Jan. 15, 2010

The U.S. Senate returns from recess on Jan. 20 to join the House, which headed back to work this week. Meanwhile, the Arkansas General Assembly this week held budget hearings in advance of Arkansas’ first fiscal legislative session starting on Feb. 8.
As we prepare to head back to work at the state and federal capitols, both state and federal economies are shaky and we are faced with a mountain of obstacles. But we’re also looking toward many opportunities. In this issue of Moving Families Forward, we’ll update you the status of health care reform, the federal estate tax, the “Big Six” state agency budget hearings for the 2011 fiscal year and Gov. Mike Beebe’s $106 million in cuts for this year’s budget.
An Update on the Tax and Budget System: Federal
Health Reform

On Christmas Eve the U.S. Senate passed its health reform bill, The Patient Protection and Health Care Act of 2009 (H.R. 3590), on a party-line vote of 60-39. AACF thanks Senator Blanche Lincoln and Senator Mark Pryor for their votes and we appreciate their efforts to pass the bill.

The Obama Administration is urging Congress to work as quickly as possible to resolve the differences between the House and Senate health care bills so the President can sign a bill before the State of the Union address on Feb. 2. This is an ambitious timetable given that the House came back to work this week and the Senate will not return until next week.

We aren’t likely to see a formal conference over the bills. Rather, the Democratic leadership in the House and Senate will negotiate a final package with the Administration. The final health care reform bill will likely look much like the Senate’s bill in an effort to retain the 60 votes needed for final passage in the Senate. However, retaining a majority of the votes in the House will be important as well. Any additional improvements to the Senate bill will largely depend on available revenue.

As outlined in Executive Director Rich Huddleston’s January 7 statement on health care reform, AACF has three key priority areas for conference: affordability, accountability, and financial stability.

We’ve also updated our paper on the impact of the House and Senate health bills on Arkansas children and families.

Estate Tax

On Dec. 3, the U.S. House of Representatives voted 225 to 200 to pass the Permanent Estate Tax Relief for Families, Farmers, and Small Businesses Act of 2009 (H.R. 4154). AACF thanks Representatives Marion Berry, Mike Ross, and Vic Snyder for voting for the House bill.

The bill would have permanently extended the estate tax at 2009 levels. Under the 2009 law, estates valued at up to $3.5 million per person and $7 million per couple are exempt from the estate tax. The value of the estate above those levels is subject to a 45 percent tax rate. Fewer than 142 Arkansas estates are affected by the 2009 law. Before 2001, the exemption was $675,000 per person and the rate was 55 percent. The federal estate tax expired at the end of December because the Senate failed to pass the House bill. If Congress fails to reinstate the federal estate tax it will revert to the pre-2001 levels.

The Center on Budget and Policy Priorities issued a paper explaining how many family-owned farms and small businesses will be worse off on balance due to the estate tax repeal and related tax changes that took effect on New Year’s Day.

An Update on the Tax and Budget System: State

Agency Budget Hearings

This week the Arkansas Legislature began hearings of the Joint Budget Committee as part of the first Fiscal Session that will focus on the state agency budget dubbed the “Big Six.” These six agencies include the Department of Education Public School Fund, Department of Health, Department of Human Services, Department of Correction, Department of Community Correction, and all higher education institutions. These budget hearings will end in January.

The Fiscal Session will officially begin on Feb. 8. By law, this session is designed to be brief and only cover bills related to appropriations. The session is scheduled to last 30 days (until March 9) with the option for a 15-day extension with a two-thirds vote, ending no later than March 24. In order for a non-appropriation bill to be addressed during the Fiscal Session, it must be filled no later than January 22 and requires a two-thirds vote by the Legislature to consider passage.

2010 Budget Cuts

Many of you have seen that Gov. Beebe had to cut the current budget by $106 million this week. This should cause alarm to child advocates across the state. We should be looking for ways to maintain, if not increase, support for programs needed by our most vulnerable children. Arkansas children depend on programs such as ARKids First, which is funded in part by state revenue. When revenue is down, deep slashes in the state budget impact thousands of children who live in our communities.

During difficult economic times, we focus too much time and energy on filling in the cracks and looking for ways to cover shortfalls for critical programs. We should work to make programs more efficient and effective. Arkansas needs to modernize its tax and budget system to allow the state economy to grow and allow children and their families to thrive. To do that, Arkansas should take a balanced approach to the crisis-one that relies on cuts as well as new revenue. This could include changing tax policy to close corporate loopholes, expanding the sales tax base to reflect the economic shift from goods to services and ensuring that the state is prepared to capture tax revenue from Internet sales.

AACF will be watching the Fiscal Session closely and monitoring the bills that are filed and how they will impact Arkansas children and their families. Expect to see updates from AACF on the ARVoices Blog or in future issues of Moving Families Forward.

If you would like more information on the topics discussed above, please contact Candice Smith, our federal tax and budget policy director, at csmith@aradvocates.org or Pat Bodenhamer, our state tax and budget outreach director, at pbodenhamer@aradvocates.org.

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