s coming back, we’re looking at those practices and what they’re doing, not only in our state, but across the country.


Rep Cavenaugh: Okay. And, Mr. Chair, I have a motion at the proper time.


Rep Dotson: We’re ready for it.


Motion to amend budget (fails)


Rep Cavenaugh: Okay. I make a motion that we accept executive rec with the exception on page 172 in the line item grants and aids, that we reduce that to $500,000, and on page 210 on the line item for grants and aid, that we reduce that to $7.5 million.


Rep Dotson: That’s a proper motion. Do we have a second? Got a second. Any discussion? All in favor, aye. Any opposed? I’m going to say the no’s have it. I got one hand. I see three hands for roll call. Give us just a second and we’ll begin roll call.


BLR staff: Mr. Chairman. Representative Bragg. Not seeing Representative Bragg, first alternate Representative Warren. Second alternate Representative Gonzales. Senator Hill. Representative Cozart. Second alternate Representative McClure. Senator Irvin. First alternate Senator Sturch. Representative Fielding. First alternate Representative Bentley. Second alternate Representative Dalby. Senator Blake Johnson. First alternate Senator Sullivan. Representative Holcomb. First alternate Representative Barker. Senator Wallace. Representative Vaught. First alternate Representative Beatty. No. Senator Chesterfield. Representative Deborah Ferguson. First alternate Representative Davis. Second alternate Representative Nicks. Senator Elliot. Yes. Representative Gray. First alternate Representative Smith. Senator English. Yeah. We’re going to check on that. I’ll get you recorded as a yes. I apologize. Yes, sir. Senator English. First alternate Representative Tucker. Representative Hillman. First alternate Representative Lynch. Senator Mark Johnson. Representative Gazaway. Second alternate Representative Tollett. Senator Ballinger. Representative Hodges. Senator Davis. Representative Jett. Senator Hester. Yes. Representative Payton. Senator Leding. Representative Tosh. Yes. Senator Garner. Representative Ladyman. Yes. Senator Flowers. Representative Murdock. Not seeing Representative Murdock, first alternate Representative Hollowell. Second alternate Representative McElroy. Senator Sample. No. Representative Beck. Yes. Senator Bledsoe. Representative Lanny Fite. Yes. Senator Caldwell. Representative Lowery. First alternate Representative Allen. Second alternate Representative Brown. Senator Dismang. Representative Meeks. First alternate Representative Hudson. Second alternate Representative Brooks. Senator Flippo. No. Senator Flippo is a no. Representative Magie. First alternate Representative Collins. Second alternate Representative Ennett.  Got a yes. Senator Hammer. No. Representative Love. Senator Hendren. Representative Scott. Yes. Senator Hickey. Representative Springer? No. Senator Ingram. Representative Wooten. Yes. Senator Pitsch. Representative Boyd. First alternate Representative McCallum. Second alternate Representative Cloud. Senator Rapert. Representative Coleman. Senator Stubblefield. Representative Penzo. Senator Teague. Representative Fortner. Representative Garner. No. Representative Johnson. Representative Deffenbaugh. Yes. Representative Charlene Fite. First alternate Representative Hawk. Representative McNair. Yes. Representative Whitaker. First alternate Representative Crawford. Yes. Representative Miller. First alternate Representative Wing. Representative Shepard. Second alternate Representative Mark Barry. Yes. Representative Cavenaugh. Yes. Representative Eaves. Representative Eubanks. Representative Evans. Yes. Representative Kenneth Ferguson. Representative Flowers. Representative Jean. Representative McCullough. No. Representative Milligan. Representative Richmond. Representative Speaks. Yes. Representative Womack. And do you want to vote?


Rep Dotson: That motion fails. Looks like Senator Sample.


Motion to pass budget (passes)


Sen Sample: Motion for executive rec.


Rep Dotson: Got a motion and a second. Any discussion? Seeing none, all in favor, aye. Any opposed? I’d say the ayes have that. All right. Moving on. Senator Chesterfield, did you get your– So I’ve got a motion for executive rec on item one which is Office of Skills. And got a second. Any discussion? Seeing none, all in favor, aye. Any opposed? Motion passes. Miss Hamilton, you’re recognized for item three.


Insurance Department


Hamilton (BLR): Thank you, Mr. Chairman. Members, we are still in volume four. We are moving to the Department of Insurance. On page 216, you will see their department appropriations summary. They have several appropriations. There are 24 of them, 11 with changes. So please bear with me. I do want to note before we get started. This division does not have any general revenue. So you are not going to find that in the funding sources. It’s an important point. Overall, there’s going to be a request for six positions to be increased over the biennium. This is both the agency request and the executive recommendation. There is going to be a reallocation on one position throughout this budget. The agency rec– or request, I should say– for year one over the 2023 authorized is an increase of $21.2 million in year one and then $140,000 in year two. And that’s going to address the salary and matching issues. The executive recommendation is an increase of $20.7 million in year one over the 2023 authorized; in year two an increase of about $136,000. Bottom of the page, you’ll see the positions increased from 189 in the agency request to 195. But in the executive recommendation, the number of positions stays the same. So first appropriation with changes is on page 218. This is their operations for their Arkansas multi-agency insurance trust fund. They use it to reduce the cost of insurance coverage for state agencies by combining the premium dollars and purchasing broader coverage for property and vehicle insurance with higher deductibles. Funding comes from a mix of sources: premiums, any insured loss or loss expenses paid by insurance or reinsurance companies, and any interest income. They’re asking for a continuing level of appropriation of $40 million. They also have a new request to increase this appropriation $20 million to offset the increases in the property premiums that are being added by the University of Arkansas. And this is going to be for each year of the biennium. You’ll see the changes on page 219. So for the 2023 authorized, you’ll see the $20 million. But then in years 2024 and 2025, you’ll see an increase to $40 million. The next appropriation with increases is on page 220. This is the Insurance State Operations appropriation. It provides for the state operations of the division and it’s funded by special revenues. You’ll see the list of where those revenues are derived. The agency is requesting, in addition to some slight increases in salaries and personal services matching, six new positions. They would like these to assist with the agency in providing risk management services. They also like to have some reclassifications and some upgrades. So there are some personnel changes that are being requested. They’re asking for a reallocation of $50,000 from special maintenance to operating expenses. They’re saying that special maintenance line item is no longer utilized by the agency because of the relocation of the insurance department. They’re asking for a restoration of $150,000 in capital outlay. And this is so the agency can replace outdated equipment and vehicles. And this is going to be for both years of the biennium. The executive does provide the majority of this request, with the exception, of course, of the new positions, personnel changes, and any upgrades. So on page 221, you’ll see the changes being requested. Authorized in 2023, the appropriation overall is $14.6 million. The executive recommendation, you’ll see the increase of five positions and increase approximately $1 million in year one and then $99,000 in year two to address the salary and match. The executive recommendation is only for an increase of $565,000 in year one over authorized 2023, and then $95,000 in year two. You’ll see in the funding sources that there is a transfer to States Central Services of about $1.5 million. This is a statutorily required transfer related to their online insurance verification system. Next appropriation with changes is on page 222, which is the next page. It’s their Fraud Investigation Unit. This is a trust fund. There are special revenues that are collected that are specifically earmarked for the purposes of this division, which is to increase– I’m sorry, investigate their allegations of fraud and the workers’ compensation cases, additional criminal violations that may be related to these investigations and any other insurance fraud matters. There are two appropriations in here that say, “Fraud Investigation Division,” but this particular unit has a law enforcement criminal investigation piece and they’re allowed to apprehend those who commit insurance fraud. The appropriation that we’re going to talk about next does not have that capability. The request of the agency also includes a position reclassification but there’s no change in appropriation associated with the request. The executive does provide for the agency’s request. On page 223, you will see that there is an increase in both the agency request and the executive recommendation of $72,000 increase in year one. That’s over the authorized appropriation in 2023. And this is just in salary and match. And then in year two, there’s an increase of about $8,400. Next appropriation with changes is on page 224. That’s their fraud investigation division. This is also funded by a trust fund and they investigate suspected cases of fraud over a broad range of activities in the insurance industry. Also, special revenues derived from annual antifraud assessment and any penalties from licensed insurers is how they’re getting their money. Salaries, personal services matching, capital outlay will have increases that you’ll see on the next page. agency is also asking for restoration at $60,000 in their capital outlay and this is also to provide replacement of outdated equipment and vehicles for both years of the biennium. The executive recommendation does provide for the agency’s request. On page 225, you’ll see the changes in the appropriation amounts in regular salaries, personal services matching, and the restoration of the $60,000 that was requested in capital outlay. Moving on to page 226, this is their Prepaid Funeral Benefits Division appropriation which provides for the administration regulation of the sale of prepaid funeral benefit plans in the state. Funding consists of investment income, grants, refunds, gifts, annual report fees, and all license fees that are paid. The agency is requesting also, in addition to the regular salaries and personal services matching capital outlay, the restoration of $30,000 to replace outdated equipment, also for some vehicles for the next biennium in the next two years. So on page 227, you’ll see these changes and those three line items. The overall increase, agency request, and executive recommendation in year one over the authorized amount in 2023 is about $27,000 in year one and then $3,300 in year two. Moving on to page 234. You’ll see their public employee claim section. This is a miscellaneous agencies fund. It’s funded by transfers from the public school fund, the county aid fund, the municipal aid fund, and various treasury funding accounts to state agencies. And this is for workers’ compensation claims. So they use this appropriation to administer the public employee workers’ compensation claims section for the state. Again, small increases, requested salaries and personal service matching due to rate adjustments and they’re asking for position reclassifications but no change in appropriation. So the executive recommendation does provide for that with the exception of the reclassification. So on page 235– sorry– you’ll see the slight increase. Both the executive recommendation and the agency’s request is the same for an increase of $144,000 in year one over authorized 2023. And in year two, increase is about $16,000. Moving on to the next appropriation on page 236, this is their health information counseling appropriation. It is a federally funded one. The program provides consultations for Medicare beneficiaries and caregivers about Medicare Medigap policies, Medicare Advantage, and Medicare Part D long-term care insurance. They are requesting slight increases in salaries and match, and some position upgrades which are not recommended by the executive recommendation. So on page 237, you’ll see that there are increases that are slightly in the regular salaries and operating expenses line item– I’m sorry, the personal services matching line item. In the authorized appropriation, you’ll see $30,000 capital outlay, but that is not continued into the upcoming biennium. So you’ll see zeros in year 2024 and 2025. We’re going to jump a few pages to page 248. This is their travel and subsistence cash appropriation. It is cash and treasury and it provides for reimbursements to individual examiners for their personal expenses that are incurred during any examination process. So these are cash revenues that are derived from exam and compliance costs paid by insurance pool, advisory organization, or residual market mechanisms. The agency is requesting to discontinue this appropriation for each fiscal year, which is also the executive recommendation. You’ll see that on page 249 where the authorized appropriation in 2023 is $100,000 and then the upcoming biennium in fiscal years 2024 and 2025 are zero. Skipping some more pages, we’re going to move to page 256.


Hamilton (BLR): It’s called the MIPPA-3 appropriation, but it stands for Medicare Improvements for Iatients and Iroviders Act. This is a program that provides application assistance to people who are likely to be eligible for low-income subsidy programs, excuse me, Medicare Part D prescription drug programs, and they use it for outreach that’s aimed at preventing disease and promoting wellness. This is another federal appropriation, and the agency is requesting, in addition to exceptions for capital outlay, a reallocation of the appropriation within commitment items. And this is just to align the budget with their expenditures. And then they’d like to change the title of this appropriation to MIPPA to allow them to utilize appropriation for all MIPPA-related grants. Over the years, the agency has gotten a number of these different types of grants, and they’d just like to consolidate it all into one appropriation so they can use it out of these line items that you see on page 257. So what you’ll see in terms of changes in the budget, on the capital outlay outline, there’s in 2023, a $30,000 appropriation. But for fiscal years 2024 and 2025, you’ll see that that’s been reduced to zero. Moving to page 260, this is their funeral services appropriation. This is a cash and treasury appropriation that provides for the personal services and operating expenses of the board. Funding comes from the cash revenues from license and renewal fees and annual permit costs. And these all pertain to the burial association, cemetery maintenance, embalmers, and funeral directors that they oversee. There will be some slight increases, again, in regular salaries and personal services matching, and they would like to continue the appropriation with these slight increases. So on page 261, you’ll see both the agency recommendation– I’m sorry– request and the executive recommendation are in the salaries and match line items only for $31,000 increase over the 2023 authorized in year one, which is fiscal year 2024. But in fiscal year 2025, which is year two, you’ll only see an increase in match, and that’ll be about $3,900. The last appropriation with changes is on the next page. This is a federal appropriation called the Market Stabilization Grant. This was established through a miscellaneous federal grant act and approved by the Legislature in 2019. They use it to study the cost of utilization of marketplace plans that are derived from the state’s all-payer claims database. They contract with an actuary to determine whether options exist that could lower premiums and further stabilize the health insurance market in the state. Funding is 100% federal, with the exception of the increases in regular salaries and personal services matching. They’re requesting that be continued into the next biennium, which is the executive recommendation. So the agency request to end the executive recommendation in year one will be an increase of about $1,100 over the 2023 authorized appropriation. That’s a salary match. And then in year two, you’ll see an increase in match only of about $660. That concludes my presentation for this division, Mr. Chair.


Rep Dotson: Thank you. On page 257, the MIPPA item, you have a $20,000 appropriation request for salaries and an $8,000 request for personal services matching, but no employees, no expenses last year, no budgeted items last year. But it looks like you’re asking for an appropriation for something that– if you would state your name for the record.


Davis (Insurance): Mary Davis, CFO for the insurance department. That appropriation is in there because they turn in their federal application that way. We do have the option to split their salaries for all of the grants, and we are looking into making changes to those.


Rep Dotson: So it would just be a salary. It wouldn’t necessarily be a position. It would be a shared position with other agencies?


Davis (Insurance): Based on the time that they spend on that particular grant.


Rep Dotson: Okay. And then your promotional items there requesting $50,000, that seems like a– that’s one of the highest promotional items line items I’ve ever seen.


Davis (Insurance): It is. So MIPPA has three priorities. The priority three grant is specifically for educational purposes. So a lot of their promotional items come out of there, and they actually give promotional items to all of their contracted vendors to hand out to people to promote the program. It is very high, but it is approved from the federal grant.


Rep Dotson: Okay. Representative Ladyman, you’re recognized.


Rep Ladyman: Thank you, Mr. Chair. Over here. On page 221, I have a question about, down under the funding sources, it shows the actual for last year was $38 million and you’re budgeting $16 million going forward. Was that $38 million an outlier or why would you budget $16 million if the norm is $38 million?


Davis (Insurance): So that’s the collections of license fees and other late fees. And the reason that we only budget that $16 million is because that money is actually swept every biennium to the general revenue. So we only keep one year’s worth of our appropriation. Everything goes back to the general revenue sweep.


Rep Ladyman: So everything above that goes back to GR?


Davis (Insurance): Correct.


Rep Ladyman: All right, thank you.


Rep Dotson: All right, Representative Cavenaugh, you’re recognized.


Rep Cavenaugh: Thank you. And I’m over to your right. First question is on page 219, the multi-agency trust fund. How much increase are we expecting on the premiums on the property? I know we’re all experiencing it, but I’m just curious.


Davis (Insurance): So just to tell you, we are still working on the estimate for the U of A facility. But right now, we are estimating that just for property is going to go up to $22 million just for the premium. And that could increase based on the value of the property out at the university.


Rep Cavenaugh: Okay, so in 2021-2022, it was $12.2 [million]. So we’re almost doubling?


Davis (Insurance): Yeah, and that $12.2 that you’re seeing, that had a couple of claims, but that also is the premiums for cyber and auto insurance also.


Rep Cavenaugh: Okay, so the $40 million request, and is that going to include that continuing?


Davis (Insurance): Yeah. We’re currently estimating about $28 million in premiums. So that will leave us $11.6 million to pay any potential claims that we would get for the year for property, cyber, or auto insurance claims.


Rep Cavenaugh: Okay. And on 229, this is your continuing education program. You have a large fund balance, and I realize that it’s taken from– and full disclosure, I’m an insurance agent too– but all the fees that we pay. So is there any opportunity to reduce those fees to the people that pay it? Because you’ve got a large fund balance in comparison to what your spend is. Is that something that y’all are looking at? Because we always ask everybody that when it’s a special revenue.


Davis (Insurance): Yeah. Currently, there’s nothing in the statute that allows us to waive or suspend those fees, but we are looking into that.


Rep Cavenaugh: Okay. Because you have enough to last lots of years. So thank you.


Rep Dotson: All right, Senator Hammer, you’re recognized.


Sen Hammer: Thank you, Mr. Chair. Anything dealing with the PBMs, is it reflected in this portion of your budget, or is that covered somewhere else? Any of the fines, penalties, etc., dealing with PBMs?


McClain (Insurance): Alan McClain, insurance commissioner. Those fines and penalties aren’t necessarily, they’re just included in. They’re not specially carved out. So you do see some of our staffing requests in there to reflect the efforts that we have in enforcing the PBM statute.


Sen Hammer: We recently appropriated, and correct me if I’m wrong there, Mr. Chair, Kevin, we recently appropriated some money for you or made it possible for you to hire additional staffing in that area. Could you just tell me, are we staffed up in that yet or where are we in that?


McClain (Insurance): Sure. We recently hired a PBM attorney that spends all of her time helping us deal with all the enforcement of the PBM statutes. We have a PBM program manager and a PBM administrative assistant. So those three are working constantly with that. So we really appreciate getting that support. We think we’re pretty lean in it, and right now, we kind of have that process lined out pretty well. Our sister states who are doing this have a lot more people doing that work. So we appreciate your support.


Sen Hammer: Last question. Is the ship contract or agency represented in any of these listed? I didn’t see where it was listed in there. Is it inside any of these that we’re debating right now?


McClain (Insurance): The ship contract?


Sen Hammer: Yes, sir. The ship portion of your agency that takes care of educating people on Medicare, is it within one of these categories?


McClain (Insurance): I’ll let Mary point that out.


Davis (Insurance): It’s on page 236, the appropriation for the ship.


Sen Hammer: Mr. Chairman, if possible, when it comes time, I’d like to have that pulled out for a separate vote, if we could, please. I’ll need to abstain from that one. Thank you.


Rep Dotson: Is that just for page 236? All right, Representative Wooten, you’re recognized.


Rep Wooten: Thank you, Mr. Chairman. Ms. Davis, can you help me out a little bit here? Direct your attention to page 215 and page 216. 215 shows 150 positions. Down in the bottom totals, you show 189 authorized, okay? And on page 216 also, it shows 189 authorized and 167 filled. So if you went with the 150– if you went with the 189 number and 167, that gives you 27 vacancies. If you go with the 150 and the 189, that gives you 39 vacancies. And the report I got from our personnel analyst staff, you show 60 vacancies. So how many vacancies do you have?


Davis (Insurance): Yeah, I’m currently showing 19 vacancies that are over the two years. I do not have–


Rep Wooten: I’m talking about your total.


Davis (Insurance): Yeah, I don’t have that–


Rep Wooten: 18 of the– I’m sorry, 18 of the 42– 18 of the 42 is vacant over two years.


Davis (Insurance): I didn’t bring another report, but I can get it to you.


Rep Wooten: Okay. Because you see, there’s conflict here. One shows 150, then it shows 167 against 189, okay? When you provide that report, would you give me the age of those over two years?


Davis (Insurance): Yes.


Rep Wooten: Okay. And the second question, I’m interested in page 219, no pun intended, but you have interest income there in one of three agencies in the totality of state government that I’ve seen that in. There may be more and I missed it. But you’re showing $19,000. Why do you do that? Why do you show that interest income?


Davis (Insurance): That interest income is the interest that we made off of a $12 million CD for that year. And the reason that it doesn’t show interest going forward is because we don’t know what the interest rates are going to be. So it’s hard for us to predict how much we’re going to make.


Rep Wooten: My question is, why do you have interest shown? Nobody else does it, so what makes you different? Are you smarter?


Davis (Insurance): We’re special.


Rep Wooten: Okay. You’re special. Thank you. That’s a good answer. Thank you, Mr. Director. I want to thank you for your efforts on the PBMs. They’re ravaging our folks and our pharmacists, and they need to be dealt with. And it needs to be dealt with in a firm manner. Thank you very much. Thank you, Mr. Chairman.


Rep Dotson: Thank you. Representative. Senator Chesterfield, you’re recognized.


Sen Chesterfield: Yes. Motion at the proper time, Mr. Chair.


Rep Dotson: It is the proper time. We do need to hold out–


Sen Chesterfield: And pull out what the–


Rep Dotson: –pull out numbers page 236 and 237 for a separate vote.


Sen Chesterfield: Thank you, sir. This is my motion.


Rep Dotson: Motion executive rec. Do I have a second? A second. All in favor, aye. Any opposed? Motion passes. Moving on to number 237, page 237. Senator Hammer, you have a question?


Sen Hammer: No, sir. I just want to make it for public record. I’m staying from voting on this because of a conflict.


Rep Dotson: Okay. All right. So I need a motion. Got a motion executive rec. Second. All in favor, aye. Any opposed? Let the record reflect that passes with Senator Hammer abstaining. All right. Moving on to item number four.


State Bank


Hamilton (BLR): Thank you, Mr. Chairman. We are still in volume four. We are moving to the State Bank department. Their appropriation consists of one operations appropriation on page 267. They examine and regulate state-chartered banks, bank holding companies, trust companies, and other entities. They are funded entirely by special revenue fees that are assessed and collected on a semiannual basis. The agency is making a number of requests. In addition to the increases in salaries, personal services matching, and capital outlay, they would like eight new positions. They’re anticipating high turnover rates in the upcoming years due to retirement. So they’re requesting these new positions to train for onboarding to manage future growth agency operations and some industry evolutions. They would like to restore six growth pool positions that were originally approved by Council this year– no, last year. They would also like to increase their regular salaries at $350,000 and $73,000 in personal services matching to support some salary grid and professional certification differentials each year. They would like some reclassifications and some upgrades. These are associated with some personnel changes that they intend to make. There’s one additional extra help position they’re requesting. So $45,000 is what they would need for that in extra help appropriation and the personal services matching line item. And this is just to assist the agency with their operations, an increase of $50,000 in operating expenses to provide for business-related travel expenses and equipment for eight of the positions that I mentioned before, as well as an increase in $50,000 conference and travel to provide travel-related training also for the eight new positions, an increase in professional fees and about $13,000 to contract with an IT external firm to assist in the development of their new and improved IT programs– and this is going to be for each year of the biennium– An increase of $350,000 capital outlay. We’re going to divvy this up. $150,000 is going to be used to enable the agency to replace obsolete data-processing equipment, $200,000 of which is going to be used to maintain the agency fleet replacement schedule. They get two to three vehicles each fiscal year. The executive recommendation only provides for the restoration of the six growth pool positions that were approved by Council. And, of course, the appropriation for new positions, reclassifications, upgrades, etc. are not permitted. You’ll see on page 269 the increases we mentioned in positions. The agency would like 14 positions and there will be an increase across six line items of about $3.1 million over authorized 2023. And in year two it’s going to be $57,000. This is going to be a salary match increase only, as well as the extra help position in the associated appropriation. The executive recommendation is only for $1.8 million increase over authorized in year one, increase of six positions, increase in the capital outlay they requested. And then year two, there will be a $52,000 increase in salary match only. That’s the conclusion of this presentation, Mr. Chair.


Rep Dotson: Thank you. Seeing no questions, we got a motion executive rec. A second. All in favor? Aye. Any opposed? Motion carries. Item five. You’re recognized.


Securities Department


Hamilton (BLR): Thank you, Mr. Chair. Moving to the State Securities Department, we’re going to start on page 271. The department appropriations summary consists of three appropriations. There’s only one with changes. It’s going to be in their state operation’s appropriation, which is on the next page, on page 272. Overall, there’s just going to be an increase of two positions requested by the agency, one position decreased by the executive recommendation, and then any increases in regular salaries, personal services matching. The operation appropriation is used basically for implementing rules and regulation regarding investments in securities. It’s funded with special revenues that come from filing fees, application fees, renewal, registration, broker-dealer-agent fees, and investment adviser fees. The agency is requesting, in addition to those increases I mentioned before, three new positions to assist with various areas of the department, such as accounting, human resources, legal, and operations. They’re asking for an increase in regular salaries and match associated with various personnel changes, reclassifications, and upgrades. Increase of $12,000 extra help, and this is for both years to offer competitive pay rates for their law clerks. And they would like an increase in $20,000 in capital outlay to procure a document management system. The executive recommendation allows for the increase in extra help and the increase in capital outlay but does not allow for the new positions. On page 273, you’ll see the changes. Net increase requested by the agency is $768,000 over the authorized 2023 appropriation. And then in year two, an increase of $28,000. For the executive recommendation, it’s $251,000 increase over authorized 2023. And in year two, an increase of about $26,000 over 2024. The difference between the two recommendations or the request is about $517,000 the first year and $519 in the next. And the executive recommendation is for less than what the agency is requesting. That’s the conclusion of this presentation, Mr. Chair.


Rep Dotson: All right. Thank you. Seeing no questions, we got a motion executive rec. Second. All in favor, aye? Any opposed? Motion carries. Item number six. You’re recognized.


Development Finance Authority


Hamilton (BLR): Members, we’re going to move to page 279. This is the Development Finance Authority’s budget. Their department appropriation summary consists of six appropriations. There are three with changes. Overall, there is a decrease of $8.6 million requested by the agency from the 2023 authorized for year one and then a $38,000 increase in year two. And that’s to address regular salary and match increase– I’m sorry, decrease. Recommended by the executive is $8.7 million in the first year, and then a corresponding increase in salary and match in the second. First appropriation change is on page 280. It’s their cash operations appropriation. This is another agency that does not have general revenue. It provides for all the operational cost of the authority, including their Federal Housing Assistance program, their HUD Home program. Other financial programs and the funding is derived primarily from federal funds and cash revenues from bond proceeds. With the exception of those line items I mentioned that would have the slight increase, they also want the following changes: position reclassifications that, of course, will ask for increases in regular salaries and matching and a restoration of $23,000 of capital outlay. And this is just to replace a old vehicle. The executive recommendation provides for their request. On page 281, you will see the increases in the salaries and matching line items. The agency request is approximately $304,000 increase over 2023 authorized in year one, with a $35,000 increase in year two. And the executive rec is $254,000 increase over authorized 2023 in year one, and then a $35,000 increase in year two.


Hamilton (BLR): Next appropriation with increases is our Student Loan Authority Operations appropriation. We’re going to move to page 284. This appropriation is essentially used to support Arkansas students by giving them financial assistance by purchasing the loans that are made to local lenders to higher education students. You’ll see a list of where they’re getting their cash revenues. With the exception of those regular salary and matching line items, there’s no change. The executive recommendation does allow for the agency’s request that you’ll see on page 285 in their appropriation summary. Only increases in line items are for regular salaries and match. Last appropriation with changes is on page 286. This is their DIS IT appropriation that provides for equipment purchases on behalf of Department of Transformation and Shared Services for their data consolidation center. All of the funding is cash from bond proceeds, and the agency is requesting a discontinuation of $9 million in their appropriation level. And that’s just going to help reflect the cash balances that they have each year. So on page 287, you’ll see this change. In the 2023 authorized columns, they are reducing the appropriation from $15 million to $6, which is something that the executive recommendation also agrees with. And you’ll see that in fiscal years 2024-2025. That’s the conclusion of the presentation, Mr. Chair.


Rep Dotson: Thank you. Representative Cavenaugh, you are recognized for questioning.


Rep Cavenaugh: Thank you, Mr. Chair. This is a question for staff. On 283, we’re not asking for any appropriation, but they still have a cash balance on there. Do we need an appropriation because of the cash balance, or do we need this appropriation?


Anderson (BLR): This doesn’t show having a cash balance. I don’t know why they have that over there in the agency request for 2025. That’s got to be a mistake, but we’ll check on that, and I’ll make sure that that is a mistake.


Rep Cavenaugh: Okay. Because they got authorized in 2022-2023 the $7,825. If the agency can look at page 283, is that even needed?


Anderson (BLR): Yeah. It’s being discontinued as well.


Rep Cavenaugh: Okay, so it’s being discontinued.


Anderson (BLR): Yeah. Yes, ma’am.


Rep Cavenaugh: So we don’t know what that’s for? Okay.


Anderson (BLR): Yes, ma’am.


Student loans


Rep Cavenaugh: My other question is on 285. This is a student loan authority where you purchase– so how many student loans have we purchased?


Conine (ADFA): Hi. I’m Mark Conine. I’m president of Arkansas Development Finance Authority. That is a little bit– that language is just a little bit outdated. We used to buy back before direct loans was taken over by the federal government. We used to make pretty substantial purchases, anywhere from $60 to $100 million, but now it’s just originations only.


Rep Cavenaugh: So all we’re doing is originating loans, and then it goes to the banks or through the federal program?


Conine (ADFA): Not anymore. These are just private loans. And so you can either choose to– if you have a gap in funding for higher education or if you choose not to get a Federal Plus loan, you can take out a private loan. And just for example, private loan now is around 7.5 % percent with about 4.2% origination fee. And the current loan that we have is about 1.5% to 2% less with 0% origination fee.


Rep Cavenaugh: Okay. So how many loans do we have outstanding?


Conine (ADFA): Private loans, it’s about $4.5 million dollars currently. This is a fairly new program. Now the old legacy portfolio, which was a federal program before it was taken over by the federal government in 2010, there’s about 113 million legacy loans.


Rep Cavenaugh: Okay. And I want to make sure I understand. So there’s 80 basis points that kind of helps fund this, is that correct?


Conine (ADFA): Yes, ma’am. There’s a trust that these loans have to be put in. And then you get a draw out of those trusts. And those trusts help you pay for your loan servicing expense and administrative expenses. It’s all calculated in the cash flow of the trust.


Rep Cavenaugh: Okay. Thank you.


Conine (ADFA): You’re welcome.


Rep Dotson: Thank you. Representative Love, you’re recognized.




Rep Love: Thank you, Mr. Chair. Mildred, I’m going back to page 281. I just missed the comment that you said about the HUD Home Program. Were we going to have any changes in the HUD, the Home program or–?


Hamilton (BLR): No, if you look on page 281, you’ll see the HUD Home Program line item has not changed from the 2023 authorized. It’s still $16.3 million going into fiscal years 2024 and 2025. So there’s no change in that program. I just mentioned that the appropriation provides for that program in terms of their operational cost.


Rep Love: Okay. All right. I missed that. Thank you. Thank you. Mr. Chair.


Rep Dotson: Thank you. Representative Cavenaugh, we’re back to you for a question.


Rep Cavenaugh: Thank you. This is on page 291, which is the grant, the federal side of it, the NHTF grants. So how many projects do we have looking at doing because we only had a million dollars. This year, we got budgeted $12.8 [million], and we’re asking for $15 [million]. How many of these low-end housing projects do we have slated?


Conine (ADFA): Representative, this is one particular funding bucket, National Housing Trust Fund. And these dollars are for 30% area medium income below. So this is kind of the lowest tier that we do. They kind of come in randomly. So what you’re seeing here is we receive about $3.3 million per year. And so some of these funds have been stacked up on top of each other. We typically don’t see a lot of requests for these funds when interest rates are low. But when interest rates start to rise and the projects get a little tighter and people need funding for, say, 0 or 1 percent, it becomes more attractive to developers. And so the past couple of years, we haven’t seen a lot of requests. But already just in the past six to nine months, we’ve seen $8 to $10 million dollars of requests. It just becomes more attractive to a developer in a rising interest rate environment. So not many the past couple of years, but we’re starting to see more requests.


Rep Cavenaugh: Okay. So you’re seeing more of these low-income housing to go– are they going into rural Arkansas? Because you think about the poverty level, you think in rural that there’s quite a bit of.


Conine (ADFA): It just really depends. They have to provide a market study that will show that that particular area will take a certain number of units, that they can fill the units, and that there’s a need. And so the answer is both. They’re going in urban areas and they go in rural areas.


Rep Cavenaugh: Okay. Because it–


Conine (ADFA): We see a lot of rehabs in rural areas.


Rep Cavenaugh: Right. It’s for veterans, I notice. And so a lot of times, they can go anywhere that we’ve got the facility for it. So that’s why I was curious. Okay. Thank you.


Rep Dotson: Thank you. Representative Wooten, you’re recognized.


Rep Wooten: Thank you, Mr. Chairman. I direct your attention to page 287. Are you a pass through for shared services on the IT? Is that what this is? It’s a $5 million budget, but it only shows actual expenditure of $762,000. How does that– I mean, how does that work?


Conine (ADFA): The DIS had come to us a couple of years ago, and they were needing to purchase some equipment, software, licenses, upgrades, various things. And so my understanding is they were, I guess, low on cash funds. And so we agreed to offer them a line of credit to purchase these, and then they have paid those down. And as they made those expenses, it was originally $15 million they thought it was going to be. So they’ve made these, and they think it’s about $6 million more. So we’re asking for a decrease to bring it down to $6 million. But they have been paying those back over time.


Rep Wooten: All right. And then on the next page, 289, there’s a $5 million authorization, and it continues for the next biennium. But is that an unfunded one, too, like the other one in the Commerce Department? Or how come there’s no budget expenditures?


Conine (ADFA): Is that-


Rep Wooten: On page 289.


Hamilton (BLR): That’s an unfunded appropriation, Representative Wooten. I’m sorry, did you hear me? That’s an unfunded appropriation. If you look in the funding sources–


Rep Wooten: So it’s a–


Hamilton (BLR): –they got appropriate only for this.


Conine (ADFA): Oh, I’m sorry. Yeah, that’s for Arkansas housing trust fund. I’m sorry. I was looking at the wrong line item.


Rep Wooten: So it’s unfunded?


Conine (ADFA): Yeah, it’s a– Yeah, it’s part of ours, and it comes from if there’s an outside source that funds that, then we’ll administer the program.


Rep Wooten: Okay. Okay. Thank you, Mr. Chairman. Thank you.


Rep Dotson: Thank you. Senator Elliott.


Sen Elliott: Mr. Chair, I just want to ask a question about the Arkansas Housing Trust Fund. I’m sorry I didn’t hear all of what the representative was asking. So I just want to point out to this body that we’ve been trying to get funding for the Arkansas Housing Trust Fund since it was passed in 2009 or whatever it was. So this is an appropriation we live in hope of we will get it funded. We’ve got the money to do it. We just aren’t doing it at this point. So I don’t really have a question about this. I just want people to know about that. That’s just the main thing, Mr. Chair.


Rep Dotson: Thank you.


Sen Elliott: Because it’s important. We just aren’t funding it.


Rep Dotson: All right. Seeing no further questions, I have a motion executive rec and a second. All in favor? Any opposed? Motion carries. Item number seven. Miss Hamilton, you’re recognized.


Workforce Services


Hamilton (BLR): Thank you, Mr. Chair. We are still in volume four. We are going to go to the Department of Workforce Services budget. Before we get started, I’m going to point out on page 296 that there are some state contracts over $50,000 that were awarded to minority-owned businesses. This is a report that’s statutorily required. So you’ll see that they’ve got three contracts there, which consists of about 3.1 of the total– 3.4%, sorry, of the total contracts awarded by the Department of Workforce Services. On page 297, they have 25 appropriations, 11 of which have changes. I will try to go through this as quickly as I can. Total number of positions that were authorized in 2023 is 924. You’ll see that there’s an increase of 67 positions to 991. This is also authorized by the executive recommendation. These were positions that came through personnel and were approved by counsel. There’s an increase of $13.2 million in year two– I’m sorry, year one that was requested by the agency. And year two, there’s an increase of $691,000. Those are salary and match adjustments. I want to note the executive recommendation, however, is a decrease in this budget of $2.9 billion in year one. And that’s going to be less than what’s been authorized in 2023. And then there’s an increase of $691,000 in year two. Funding sources basically consist of general revenue, federal revenue. You’ll see federal revenue is about 70%– or 74% of their budget, the stabilization tax. And then at the very, very bottom, you’ll see that there’s a statutorily required transfer that they do to DHS, DCO. And this is in support of some of their TANF and workforce programs.


Hamilton (BLR): All right. So the first appropriation that has changes is their operations appropriation, which is on page 304. Here, you’ll see the increase in positions that I mentioned earlier, as well as the increase of $7.3 million over fiscal year 2023. This is both the agency request and the executive recommendation. You’ll see the changes are on line items for regular salaries, extra help, personal services matching. And you’ll see in year two that there’s a slight increase of $632,000. And that’s to address just the regular salaries and matching line items. We’re going to jump to page 316. The narrative is actually on page 315. This is their TANF block grant paying new hire registry appropriation. This appropriation essentially provides grants to assist needy families with children so kids can be cared for in their own homes. They try to promote job preparation, work, and marriage, and to reduce any of the out-of-wedlock pregnancies that occur in the state and to encourage the formation and maintenance of stable two-parent families. Their new hire registry was established to develop and maintain a state directory where employees can report newly hired and returning employees to aid in the establishment of enforcement of child support orders. Funding is from general revenue and then the block grant that I mentioned. The hire registry contains 22 authorized extra help positions. Now, when you turn the page, you’re just going to see that one line item. So they’re including that to let you know that there are extra help positions in this appropriation. They are asking for some adjustments in salary and matching. And they are requesting general revenue in both years of the biennium of about $3.6 million. They would also like to restore one position. And this was approved by Council. This was in the August Personnel meeting and the accompanying salary and match. And this is just some of the duties of this appropriation. The executive recommendation does allow for all of these requests, and you’ll see the changes on page 316. As I said, there’s just one line item. So you’ll see the increase, agency request, and the executive recommendation is about $3.8 over year 2023 authorized. And then in year two, you see there’s just a $38,000 increase. And that’s just to address the salary match that I mentioned earlier.


Hamilton (BLR): We are going to jump to page 320. This is the Federal Employees Benefit. This is a cash and bank appropriation that allows for payments of unemployment insurance benefits to unemployed federal civilian employees and servicemen and public service employees. This is money that’s deposited into a cash account in a bank, but it’s funded with federal dollars. The large change here is the agency is requesting to continue their $3 billion appropriation, but the executive recommendation, if you look on page 321, is for a decrease in $2 billion in appropriation. So moving forward, the appropriation is going to be $1 million each fiscal year. Next appropriation changes is on the next page. It’s their UI benefits taxable employees. This is another cash and bank appropriation that’s federally funded. The executive recommendation is also different from the agency’s request. They’d like to continue their $2 billion appropriation each year, but the recommendation from the executive branch is to decrease that to $1 billion each fiscal year. That’s on page 323. Next appropriation with changes in their Building Improvement Land Reed Act fund appropriations on page 326. These are excess funds that were collected under the FUTA tax. Basically, any of the states that had received loans from three federal programs were to pay these loans back with interest so that they could meet their statutory ceilings. In the event that this happened, then the excess funds that were collected were dispersed to states and considered Reed Act funds. Well, the funds were not replenished. So there have not been Reed Act funds for a number of years. If you will look on page 326, you’ll see that the agency is requesting $3.1 million in each year to continue into the next biennium, but the executive recommendation is to decrease it to $1.


Hamilton (BLR): We’re going to move to their DWS grants appropriation, which is on page 330. This is another federal appropriation used for anticipated federal workforce development grants. And this is just if the grants become available. These are given by the US Department of Labor. They’re the ones who release the money. Continue appropriation of $4.5 million is being requested by the agency. The executive recommendation on page 331, you’ll see, is different. This also has been decreased to zero for each fiscal year. We are going to move to page 338. That’s the next appropriation with changes. It is their adult education. This is the state operations portion. It provides for the administration, personal services, and operating expenses of the adult education program, and it is funded from general revenue. The agency is requesting appropriation and general revenue in the amount of about $1 million in both fiscal year 2024 and 2025. And you’ll see the request on page 339. Increase in salaries and match, about $163,000 over year 2023 authorized. And then in the second year, there’s an increase in salaries and match only of about $10,000. There is an increase in one position. So the authorized positions in 2023 is 14, and then moving forward into the biennium, it’s 15 each fiscal year. Next change is on page 340. This is the adult basic education. It’s also a state funded appropriation that provides for the state match requirement for the Adult Basic Education federal appropriation. These you’ll see on pages 342 and 343 as we move forward. Funding comes from the Educational Excellence Trust Fund which is transferred from Department of Ed. With the exception of the changes in regular salaries and matches that you’ll see on page 341, there are no changes. So increase of $12,000 over authorized 2023, and then in year two, an increase of about $4,700 in fiscal year 2024-2025.


Hamilton (BLR): Moving on. Next appropriation with changes is on page 342. This is their federal appropriation, also for Adult Basic Education. US Department of Ed provides the funding for this and it requires a 25% state match. Small increases on page 343 you’ll see in regular salaries and match only. $56,000 is what’s being requested and recommended over year 2023 authorized. And then year two, $4,800 is the increase. All right. Governor’s Commission on Adult Literacy, this is a public school funded appropriation. These are grants that are awarded to literacy councils in the state of Arkansas. I’m on page 344. This is a general revenue funded appropriation. So they are requesting general revenue of about $771,000 in both fiscal years 2024 and 2025, which is the executive recommendation. You’ll see those increases on page 345. And the last appropriation with changes is on page 346. This is also general revenue funded appropriation from a transfer from Educational Excellence Fund from Department of Ed. And this is used to educate adults with less than a high school equivalency and for those who are retraining that are already in the workforce. Once again, general revenue is being requested of about $7.3 million in both fiscal year 2024 and 2025, which is what you will see on page 347 is their request. Authorized is $20.9 million, and it is being increased to $22.7 in both fiscal year 2024 and 2025. And that is the conclusion of this presentation, Mr. Chair. I did forget to mention that they did have an increase of $1.8 million. And this is just going to provide additional programs at adult education centers. Now this is the conclusion of my presentation.


Rep Dotson: Thank you. Representative Cavenaugh.


Rep Cavenaugh: Thank you, Mr. Chair. My first question is on 308, which is a UI trust fund loan interest. This shows that we hardly spent anything in 2021-2022, but we have over a $5 million fund balance. If we can talk about that fund balance and what it might be able to be used for.


Hamilton (BLR): According to ASIS, the actual expenditure is that $4,600 is just on UI loan interest.


Rep Cavenaugh: It’s on page 308.


Traylor (DWS): Good morning. I’m Courtney Traylor, deputy director at the Division of Workforce Services. That $5 million was set up, I believe, when we had to take a loan. Back in the recession of 2009, we had to take a loan to cover our unemployment benefit trust fund from the federal government. And that fund was set up so that when we charged employers on the interest so that we could pay that back to the federal government, that’s where that money went. So we have left $5 million in there, I believe, since 2014. It’s had a fund balance of $5 million so that if we ever have to borrow money again– or it is kind of a buffer so that we don’t have to borrow money again. So that we have a place to receive that interest payment, and that we could pay that back to the federal government if we get into that situation again.


Rep Cavenaugh: Okay. So the $4,600 that we paid in 2021-2022, was that the last payment on that or?


Traylor (DWS): Anything over $5 million, we deposit into the UI trust fund. So we try to keep it down to $5 million, and then anything in excess of that is transferred out to the UI trust fund.


Rep Cavenaugh: Okay. And then 312, which is your unemployment insurance fund, we’re looking at that. And your most historic spend has been $3.9 on that. That was in 2014-2015. This is your administrative cost. It’s 312. But it’s showing that we’ve got a fund balance of $40.8 million. Why do we keep such a big fund balance in that?


Traylor (DWS): I think that’s in the– I don’t think that’s the actual fund balance. That’s what we’re budgeting to receive in there, if I’m not mistaken.


Rep Cavenaugh: This says it’s 2021-2022 actual. It says the fund balance had been $12.3. You got from the stabilization tax $2.8. So they made the total funding $40.9, but you only spent $54,000. So your excess in the funding was $40.8 million.


Traylor (DWS): That is a fund that we have set up. It’s designated only for UI admin expenses. So we have an operating account that all of our operating expenses come out of, and then we have this fund where we designated for UI admin. We are allowed to carve out $6 million a year in stabilization tax that we put in there for our operations. So I know that that’s part of it.


Rep Cavenaugh: The stabilization shows that you got $28.5 million.


Traylor (DWS): And then we have a sub fund in there as well, where we’re allowed to carve out $35 million from stabilization for UI modernization and deposit in there, which we’ve collected $24 million so far.


Rep Cavenaugh: But that’s in another appropriation. I’m looking at this appropriation. It’s–


Traylor (DWS): It’s in this one as well because it’s specifically for UI administrative expenses.


Rep Cavenaugh: I thought you had a UI modernization one. You do have a UI modernization one. So that’s why I’m confused. So I guess if you look at this, you’re showing you got a $40 million fund balance, and you’re only spending $54. You’re asking for $6 million appropriation.


Traylor (DWS): And $6 million would be the stabilization. I don’t believe we’ve asked for the UI modernization appropriation yet. We will do that, but that has not been requested yet. But we have been collecting the money for UI modernization, I think, since early 2021. And so that fund has built up. When we have enough in there, then we’ll be able to come to you all and request for appropriations to start that project.


Rep Cavenaugh: Okay. All right. Thank you.


Traylor (DWS): Thank you.


Rep Dotson: Thank you. Representative Springer, you’re recognized.


Rep Springer: Oh, it’s still morning. Good morning. Thank you, Mr. Chair. Maybe I missed it. I’m on page 297 of this appropriation. And I see where the agency for the 2023-2024 year and the 2024-2025 year, there’s a big difference in the amount of the request from the agency, in fact $3 million, compared to the executive recommendation. The agency request on page 297 indicates that the agency is requesting $5,272,000,000, so forth, and then the executive recommendation is $3 billion less than that. And I guess I’m missing it someplace. Why is there such a difference? I’m not sure if you all can answer that between the agency recommendation for the fiscal year that’s coming up compared to the executive recommendation. Does that make sense? Are you understanding my question?


Traylor (DWS): Yes, ma’am.


Rep Springer: Why there is, I missed it somewhere.


Traylor (DWS): So I think–


Rep Springer: Is there an explanation?


Traylor (DWS): Sure. I think that those amounts were increased during the pandemic, because that’s the appropriation if we receive the funds from US Department of Labor so that we can pay those benefits out. And I believe I think even in the height of the pandemic, we didn’t exceed a billion dollars. And so I’m assuming that’s why it’s been requested to bring it down to a billion, and we’re okay with that.


Rep Springer: Oh, okay. All right. So I just wanted to be sure because your recommendation is $3 million more than what’s actually been–


Traylor (DWS): And that’s really just in case we have another downturn in the economy, and we have to pay out those benefits. We would have to come back to this body and ask for additional appropriation.


Rep Springer: Okay. All right. I’m just concerned that much money, whether or not it’s actually needed rather than what’s being approved here. Thank you.


Rep Dotson: Thank you. Senator Hammer, you’re recognized.


Sen Hammer: Thank you, Mr. Chair. I’m sorry, I may have heard it in all that discussion a while ago, but what’s the total balance in the Medicaid Trust Fund right now?


Traylor (DWS): In the UI trust fund?


Sen Hammer: Unemployment. Sorry. Sorry. Unemployment.


Traylor (DWS): $892 million.


Sen Hammer: Okay. And didn’t we have legislation that if it hit a certain threshold, it triggered and we reduced the amount we were collecting from the employers, or am I having a bad moment?


Traylor (DWS): There is a calculation, and it’s based on several factors. One is the total number of employees covered or paid in payroll. And another one is the balance of the trust fund. So as of right now, that stabilization rate will remain at 0.2.


Sen Hammer: And is that because we’ve hit the threshold in the trust fund, or because of the individual employer’s status?


Traylor (DWS): Yes, it’s the number of employees and the balance that we currently have.


Sen Hammer: Okay. And earlier this morning in the Audit discussion, how many do we have on unemployment right now?


Childers (DWS): Charisse Childers, director of Division of Workforce Services.


Rep Dotson: You’re recognized.


Childers (DWS): Mr. Chair, thank you. Senator Hammer, last week we paid out benefits to 3,852 individuals.


Sen Hammer: So we have 3,852 on unemployment?


Childers (DWS): Yes, sir. Well, that received benefits last year– last week.


Sen Hammer: Last week?


Childers (DWS): We have some that are eligible, but they didn’t do their weekly claim. So that’s–


Sen Hammer: I’m sorry, their what?


Childers (DWS): We have individuals who are eligible to receive benefits, but they did not do their weekly claim. So our number of individuals that received payments last week was 3,852.


Sen Hammer: What would have been the other number had they met the–


Childers (DWS): It would’ve been the continuing claims number. And let me see if I have that. 6,715.


Sen Hammer: 6,715?


Childers (DWS): Yes, sir.


IT modernization


Sen Hammer: Okay. We passed legislation last time that we’re collecting a percentage to go to the upgrade of the system on kind of the framework and that. Can you tell us where we are as far as the upgrade of the system and the collections that was put out for an RFP, if I remember right? And can you just give us an update on where we are? And is that stood up and fully operational now, or where are we on it?


Childers (DWS): Senator Hammer, we pulled the RFP back in September. We had had that RFP out and began that procurement process in September of 2021. And so we pulled that RFP, and in that period of time– that one year period of time, we analyzed all of our existing resources within ADWS and our ability to work with DIS. And that’s where we are in the current stage of the UI modernization. We are going to utilize our current resources, those that are being provided by USDOL, which were set up and established during that one year period. And then modernize our tax system first and then the benefit system. In the RFP and in our responses, it was estimated that that would take three years in order to upgrade our systems. And so we are still operating within the funds that were set aside for this modernization and within the timeline that would have started with a new RFP. And we plan on starting that full speed on January 1, 2023.


Sen Hammer: How much money has been collected? Because that was being set aside, so how much do we have collected up right now?


Childers (DWS): About $24? $24 million.


Sen Hammer: And that had a cap on it, didn’t it?


Childers (DWS): $35 [million].


Sen Hammer: Okay. So you’re going to continue to collect up to $35 [million]. And do you anticipate that for what you’re going to issue the RFP for that that’s going to cover it, or are you going to have to come back and ask for more?


Childers (DWS): At this time, we don’t anticipate putting out another RFP. We are going to work within the resources that we have at DWS, with DIS, and then we will determine if we need additional vendors to assist after we implement any modules that are developed by USDOL. We anticipate that we will be able to do all of that within the $35 million set aside.


Unemployment fraud


Sen Hammer: Okay. And then the last question would be– or series would be, how many cases are still pending that we have people out there that it’s been determined that perhaps there was fraud involved with the money that we got? Can you give us an update on the number of cases that are under investigation for potential fraud for the unemployment claims during the pandemic?


Childers (DWS): Yes, sir. Courtney Traylor can give you the number, which was asked previously, the total dollars benefits paid out and what we’ve recovered. And then while she’s doing that, I’ll look to see if I have a number for the total individuals that are still being, I guess you could say, included in the process of recovery. But I don’t think I have that number with me, but I will look.


Sen Hammer: Okay.


Childers (DWS): Thank you.


Traylor (DWS): So the amount that we dispersed in 2020 was $700– or I’m sorry, $2.567 billion. And of that, we’ve identified $25.8 million in overpayments. In 2021, we dispersed $222 million. And of that, we’ve identified $43.5 [million] in over payments. And then in 2022, we dispersed $38 million, and we identified $13.3 million in overpayments. So in total, we dispersed $3.4 billion and about $83 million have been recognized in overpayments. And we have collected almost $32 million of that, and we’re continuing to do so.


Sen Hammer: Just a couple more, Mr. Chair?


Rep Dotson: I’ve got several in the queue. So just one more, please.


Sen Hammer: Thank you. I’d like to get a summary from you all as far as where we stand, the number of cases that are outstanding, when they’re scheduled to be brought up, and I’d just like to get a summary report surrounding all of that conversation right there, if we could. And I’ll get with you offline to fill in the blanks, okay? And that money is going back where when it’s collected? Is it going into the trust fund? Or where’s that money going back to when we collect it? Thank you. Could you answer that? Where’s that money going back to? Is it going into the unemployment trust fund? Or where is it going when you get it back?


Traylor (DWS): The federal portion goes back to the Department of Labor, and then the state portion goes back into the trust fund.


Sen Hammer: All right. Thank you.


Rep Dotson: All right. Representative Speaks.


Rep Speaks: Thank you. Mr. Chair. Over here. I want to talk to you about this. The budget on page 345, the literacy, is this the only budget for literacy?


Childers (DWS): Representative Speaks, just for clarification, are you talking about the Governor’s Commission on Adult Literacy?


Rep Speaks: Yes. Isn’t that all that you have that gets dispersed to–?


Childers (DWS): Those are the funds that get dispersed to the literacy councils around the state.


Rep Speaks: Okay. That’s the one I’m interested in.


Childers (DWS): Yes, ma’am.


Rep Speaks: So this is the only one?


Childers (DWS): Yes, ma’am.


Rep Speaks: Okay. In the disbursements to the different groups that’s out here in the state, I’d like to know what that Adult Learning Alliance Incorporation is for their– I mean, for 2022, that’s almost $200,000. What is that used for?


Childers (DWS): Representative Speaks, what page are you referring to?


Rep Speaks: It’s just information that I had received. It’s showing all the different disbursements to the various groups out here in our state.


Childers (DWS): Within the Literacy Council disbursements or to all the adult ed providers?


Rep Speaks: No, this is just adult literacy.


Childers (DWS): So I don’t have their budget or the disbursements with me. I can get that information to you.


Rep Speaks: I’d love to know what’s used because in looking down through here at what’s disbursed, the one I’m interested in, of course, is Twin Lakes Literacy Council. And I’ve had a lot of questions from the board there because the money fluctuates every year, and it all depends upon how much is put into that Adult Learning Alliance, and I just want to let them know what’s causing and what that’s going for.


Childers (DWS): Yes, ma’am. I’ll provide that information to you.


Rep Dotson: Thank you.


Rep Speaks: Thank you. Thank you.


Rep Dotson: Representative Wooten.


Rep Wooten: I’d like to direct your attention to page 294. On that page, it’s showing an employee summary total of 629 positions. And my question is, does that include vacancies, or is that just bodies that are filling positions at that point in time?


Childers (DWS): Representative Wooten, that is total number of individuals. Because we actually break that down into the white employees, black employees–


Rep Wooten: I understand all that. I’m just asking you, are those bodies that are in those positions? Okay, let me ask you this.


Childers (DWS): Yes, sir.


Rep Wooten: So it doesn’t include the 368 that you have that are vacant?


Childers (DWS): No, sir.


Rep Wooten: Okay, so if you take that 629 number and you add those vacancies to it, that gives you 997 positions, and you’re authorized 924. On page 297, you’re authorized 924. You budget for 850. If you use the 850 number and take the 368 off of that, then that leaves you with 482. And then carrying it further, if you use 823, which it shows the position to fill, which is I also understand that’s a point in time, if you use that 823 number and then you add that in, that gives you 1,191. So how many employees do you have over there?


Childers (DWS): Yes, sir. The numbers are based on the period of time in which the report was created. So there is some–


Rep Wooten: So you’re telling me that between 997 and 1,191, during that period of time, you had 300 employees leave?


Traylor (DWS): No, sir.


Childers (DWS): Provide me the period of time, please.


Rep Wooten: Well, I’m just telling you, when the budget was prepared and the analyst report that was given to me by the personnel people.


Childers (DWS): Yes, sir. We have been reducing staff significantly since we stopped distributing federal benefits.


Rep Wooten: How many positions have you turned in to the Personnel committee under the new legislation?


Childers (DWS): Those that are on our report, the total for DWS, specifically, there are 59 positions. And out of those positions, only 16 are left with an intent to fill. The difference in that number between 59 and 16 are those that we are not filling and we have reduced because of the act in 2019.


Rep Wooten: Mr. Chairman, I’d like to request that they look at these numbers or get with the staff and look at the numbers to explain why there’s such a difference of 1,191 versus 924 that we have in the budget. And that number, 1,191 is based on an actual of 823. And then with 368 vacancies, that adds up to 1,191. And yet we show an authorization of positions of 924. So we need a clarification on where that’s coming from. And then, carrying it one more step further. You turned in 59, you say, but from 924, you’re asking for 70 new employees in the Department– or in Workforce Services.


Rep Dotson: All right. Can–?


Rep Wooten: You got 991 in your budget for next year, and you’re authorized 924 now.


Rep Dotson: Can you get with staff after the meeting to iron out the details with Representative Wooten?


Rep Wooten: So we need to get some reconciliation, if you would, please.


Childers (DWS): Yes, sir. Representative Wooten, we will provide you with the details and year by year analysis of our total positions that are currently filled and those that are in our appropriation.


Rep Wooten: All right. Thank you. Thank you, Mr. Chair.


Childers (DWS): Thank you.


Rep Dotson: Thank you, Representative. Representative Cavenaugh.


Rep Cavenaugh: Thank you, Mr. Chair. My question is where in your budget would I find where there would be attorney fees or settlements with employees that sued the agency?


Hamilton (BLR): Representative Cavenaugh, ordinarily, in their appropriation summary and their funding, you would see an expense called claims. If you don’t see that as a line of item, then they haven’t had any.


Rep Cavenaugh: Okay. And do they have an appropriation for future claims?


Hamilton (BLR): This wouldn’t be an appropriation for it. It would just be a line item.


Rep Cavenaugh: Do they have a line item?


Hamilton (BLR): No, they haven’t had any claims so they hadn’t had the need for the line item.


Rep Cavenaugh: Okay. The reason I ask, and you’re well aware of it, Dr. Childers, is we have a real issue in the Jonesboro office. You had a real internal issue there. And I have several of the employees that work there that are still concerned about the working environment in that particular office. I get multiple phone calls– I’ll be honest with you– probably every two weeks about employees that are still uncomfortable with the working environment in that location. You’re aware of the issues that we had there. You’ve had to terminate, I think, four employees from there– three or four because of the incidents that we had there between sexual harassment, between drinking on the job. And it not only goes into the working environment of the employees, but it also goes into the working relationship with employers in that location. There’s employers that tell me that they won’t work with that location because they can’t get anybody to answer the phone. So they go to other locations to try to post their jobs. And that’s not one employer. It’s several. And from what I hear is that there may be lawsuits brought against the department because of the department’s lack of response to some of these concerns employees had. Have you got that department cleaned up? Is it fixed? Is it working efficiently?


Childers (DWS): Representative Cavenaugh, I appreciate your concerns. We have made significant progress in that office as far as training of the management within that office and then also spending significant amount of time in that office in training and then addressing the concerns that some of which are actual concerns that have been expressed by employees. And others, I’ll have to say, are not concerns that we have found any evidence to support. So we have done investigations in that office with personnel. We have a process for that, and we take that very seriously. And so, as I stated, we are happy to report that there’s been a lot of progress in that office. But some of the things that you brought to my attention regarding employers and then also attentiveness by employees and those answering the phone, those are items that I have not heard, and that I will make sure that I address.


Rep Cavenaugh: Okay. So you’re saying that throughout your whole investigation there, you all didn’t terminate an employee because of any misconduct?


Rep Dotson: Representative Cavenaugh, we need to get back to the budget, specifically. If you can have this discussion– this is more of a policy and administrative type discussion.


Rep Cavenaugh: Thank you.


Rep Dotson: All right. Senator Chesterfield.


Sen Chesterfield: I move executive rec. That’s a proper motion. A second. All in favor? Any opposed? Motion carries. All right. Members, here is where we’re at. We’ve got three more. I’m going to ask that everybody keep your questions specifically regulated to the budget and not policy questions as we go through these last three here. Okay, Ms. Hamilton, you are recognized.


Rehab Services


Hamilton (BLR): Thank you, Mr. Chair. We’re going to go to page 352. We’re going to discuss the Rehabilitation Services Department of– Division, sorry, within the Department of Commerce. You’ll see their appropriation summary is on page 352. It has nine appropriations. There are four with changes. So I’ll just go through those. Overall, there’s an increase requested by the agency of 11 positions and $3.1 in additional appropriation over 2023 authorized and then $330,000 in year two. And that’s through just salaries and match. The executive recommendation is just $3 million increase over authorized 2023 and increase of 10 positions. So the first appropriation is the next page on page 354. It’s their operations appropriation that they use to increase services to people with disabilities. The agency is requesting appropriation and general revenue, because they do get general revenue in this paying account, of $11.9 million in both fiscal year 2024 and 2025; the restoration of 10 growth pool positions that they got through Legislative Council on January of this year; one new rehab director position to work with district staff and uphold the regional responsibilities and some position reclassifications. There’s no change in appropriation requested with these reclassifications. The executive recommendation allows for some of the requests. You’ll see on page 355, there is an increase of 10 positions– I’m sorry, the increase of nine positions that is recommended by the executive versus the 10 requested by the agency. And then approximately $2.5 million increase in appropriation over 2023 authorized in year one and then $263,000 in year two.


Hamilton (BLR): Next appropriation with changes is on page 357. The narrative on 356 is for their increase– it’s called the ICAN appropriation, the increased capabilities access network. This is a federal program providing information on new and existing technology to any person who needs assistance with their disabilities. There are several state programs and federal programs that they utilize. Funding is 100% federal. They’re requesting $714,000 in fiscal year 2024, which is over the 2023 authorized. And then in 2025, they’re requesting $717,000. The executive recommendation does allow for the agency’s request. You’ll see it on page 357. The position number is going to increase just by one, but the recommendation is the same for both the agency request and the executive recommendation, a net of $79,000 increase over 2023 authorized and then three– sorry, $3,300 in year two. Next appropriation changes is on page 358. This is a statewide disability telecommunications equipment fund appropriation. As you can see, it provides for services for persons who are deaf, hard of hearing, blind, or speech impaired. It’s funded by special revenues by a surcharge on telephone numbers. There is a slight increase requested in personal services matching. On the next page, 359, you’ll see that that is the only line item that has an increase. It’s about $4,700 in year one and about $1,900 in year two. And that’s over the authorized 2023 appropriation.


Hamilton (BLR): We’re going to skip a couple of pages and go to page 369. That’s the next appropriation that has change. This is the blind services operations appropriation. It provides services to people who have visual impairments. They’ve got field services, vending facility programs, and a DSB director’s office. These are three independent units that are funded by this appropriation, funded with general revenue and federal revenue. The agency is requesting $6.7 million in fiscal year 2024 and $6.8 million for fiscal year 2025. And general revenue, about a million in both fiscal years. The agency is also requesting those slight increases in personal services matching and regular salaries and some position reclassifications. The executive recommendation on page 369, you’ll note that there is the increases in the line items and regular salaries, personal services matching, and a decrease of $25,000 in the capital outlay line item from $25,000 in 2023 authorized to zero throughout the biennium. That’s the conclusion of the presentation, Mr. Chair.


Rep Dotson: All right. Thank you. Seeing no questions, we got a motion executive rec and a second. All in favor? Any opposed? Motion carries. Moving on to item nine. Ms. Hamilton, you’re recognized.


Waterways Commission


Hamilton (BLR): Thank you. Members, we’re on page 372. This is our Arkansas Waterways Commission. Their appropriation summary is on page 373. It consists of three appropriations. There’s only one with changes, which is on the next page, 374. This is a miscellaneous agencies funded appropriation that supports the development of the navigable waterways in Arkansas. The appropriation is funded with general revenue, and $50,000 of taxes and penalties is collected for water transportation companies under Arkansas Code 26. In excess of $2.5 million with the exception of the regular salaries and match increases, they are requesting general revenue funding of $274,000 each year of the biennium, which you will see on page 375. So the line items that you’ll see changes in are regular salaries and match, $17,000 increase over 2023 authorized in year one and $1,900 over 2024 in year two. That’s the conclusion of the presentation, Mr. Chair.


Rep Dotson: All right, thank you. Seeing no questions, we got a motion executive rec. A second. All in favor, aye? Any opposed? Motion carries. Take us home, Ms. Hamilton.




Hamilton (BLR): Thank you. Last item on the agenda is the Department of Aeronautics. Appropriation summary is on page 381. They’ve got two appropriations, one with changes in their state operations appropriation. You’ll see it increases from the authorized appropriation in 2023 of about $15.6 million. Slight increases in 2024 and 2025 just to account for matching and personal services. Their operations appropriation provides for exam rating and licensing of airports, landing fields and air navigation facilities. It’s funded entirely with special revenues derived from aviation sales and use taxes. On page 383, you’ll see the increases in those two line items. It’s about $35,000 in year one, which is over authorized in 2023. And then in year two, it’s about $3,500 salary match only over year 2024. That’s the conclusion of this presentation, Mr. Chair.


Rep Dotson: Thank you. Seeing no questions, got a motion executive rec and a second. All in favor? Any opposed? Motion carries. That wraps us up. JBC Special Language is at 1:30 in Mac B. We are adjourned.