House Education Committee
January 28, 2025
Representative Keith Brooks [00:00:33] So, members, just a couple of updates on the agenda this morning. As with a lot of legislative work, there's an ebb and flow to what we do. And sometimes we don't know exactly where we're going until we get there. So this morning, we are only going to be hearing one bill. That's Representative Brown's HB 1085. She is on the way here and almost here from what I hear. So hopefully we'll do our best to stall until she gets here.
Representative Richardson is on member's own this morning with an amendment and then Representative McKenzie and Wooten's, I was asked by the sponsor to put those on deferred while they add amendments and work on the bills. And so that's where we're at. I would encourage you to, if you have bills that you're going to be filing relative to education, please go ahead and get them in. Because as you know, as we pick up speed here in a few weeks, the agenda will be full of a lot of these that have come off of fiscal impact and the deferred list. And so we will have very full agendas. So let's take this, enjoy the peace for just a few days, at least.
Another announcement relative to calendar, so on Thursday, we are going to be meeting in joint special order of business with the Senate. Currently, we technically have that scheduled for 1:00. That's if we go into session at 11. Speaker Evans was not sure about that as of yet, but that's tentatively where we have it scheduled to meet in joint with the Senate so that we can give Secretary Oliva the opportunity to review the NAEP scores, which I believe come out today, Secretary. Tomorrow, sorry, come out tomorrow. So NAEP scores, most recent scores will come out tomorrow. And so we're going to give the secretary the opportunity to review Arkansas's progress as well as discuss where we are continuing to go and answer questions on those.
And so I know that 1:00 on Thursday may not be the ideal time relative to travel, but I want to put that on your calendar as soon as we could get it there. So again, 1:00 is currently our anticipation for a special order of business on Thursday. We will not meet at 10:00 on Thursday morning. That 1:00 will be our meeting for Thursday.
So pending Representative Brown's arrival, we are going to recess momentarily. Yes, sir. We will be doing pictures on Thursday. Stay tuned for a time. Yes, sir. So we're going to momentarily recess the committee while we wait on Representative Brown to get here so that we can continue with a little bit of business. So we will stand in recess until Representative Brown arrives.
[Recess]
House Education will come back to order. Welcome, Representative Brown. If you would, please introduce yourself for the record and then you'll be recognized to present HB 1085.
Representative Karilyn Brown [00:06:39] Thank you, Mr. Chair.
Representative Keith Brooks [00:06:41] Sorry, as amended. My apologies.
Representative Karilyn Brown [00:06:47] As amended. We have the financial impact statement. Does anybody have any questions about that?
Representative Keith Brooks [00:07:05] Any questions from the committee? I believe, if I recognize it right, it looks like it's less than what it was. Maybe about half.
Representative Karilyn Brown [00:07:14] They had based the original financial impact statement on the way the federal government calculated it, which was a broad look at the entire United States and how it might impact other communities other than communities like ours. So what they did then is look specifically at how it might affect Arkansas in particular, and that's why the number is reduced. I think it's more realistic.
Then as far as the bill is concerned, just basically what we're doing is we're bringing our 529 plan, which we call Brighter Future plan for our education savings accounts, those accounts can be used K through 12 or for post-secondary education. And previously, when you had money left over that-- the owner of the account had designated a beneficiary and it did not appear that that beneficiary or it became apparent that the beneficiary was not going to need that money for education, then the owner of the account is now allowed to roll that over to a Roth IRA, which is similar to these plans because you put money into a 529 plan on after tax dollars, just like you do in a Roth IRA.
Representative Keith Brooks [00:08:58] Thank you, Representative Brown. Representative Beck, you're recognized.
Representative Beck [00:09:04] I agree with the bill. Let me get my mic out. All right. I agree with your bill. I think it's the way to go. But the question I have is, if this bill really does nothing in terms of education, changes in terms of education, it does change tax and revenues for the state. So why is this not a tax and revenue bill? It is a question of the chair.
Representative Keith Brooks [00:09:31] I don't know that I have a firm answer. We could possibly defer to Representative Brown. Obviously, the decision of the parliamentarian was to put it in Education. It's dealing with education matters specific to students of a certain type. So perhaps that's why. But I will be glad to circle back around with the parliamentarian to see. Representative McKenzie.
Representative Brit McKenzie [00:10:00] So I believe because the Brighter Future Fund was created in Education code title. So anything that, again, this has a general revenue impact. Now, after its creation, since it's touching, I don't know, Title 19, Title 18, it gets automatically referred to here. You're right, it has a GR score, but anything that falls in those titles, that's the guiding method of what committee it goes to.
Representative Keith Brooks [00:10:26] Representative Meeks, you're recognized for a question.
Representative Stephen Meeks [00:10:28] Thank you. Mr. Chair. On this GR impact, it's not we're going to be paying out $190,000 according to this. But I just want to make sure I'm correct. The expectation is that we will lose $190,000 in revenues that we might otherwise get.
Representative Karilyn Brown [00:10:47] Yes. That is based on the assumption based on the number of people who have previously withdrawn everything from whatever was left and they didn't have a way to roll it into a Roth IRA. It's anticipating then that everybody's going to roll, I think. The Treasurer's office is here if you want to ask them for sure or DFA may be here and they can answer that. But anticipating that those people who have previously just withdrawn, surrendered their money and then had to pay the taxes on it, they won't have that revenue.
Representative Keith Brooks [00:11:30] Representative Brown, I'll go ahead and recognize Mr. Lender. If you want to come to the table, introduce yourself with DFA and can provide additional clarification.
Keith Lender [00:11:42] Good morning, Committee. Keith Lender, DFA. And yes, Representative Meeks, you are correct that these would have been taxable events in the past. They won't be any more. So this will be a reduction in general revenue, not money being paid out.
Representative Stephen Meeks [00:11:54] All right. Thank you.
Representative Keith Brooks [00:11:57] Representative Cozart, you are recognized for a question.
Representative Bruce Cozart [00:12:00] Thank you, Mr. Chair. On the back of the sheet, it just talks about the time frame. So I think the time frame is unknown because of the tax form, the computer updates and implementation for the employees to be educated on how to do this. Do you have any kind of idea exactly what that time frame could be though?
Keith Lender [00:12:22] Were this bill to pass, the department would be able to implement it at the time it went into effect. There wouldn't be any sort of delay.
Representative Bruce Cozart [00:12:31] Thank you, Mr. Chairman.
Representative Keith Brooks [00:12:33] Vice-Chair McKenzie, you're recognized.
Representative Brit McKenzie [00:12:35] Mr. Speaker, so just to be clear so we're all speaking from the same hymnal, the $190,000 represents taxable. The penalty for withdrawal out of the 529, not for the purposes of education, correct?
Representative Karilyn Brown [00:12:50] It's not necessarily a penalty. You pay the taxes. You pay the taxes on the growth, not the seed money. But you pay taxes on the growth. Am I correct?
Keith Lender [00:13:03] Yes, ma'am. What would have happened under current law is you realize you weren't going to need this money for education. You would have withdrawn it. It would have went to the beneficiary. It would have been taxable income to that beneficiary. So they would have paid income taxes on it. Under this bill, they will have an option to divert that money into the Roth. So then that taxable event of them receiving the money wouldn't occur. So it's just a reduction in taxes that would have been collected.
Representative Brit McKenzie [00:13:31] To that end, this is all post tax money to begin with. All 529 contributions are already taxed prior to being put into the account prior to growth?
Keith Lender [00:13:39] Correct.
Representative Keith Brooks [00:13:44] Seeing no additional questions, we do not have anyone who has signed up to speak for or against. Is there anyone who the audience would like to speak for or against the bill? Seeing none, Representative Brown, would you like to close for your bill?
Representative Karilyn Brown [00:13:56] Yes, I would like to close for my bill. And I would like to just interject that the Arkansas 529 Plan is the fourth highest rated 529 plan in the country. So I think that's pretty magnificent. Our contributions are considerable. Yes. I would like to close for the bill and ask for a good vote.
Representative Keith Brooks [00:14:16] Representative Brown has closed for the bill. I have a motion to do pass. All in favor, say aye. As amended. Do pass as amended. All opposed. Congratulations, Representative Brown, your bill has passed.
Representative Karilyn Brown [00:14:27] Thank you.
Representative Keith Brooks [00:14:29] So seeing no further business, again, just a reminder of the announcement. Tentatively 1:00 on Thursday we will meet in Big Mac A with a Senate joint Special Order of Business to hear Secretary Oliva discuss NAEP scores. And seeing no other business, House Education is adjourned.
