By Rob Moritz
Arkansas News Bureau
LITTLE ROCK — Gov. Mike Beebe on Tuesday announced he would cut $100 million from this year’s state budget because of a drop in expected revenues.
The cut means a 2.2 percent reduction of the overall budget, with the Departments of Correction, Community Correction and Health and the Arkansas State Police taking the largest hits.
“Just like any family or business, state government must live within its means,” Beebe said in a news release announcing the cuts. “Despite our conservative budgeting, it appears that our recovery from the recession has been slower than anticipated. There are still positive signs in the revenue numbers, and we maintain hope that the recovery will accelerate.”
Existing fund balances will ensure continued adequacy for public education, he said.
The governor told reporters later he opted for the cuts after September revenue collections were $55.8 million below forecast and down $71 million, or 14.8 percent, from last year. The reduction in revenues was blamed on a drop in corporate income and sales tax collections during the month, he said.
“The huge drop in September was a surprise,” Beebe said.
Since the beginning of the fiscal year on July 1, state revenues have been a total of $75.3 million below forecast — $13.7 million in July, $5.8 million August and $55.8 million in September.
Arkansas began the current fiscal year with major cuts taking effect, including a 1-cent cut in the sales tax on groceries and a reduction in the tax that manufacturers pay for utilities, both approved by the Legislature at Beebe’s behest.
The governor said he remains optimistic that the state and national economy will improve.
“What we’re hearing nationally, and what all the prognosticators are saying, is we’ve kind of hit bottom … and we’re coming back, but they’re also very cautious and saying it will be slow in its rebound,” he said.
Beebe told reporters he did not anticipate the need for state employee layoffs because agencies have some financial cushion with unfilled job vacancies and projects that have not started.
Rep. Bruce Maloch, D-Magnolia, co-chairman of the Legislature’s Joint Budget Committee, supported the governor’s budget cuts.
“I think it was both timely and appropriate as to the amount,” Maloch said. “It takes care of the shortfall that we experienced the first three months of the year … I think it’s good to take action now because it’s easier for agencies to adjust their budgets earlier in the fiscal year.”
Maloch said the governor has the option of cutting more if revenues continue to fall below forecast or of restoring funds if the revenues exceed forecast between now and the end of the fiscal year.
The new forecast means a $9.1 million cut in the state prison budget, $2.9 million from the Department of Community Correction, $3.6 million from Department of Health $1.9 million from the state police.
State prison spokeswoman Dina Tyler said the cut means a possible delay in opening of a new special needs unit in Malvern. She said the department has some unfilled positions that it could use to off-set some of the cuts.
Another concern, Tyler said, is the $4.3 million for increased medical costs, which will not be covered in the revised budget.
“We’re not sure how we’re going to handle that right now,” she said.
State police spokesman Bill Sadler said agency officials were reviewing the proposed cuts and planned to make a recommendation to the director later this week.
Beebe told reporters he has no regrets about cutting the sales tax on groceries another penny in the face of a recession this year after a 3-cent reduction two years ago.
“Not at all,” he said. “What state government is about is taking care of the people … and if the people ever needed help with something as essential as bread, milk and groceries, it’s in a recession.”
In May 2008, the Beebe administration lopped $107 million from the state budget after forecasters predicted the economic downturn might lower revenue.
