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FINANCING STATE PROGRAMS

FINANCING STATE PROGRAMS. Bureau of Legislative Research, 2012. THE ARKANSAS BUDGET. HOW BIG IS IT? WHERE DOES IT COME FROM ? WHO GETS THE MONEY?. Some Definitions. GENERAL REVENUES. Funds received by the State from fees and taxes levied on the general population of the state.

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FINANCING STATE PROGRAMS

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  1. FINANCING STATE PROGRAMS Bureau of Legislative Research, 2012

  2. THE ARKANSAS BUDGET • HOW BIG IS IT? • WHERE DOES IT COME FROM ? • WHO GETS THE MONEY?

  3. Some Definitions

  4. GENERAL REVENUES • Funds received by the State from fees and taxes levied on the general population of the state. • The proceeds are not designated to be used for a particular purpose but are allocated every year by acts of the General Assembly. • Interest earnings are retained in the State Treasury.

  5. SPECIAL REVENUES • Taxes and fees in the State Treasury which are designated or earmarked by law to be used for a particular purpose. • The State Treasury retains most of the interest earnings.

  6. FEDERAL REVENUES • Monies in the State Treasury received from the U.S. government either as project grants-in-aid or as reimbursement for eligible expenses. • The Federal government retains any interest earnings

  7. TRUST FUND REVENUES • Funds in the State Treasury that are received by the State in which the State is a trustee and is acting in a fiduciary capacity. • Trust funds retain their interest earnings.

  8. CASH FUND REVENUES • Funds received by the State which are not required by law to be deposited into the State Treasury. • Cash funds retain their interest earnings.

  9. Types of Revenue and Their Distribution

  10. ARKANSAS REVENUE COLLECTIONS2000-2012 FISCAL YEARS (Millions)

  11. 70%

  12. TOTAL STATE REVENUE – 2012 $19.2 Billion Trust & Other Non Revenue 16% General Revenue 31% Federal 28% Special 9% Cash 16%

  13. Three Methods of Funding Available • DEDICATED SOURCE

  14. DEDICATED SOURCES OF FUNDS • State Dedicated Tax or Fee (Special Revenue)

  15. SPECIAL REVENUES – 2012 FUNDED BUDGET $ 1.7 Billion

  16. DEDICATED SOURCES OF FUNDS • State Dedicated Tax or Fee (Special Revenue) • Federal Grant-in-aid

  17. FEDERAL FUNDS – 2012 FUNDED BUDGET $5.4 Billion

  18. DEDICATED SOURCES OF FUNDS • State Dedicated Tax or Fee (Special Revenue) • Federal Grant-in-Aid • Cash Funds

  19. CASH FUNDS 2012 FUNDED BUDGET Constitutional Officers 8% Total State Agencies 21% Boards & Commissions 3% Higher Education Institutions 78%

  20. DEDICATED SOURCES OF FUNDS • State Dedicated Tax or Fee (Special Revenue) • Federal Grant-in-Aid • Cash Funds • Trust Funds

  21. TRUST AND OTHER NON-REVENUE FUNDS 2012 FUNDED BUDGET $3.2 Billion

  22. DEDICATED SOURCES OF FUNDS • State Dedicated Tax or Fee (Special Revenue) • Federal Grant-in-Aid • Cash Funds • Trust Funds • Non-revenue Receipts

  23. ACT 311 of 1945 The Revenue Stabilization Law

  24. REVENUE STABILIZATION ACT (RSA) “Arkansas’ Present System of Tax Allocation and distribution is as archaic as the old tasseled surrey - -complex, confusing, inefficient. The system itself is a burden on the taxpayers.” - Governor Ben Laney, 1945

  25. REVENUE STABILIZATION ACT (RSA) “…I propose as our next step that our archaic and hydra-headed system of over one hundred state funds be forever eliminated,” – Governor Ben Laney, 1945

  26. What It Did • Removed the dedication from major broad-based taxes • Provided a fund distribution from a pool to various operating funds • Allowed the legislature to set their funding priorities every year • Prevented deficit spending • Reduced funding instability due to changing economic conditions • Assured agencies of even cash flow

  27. What It Also Did • Permitted the approval or mandate of a program without providing funds to implement it, raising unrealistic expectations • Allowed the Governor to manipulate financing and timing of legislative enacted initiatives • Permitted agencies and the Governor to determine programmatic priorities within funds and disregard legislative intent

  28. What’s this A and B Stuff?

  29. The Steps The Legislature, with consultation with the Governor: • Determines the Maximum General Revenue support to be distributed over the next year • Determines the maximum amount each general revenue fund is to receive from general revenues for the next year • Determines the number of priority categories (A,B,C…) • Sets the minimum level of support required for each general fund and designate it as “A” • Sets the next level of support for each fund and designates it as the next priority (A-1 or B) • Continues the steps until the maximum level is reached

  30. A B C Revenue Stabilization Law Revenue Flow

  31. Refunds/Claims $561.9 M Debt Service $32.5 M Public School Desegregation $68.0 M Educational Excellence $280.0 M City/County Tourist Promo $5.3 M Central Services & Constitutional Officers $195.4 M Aging Transport $0.16 M Educational Adequacy $24.8 M General Revenues 2011-12 FY Other 1.1% Income 56.2% Insurance 1.6% $5,936.1 Million Sales/Use 36.0% Luxury 5.1% Take Out $1,184 Million Economic Development Incentive $16.5 M

  32. $4.75 Billion Net Available Gen Gov 3.7% Hi Ed 16% Public School 42.3% DHHS 24.4% Gen Ed 2.2% Corr 8% Other 3.4% A + B $4.6 Billion

  33. For the 2011-2012 year the Stabilization looked like this:

  34. Revenue Stabilization Law A • Take all General Revenue collected • Take out $1,184 Million for Claims, Refunds, Desegregation Costs, Educational Excellence and various Processing Fees • Distribute $4.6 Billion as follows:$1,942 million to Public Schools$1,105 million to Health & Human Services$72.6 million to Higher Education Institutions • $367.2 million to Corrections $101.7 million to General & Workforce Education • $32.2 million for Other General Government & Local Aid • Then: $10 million to Rainy Day Fund Set Aside

  35. Revenue Stabilization Law Then: Once “A” is fully funded, $10 million to Rainy Day Fund Set Aside

  36. Revenue Stabilization Law B • Then: Distribute $31.9 million as follows: • $563 Thousand to Public Schools • $1.5 million to General Education • $16.5 million to Health and Human Services • $7.6 million to Higher Education Institutions • $5.7 million for Local Aid & General Government

  37. RSA PRIORITIES The legislature does not specify which programs are in which priority. The Governor and his agency directors decide priorities within the funds.

  38. GENERAL REVENUE PROGRAMS

  39. GENERAL REVENUE PROGRAMS2011-2012 FISCAL YEAR$4,595.9 million Gen Ed $103.2 2.2% General Gov $170.7 3.7% Higher Ed $733.5 16.0% Corrections $367.2 8% Other & Local Aid $156.0 3.4% Health/Human Services $1,121.8 24.4% Public School $1,943.5 42.3%

  40. CHANGE IN GENERAL REVENUE DISTRIBUTION2002-2012 FISCAL YEARS

  41. EDUCATIONAL ADEQUACY • Foundation Funding • Categorical Funding • Public School Academic Facilities Funding • 98% Actual Collection Adjustment

  42. Foundation FundingRates FY2005-FY2013

  43. CATEGORICAL FUNDING PROGRAMS • National School Lunch (NSL) • Alternative Learning Environment (ALE) • English Language Learner (ELL) • Professional Development

  44. National School Lunch Funding • Districts with 90% or greater of total students qualified as NSL students $1,549 per NSL student • Districts with 70% but less than 90% of total students qualified as NSL students $1,033 per NSL student • Less than 70% of total students qualified as NSL students $517 per NSL student

  45. OTHER CATEGORICAL FUNDING PROGRAMS • Alternative Learning Environment (ALE) funding provides $4,228 per full-time equivalent (FTE) students in the previous school year to help school districts educate students who need different learning environments due to social or behavioral factors that make learning difficult in a traditional classroom. • English Language Learner (ELL) funding provides $305 per student in the current school year to help school districts educate students with limited English language proficiency. • Professional Development (PD) funding provides up to$52 times the school districts previous school year ADM. The Department of Education is authorized to retain up to $4 million for statewide PD efforts and therefore, the school districts typically receive about $41 per ADM for PD.

  46. PUBLIC SCHOOL ACADEMIC FACILITIES FUNDING • In addition to Foundation Funding and the Categorical Programs, the State has allocated $917.3 million for public school facilities for the period FY2005 through FY2013. • The Commission for Public School Academic Facilities and Transportation has approved a total of $879.9 million in state financial participation through the end of FY2013 for facility programs. • The Division of Public School Academic Facilities and Transportation expended $668.8 million as of June 30, 2012, leaving a FY2012 year-end fund balance of $188.8 million.

  47. PUBLIC SCHOOLS BONDED DEBT Statewide Fiscal Year Ending June 30, 2012 2.9% increase 8.8% increase 5.2% increase 7.7% increase 8.8% increase 6.6% increase 7.2% increase 11.1% increase

  48. 98% ACTUAL COLLECTION ADJUSTMENT

  49. EDUCATIONAL ADEQUACY FUND

  50. “Doomsday Clause” • Chief Fiscal Officer determines not adequate resources in Educational Adequacy Fund and Public School Fund Account • All other General Revenue Budgets proportionally reduced by amount needed

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