By David J. Sanders
It all felt very similar: Gov. Mike Beebe standing before the lawmakers weaving his words together in a disjointed cadence and imploring them to raise taxes for a noble goal.
Last time, it was the state’s severance tax. Surely everyone remembers how last April, Beebe convinced lawmakers — more than the needed supermajorities in both chambers — to raise the tax on the state’s budding natural gas industry.
The new money from the severance tax would fix the state’s crumbling highways. Beebe based his revenue projections on a so-called “conservative estimate” on the future price of natural gas — $8 per 1000 cubic feet was his figure.
There were some of us at the time who pointed out that his $8 estimate wasn’t conservative at all, but was way too high. In fact, when I cited industry analysts who predicted that an oversupply of natural gas would drive down the price in 2008 and 2009, Beebe backers simply dismissed the source.
Well, consider these words that appeared in Wednesday’s Kansas City Star:
“Natural-gas prices are down to levels not seen since 2006, and settled Wednesday at $4.97 per 1,000 cubic feet on the New York Mercantile Exchange. Put another way, that’s more than 60 percent below where they were in July.”
Curiously enough, at last check, Richard Weiss, director of the Department of Finance and Administration said his agency hadn’t updated their revenue projections that are based on the original $8 estimate. (Note to lawmakers: Next time you bump into Mr. Weiss in the halls at the Capitol, you might want to ask him to consider revising his revenue estimates.)
All of this brings me back to last week at which time Beebe rolled out plans to fund a myriad of health care initiatives by raising the tax on a pack of cigarettes – 56 cents per pack to be exact.
I, for one, support the governor’s call for a statewide trauma network – it’s a good idea that’s long overdue. But Beebe didn’t stop there. He sprinkled in several new initiatives to – shall we say – sweeten the pot.
Beebe’s wants lawmakers to fund more community health centers, expand ARKids First, and build a Fayetteville campus for UAMS.
The governor plans to parlay what the state raises in new revenue with federal matching funds to subsidize his new proposals, which all sounds well and good, but let me provide this cautionary note.
The trauma system, which is the goal I’m told, could be funded without raising taxes. Lawmakers could rely on a mix of state surplus dollars — the state has $300 million in surplus – and/or by raising fees on drunk drivers, which is how many states fund such enterprises.
Federal matching funds can be dangerous. Let me explain. If the state funds new and expanded programs, coupled with a 3-to-1 or 4-to-1 dollar match from the feds, then watch out.
The current economic downturn has hit Arkansas, but hasn’t impacted state revenues yet. It will. Just listen to President-elect Obama or anyone else. Things are going to get worse before they get better. There is a very real chance that the deepening recession will cause state revenues to plummet. It’s possible that sometime in the near future lawmakers will be forced to cut and shuffle budgets just to cover the essentials.
If that happens, lawmakers might have to cut the dedicated dollars for these new programs, which means that of those programs relying on a federal match, a dollar cut would really be (depending on the ratio) a four- or five-dollar cut.
Since it’s likely the governor and lawmakers will agree to launch a new trauma system, they should pay for it with surplus dollars or by raising fees. Beyond that, the time isn’t right for the state to raise taxes in order to haul off and fund new programs. Economic uncertainty is the only thing certain right now.
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David Sanders writes twice weekly for the Arkansas News Bureau in Little Rock and is the host of Arkansas Education Television Network’s “Unconventional Wisdom.” His e-mail address is DavidJSanders@aol.com.
