Legislative budget hearings have begun at the state Capitol, in preparation for the 2025 regular session that begins in January.
Members of the Legislative Council and the Joint Budget Committee will review in detail every state agency spending request. In November the governor will submit a balanced budget proposal, which will be a starting point in writing budgets for state government. According to the Arkansas Constitution, the legislature has the final say in all fiscal decisions.
The Senate and House Education Committees completed a vital first step in the budget process. They recommended a 2.48 percent increase in all the various categories that make up foundation school funding.
Public school funding is the starting point in the legislative budgeting process because the Constitution mandates that the state provide all children with an adequate and equitable education.
The state Supreme Court has ruled that the legislature’s constitutional duty is to fund an adequate education system. Legislators must first determine how much money is needed for education, rather than simply funding schools based on how much the state can afford after it has funded other programs.
Arkansas operates under a balanced budget law known as the Revenue Stabilization Act, which requires state agencies to reduce spending if tax revenue declines due to an economic downturn. The importance of school funding was reaffirmed in 2003 when the legislature passed the so-called “doomsday law” that protects school funding from budget cuts.
State government in Arkansas spends more than $39 billion a year. More than $6.3 billion comes from state revenue sources such as sales taxes, individual income taxes and corporate income taxes. The largest single expenditure of state tax dollars will go to public schools from kindergarten through twelfth grade. Last year that was $2.57 billion.
State agencies will spend more than $12 billion in federal funds. Last year most of that amount, about $7.4 billion in federal funding, went to the state Human Services Department for Medicaid and other health services. State government paid for about $1.8 billion of the DHS budget.
The state collects about $894 million in special revenues, which come from taxes levied for special purposes. The Transportation Department maintains highways and bridges and collects about $673 million in special revenue from motor fuels taxes and fees.
Colleges and universities receive about $783 million in state aid. They generate an additional $5.4 billion in cash funds, derived from tuition and fees. The University of Arkansas for Medical Sciences has the largest source of cash funds, raising about $2.5 billion a year.
The University of Arkansas at Fayetteville generates about $1.3 billion in cash funds, compared to $212 million it receives in state funding. Arkansas State University at Jonesboro generates about $224 million in cash funds and receives about $63 million in state aid.
Last year the state spent $568 million on corrections, including $25.8 million paid to counties for holding state inmates in county jails. State prisons also generated about $40 million in special revenue and cash funds from their farm and industry operations. In all, the total operating budget for corrections was $662 million. That included the costs of supervising parolees who had been released early from prison.
