Quick Summary

Key Takeaways:

• Meeting Focus:

  • The Senate Revenue and Tax Committee, led by Senator Jimmy Hickey, focused on procedural updates and discussed how broader economic analysis tools could support the evaluation of legislation.

• Procedural Updates:

  • The committee adopted rules to guide its operations for the session. The motion passed unanimously.

• Discussions on Economic Analysis:

  • The committee explored the integration of new tools to assess the broader economic impacts of legislative proposals, following a decision made the day before by the Arkansas Legislative Council (ALC) Executive Subcommittee to adopt the REMI (Regional Economic Models, Inc.) dynamic modeling system.

Background from January 15, 2025 - ALC Executive Subcommittee:

• Adopting the REMI Model:
  • The ALC Executive Subcommittee voted to implement the REMI model, a tool designed to analyze long-term and wide-reaching economic effects of policies.
  • During the meeting, Representative Robin Lundstrum advocated for this approach, noting that traditional static scoring methods only provide immediate impacts on state revenue and fail to reflect broader economic changes.
  • Experts from REMI highlighted the potential of dynamic modeling to inform more comprehensive legislative decisions.

Senator Jonathan Dismang’s Remarks:

• Caution on Speculative Modeling:

  • Senator Dismang stressed the challenges and uncertainties in broader economic models, pointing out that predictions often rely on assumptions that can vary widely.
  • He highlighted the importance of using these tools to supplement, not replace, the more precise fiscal impact analyses provided by the Department of Finance and Administration (DFA).

• Role of DFA and Policy Recommendations:

  • Senator Dismang made it clear that the DFA’s primary responsibility is to provide accurate, objective data on revenue impacts. He warned against using models like REMI to pressure the DFA into offering policy suggestions or aligning with speculative economic predictions.
  • He emphasized that doing so could undermine the DFA’s role as an impartial source of fiscal analysis and potentially bias legislative decision-making.
  • "The moment we ask DFA to agree to an unknown outcome, then we're asking them if they would go ahead and give us their policy. And that's hopefully not something that we would want from the committee is DFA to be directing policy." - Dismang

Senate Revenue and Tax Committee Transcript

January 16, 2025

 

Senator Jimmy Hickey I hope that, and I think this is the way that our leadership operates with Senator Hester. Senator Dismang, of course, been heavily involved in this, that whenever we do something like that, we have a pretty good idea that that is going to be the direction and the path. Because most of the time it's going to create a revenue reduction. Of course it is the way that it would normally operate in here nowadays, that we know that that is going to be a bill that is a priority of this institution. 

So, but no. If five of you all say, Hickey, we need to put something on the-- we want to see this. We want to hear this today. We want to get it rolling out. Then that's the way it's going to be done, of course. So, yes, sir. No, I appreciate the question. Any other questions? If I could have a motion to -- I have a motion to adopt. I have a second. All in favor say aye. Any opposed like sign. Okay, seeing none, we're going to consider that those rules will be in place. Okay. 

Just a little housekeeping type stuff. Just whenever you leave, be sure that you leave your-- any bills during the session, just be sure that you leave everything at your desk in the folders here. Try not to pick them up. I know sometimes we get in a hurry, but they help staff if we will just remember not to do that. Of course it's our intent to always meet in this room unless there's some extraordinary issue that was to come up. But it's been our standard practice that we will always meet in here. Of course, as you all know, we got to have five in here before we can start the meeting, just like today. So we all get to running around and things like that. But I'll try to give you plenty of notice that we're going to be here and possibly hearing those bills that we just discussed that will be taken up. 

And from that standpoint, I guess what I'd like to do is I do need to introduce our staff right here. Brandon Smith, he's with us. As far as Teresa Maxwell. She sits with us too. The attorney that does our stuff over the bureau that you all know well, of course, is Joy Leonard. We work with her. And Mr. Silva over there also helps. So that's kind of if you need anything or want to understand something or need to talk to something, that would be the avenue you'd need to go. 

Secretary Hudson, I'm going to introduce you, if that's okay. Secretary Jim Hudson, I think you all know, with DFA. And if you would like to, you can introduce your staff. That way members will kind of know who they may need to contact or work with if they have any questions. Yes, sir. Unless you want to sit here. [Off-mic introductions]

 

Senator Jimmy Hickey Super. Thank you, Mr. Gehring, Mr. Hudson and Mr. Collins. We appreciate that and everybody that works with you all. As far as for myself, and I think I can speak for the majority of this, I personally think you all do a superior job. You kind of got your back against the wall anyway because just the word tax at all always put you in a situation where it's an unsavory term anyway to most people. So I think y'all do an excellent job and you've got a hard job and we appreciate the work that you all do. So we look forward to working with you all during this session. Any other members have any questions? Yes, Senator Dismang.

 

Senator Jonathan Dismang Well, and it's really just to comment on how these new impact studies that we're going to do is going to mesh with whatever they do, because I would almost prefer that they don't mesh. And the reason being is what they're being asked to do is pretty much a snapshot of if this stops now, what happens to the GR without any consideration of economic changes that may come along because of that. It's a very, very different animal. That should be a true number. 

At times we've been able to assist from a taxpayer perspective and provide some insight where maybe DFA hadn't recognized some taxpayer issues or some taxpayer tendencies or whatever it may be. And I think that's all been fine throughout the last several years. What  this other entity is going to do is something that it's not a science and is not an exact art and it is not always going to be accurate. And we need to acknowledge that as a committee that we may get an impact statement from this entity that is really literally churning it through a computer program that is not going to be perfect and we shouldn't anticipate them or want them to. 

And the moment we asked DFA to agree to an unknown outcome then we're asking them if they would go ahead and give us their policy. And that's hopefully not something that we would want from the committee is DFA to be directing policy. And we try to stay away from that. So however that plays out, we need to be very mindful of that during the session, especially since this is the first time that a tool could be utilized that many times. You know, we've had something similar in the past, but we haven't used it every single time we've run a bill. 

And I'm not sure that we should be running it every time we run a bill or utilizing it every time we run a bill. But I do not want to ask them, do you agree, or can you change yours because this is what this computer program-- because that's all that it is-- is going to spit out.

 

Senator Jimmy Hickey Yes, sir. You and I have not even discussed this. And I think that we're actually on the exact same page with that. I could go one step further and say I believe that the, again, I think it's a great tool. I think it's going to be a great tool for us to use. It's just something else that we can consider in the thing. Again, there may be some subjectivity to that. And there may be also, as Senator Dismang, not putting words in your mouth, but normally what DFA does is that's for the next year that's going to show what the impact is so that we can make sure that we're staying within those budget confines. 

As far as the dynamic scoring, those may play out. And if we decide to do one, we've got to try to figure out if the way that it was done is going to take place over three years or five years. And if we think that the economy-- the economy is going to have to hit a certain level, of course, for those to even play out. 

So again, I think it might make our job a little harder. But Senator Dismang, personally, I think you're right on with that. And maybe we should have another discussion. It had been my thought process that since those are going to come early that we would get those to DFA. So if we were to have one of those that we would get it to DFA just so that they would have it. I think that they're going to maintain their independence and operate the same way. But do you agree or have you thought that through or do you think that we should--

 

Senator Jonathan Dismang If we have, I don't know, make it up, 100 bills that are going to impact GR or taxes and whatever it may be, in the course of this year, we've asked them to do a fiscal impact on each and every one of those, and then we'll be asking them to then review our work to make sure that the assumptions made were appropriate or whatever. And I'm not sure that they have the time to do that. I mean, it's hard enough at times because of the volume of what's being done to get the fiscal impact statement from DFA. So I'd be hesitant. 

And the other thing is, I don't know that it's their place to be-- the modeling is going to be based on assumptions from historical trends or other states' analysis or whatever. Again, it is not exact. And for us to sit in here and say, hey we can cut this tax and raise an extra 3 million or whatever, you know, if that's what the modeling spits out, they can't agree to that and shouldn't agree to the assumptions or try to re support those assumptions. It's either black and white for them. So. I don't know. What I'm saying is I don't know. But I think it would not be very fair to send them more homework to do when what we really, really need are those fiscal impact statements back.

 

Senator Jimmy Hickey Okay. Good points. Again, we're just going to have to kind of consider this. It's all new. I don't think we've got the program back yet, but I think that since it's been passed out of the executive committee, it at least deserves for you all to start thinking about it, the thought process, some of the comments that Senator Dismang has had, and and we'll just move forward step by step. Senator Hammer.

 

Senator Kim Hammer Sorry if I should know this, but let me ask, do we know what the turnaround time is going to be once we charge the entity that's going to be doing the analysis? What is the ability for them to turn around in a timely manner? Because if we're going to hold the bills to a certain date, are they going to be charged with analyzing that up to so that when we pull the trigger and start looking at these, they'll be ready? How's that going to play out?

 

Senator Jimmy Hickey It's my understanding, of course, that all of this is supposed to come into play maybe next week. So I don't know if they're going to have a little bit more time before they're going to be kind of up and running with it all. But as Senator Dismang says, most of it's going to be run through some computer program. So I think as far as a turnaround time with it, although DFA does a good job, although sometimes these things are hard to calculate on the static side, I think the computer program is supposed to turn around fairly quickly, maybe a day or 2 or 3, something of that nature.

 

Senator Kim Hammer Okay. All right. Thank you.

 

Senator Jimmy Hickey Yes, sir. Any other questions? Any other thoughts? DFA, anything you want to say? [Remarks off mic] Okay. All right. We'll try to figure out that process together right here, how we do it. Anybody from the audience want to speak up and say anything? That's not on our agenda, but I think that's probably the best way. Yes, ma'am. [Remarks off mic] Okay, Super. We appreciate that. Anyone else? Anything else from the members? All right. We should be organized and ready to go. We're adjourned.