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2 panels back hire to assess aid's impact

Lawmakers seek data to use in weighing income-tax cuts by Michael R. Wickline | July 25, 2021 at 12:00 a.m.
Magnolia trees bloom around the Arkansas State Capitol building Thursday, March 18, 2021 in Little Rock. (File photo)

Two legislative panels on Thursday advanced a proposal to hire Moody's Analytics Inc. as a consultant to assess the impact of federal COVID-19 stimulus payments on the state's economy and tax revenue in preparation for a special legislative session to consider income-tax cuts this fall.

Moody's Analytics also would assess how much specific changes to Arkansas' individual income-tax rate structure would have on the state's economy and tax revenue, based on the Bureau of Legislative Research's proposed scope of work for the consulting firm.

Moody's would be paid up to $288,000, including travel expenses, by the bureau under the proposal that would run through Dec. 31.

The consulting firm would provide written reports of results, key findings and recommendations no later than Sept. 30 under the proposal that the Legislative Council's Executive Subcommittee and Policy-Making Subcommittee advanced Thursday to the full council, which met Friday.

The consultant would present its report to a legislative committee designated by Senate President Pro Tempore Jimmy Hickey, R-Texarkana, and House Speaker Matthew Shepherd, R-El Dorado.

The Legislature plans to reconvene at some point this fall to redraw congressional district boundaries and "immediately after that it is the intent that we will probably go into a special session to look at tax cuts," Hickey told the Executive Subcommittee.

Gov. Asa Hutchinson has repeatedly said that his priority is to further trim the top individual tax rate of 5.9%.

Aid impact

Hickey said Arkansans received several rounds of federal aid, ranging from the Paycheck Protection Program loans to stimulus payments, "so what we need is ... somebody that is able to extrapolate those numbers out, that additional revenue that has been skewed, so we can come up with a dollar amount on what is a prudent tax cut that we can do for the state of Arkansas."

The state's long-term reserve fund totals $1.2 billion, and "a huge portion" of the fund resulted from the federal payments that boosted sales and income tax collections in fiscal 2021, Hickey said. Hutchinson often refers to that reserve fund as the state's savings account.

The fiscal year ended June 30.

Hickey said the consultant will figure out what tax collections would have been absent the federal money and the pandemic, so lawmakers can make sure the state can afford whatever tax cut is enacted.

Sen . Kim Hammer, R-Benton, asked why the Bureau of Legislative Research couldn't do this work rather than Moody's Analytics.

Hickey said it would be difficult for the bureau's staff to do the type of financial analysis that he seeks.

"We also have got some other revenue items that we want to see if they can be taken into account, which would be the sales tax ... coming off from the internet [sales] and things of that nature," he said. "Whatever tax cuts that we have initiated that went into effect, we also are going to take those into account."

Rep. Jim Dotson, R-Bentonville, was surprised about the proposal to hire consultants.

"I'm trying to figure out where we came up with doing this," Dotson said. "Didn't we pass legislation during the session to do this exact thing on a long-term continuing basis? Why are we having a short-term contract?" Hickey said the proposal to hire Moody's Analytics is separate from the legislation enacted earlier this year.

He said hiring Moody's would enable lawmakers to prepare for considering tax cuts this fall and factor in the impact of federal stimulus funds on tax collections.

"We probably talked to the bureau six weeks ago, I'm guessing, about trying to figure out how this could be done, if we could do it, if we didn't feel like we could do it, who could be capable of doing it and then we had to start these discussions with them of what we were wanting," he said. He said the bureau contacted Moody's Analytics to see if it was interested in doing this work.

Earlier this year, the Legislature enacted Act 876 to allow the bureau to hire a consultant to help make projections of tax revenue and learn the financial impact of bills. The Bureau of Legislative Research last month issued a request for proposals for consultants that closes Aug. 30, he said.

Under Act 876, the state Department of Finance and Administration cannot provide certain information to the bureau, including the consultant, until Jan. 1, said bureau Director Marty Garrity. The department makes financial projections for the governor.

Afterward, finance department spokesman Scott Hardin said the department "does not have a statement regarding the plan to hire Moody's."

Census information

Matthew Miller, assistant director of the legal office at the Bureau of Legislative Research, told the Executive Subcommittee that he learned last week from U.S. Census Bureau officials that state officials who receive census data,will receive "flash drives and DVDs of the census data" on Sept. 30. He said he learned that information at a conference in Salt Lake City sponsored by the National Conference of State Legislatures.

"But the Census Bureau, knowing that states are waiting and that things are a little behind, are going to make available on Aug. 16 the same data in a somewhat more raw format," he said. "It is not accessible, but will be the exact same data as what is going to be distributed on Sept. 30."

Between Aug. 16 and Sept. 30, the U.S. Census Bureau will be working on taking that data and getting it in the customary format in which the state receives that information, Miller said.

A bureau vendor can work with the Aug. 16 data to put it in the bureau's map drafting software, which will take a few weeks, so "probably around the start of September, we'll have our map drawing software with the actual census data within it," he said.

"At that point, we'll be ready to work with that data and if you want to draw a map or work on something, you can come and talk to a few bureau staff members," Miller said.

Afterward, Hickey and Shepherd said they haven't yet decided on when the Legislature will reconvene to redraw congressional district boundaries.

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