House Revenue and Tax Committee
January 28, 2025
Representative Frances Cavenaugh [00:00:01] We'll start the committee. If there's any guest here wishing to speak for or against a bill, please be sure to sign up so that we will have that on the list. I just want to-- you got anything you'd like to ask? Okay. What we're going to do is I'm gonna to tell you the bills we're going to hear today. We're going to hear four bills today, but we're only going to be able to vote on one because three of them have a fiscal impact and one does not.
The first bill we'll hear is HB 1063. Then we will go to 65, 66 and 74. 74 is the only one that does not have a fiscal impact that we will be able to take a vote on. The rest of them, we are going to present and debate. Any questions about that? Okay. With that, Representative Mayberry, are you here to present your bill? If you go to the end of the table and introduce yourself, please. If you'll introduce yourself for the record.
Representative Julie Mayberry [00:01:15] This is State Representative Julie Mayberry.
Representative Frances Cavenaugh [00:01:18] All right. And your guest.
Chris Scott [00:01:20] Chris Scott, manager of the 529 and ABLE programs in the Treasurer's office.
Representative Frances Cavenaugh [00:01:24] Thank you. And you are actually recognized to present your bill, Representative Mayberry.
Representative Julie Mayberry [00:01:28] Thank you, Madam Chair. Everybody, back in 2015 or so, we passed ABLE legislation here in the state of Arkansas. Basically, the federal government decided that it was okay to allow states to allow individuals with disabilities to have a savings account. As it stood before, if you had over $2,000 in your name, you would lose your benefits if you had Medicaid, if you had perhaps Social Security income. And you can imagine as you're trying to save up to provide for yourself, that limit of $2,000 really gets in the way. And I think all of us will agree that we want people to be able to help support themselves.
And so we passed legislation here in the state of Arkansas that allowed for us to start ABLE accounts. I'm proud to say that my daughter Katie over here with spina bifida was the very first account that we had in the state of Arkansas. And we have used that account. It has helped us actually add an accessible bathroom on to our home that we were unable to do. But today I'm coming to you because every so often the federal government expands what it allows in those accounts.
But we need to make sure that you all are okay with it at the state level. And the way that the accounts were originally set up, if you were 26 or under, if the disability occurred before the age of 26, you could have one of these accounts. But if you were even a day over 26 when the disability happened, you couldn't. Now, the federal government is saying they are allowing up until age 46.
And so all we're doing here in the state of Arkansas is trying to align ourselves with the federal regulations that will now allow someone up to the age of 46, if that's when their disability occurred, to be able to set up one of these accounts. And I'll let the Treasurer's office explain a little bit more.
Chris Scott [00:03:35] Yeah. So just to kind of expand upon that, Representative Mayberry and Madam Chair, in December of 2022, Secure Act 2.0 passed and that amended Section 124 of the Internal Revenue Code. And as you explained, it expanded eligibility for the ABLE accounts by raising the qualifying age of disability onset from 26 to 46 years of age. And this change is effective in January 2026. And this means that more people with disabilities will soon be able to open up an ABLE account to save money without risking their benefits. We did not want to make the newly eligible Arkansans with disabilities wait until the 2027 legislative session. And I'm free to take any questions.
Representative Frances Cavenaugh [00:04:24] Members, do we have any questions? Representative Ray.
Representative David Ray [00:04:31] Thank you, Madam Chair. So a couple of questions, just generally about the ABLE accounts. The $5,000 limit on the contribution per year, is that limit set by the state or is that something that the federal government sets?
Representative Julie Mayberry [00:04:49] I'm going to let you answer that because actually it's more than 5000.
Chris Scott [00:04:52] So the annual contribution limit into an ABLE account for the year 2025 is $19,000. It's always tied to the gift tax exclusion that the feds change. And the $5,000 figure that you mentioned, that is the state income tax deduction. So if somebody contributed $7,000, $8,000, they could only claim $5,000 of that on their state income tax deduction.
Representative David Ray [00:05:17] Okay. That makes sense. My other question was regarding the Secure Act. Is this the only change for the ABLE accounts that was part of the Secure Act that we would need to incorporate or are there others?
Chris Scott [00:05:32] Yes. This was the only change to ABLE accounts.
Representative David Ray [00:05:34] Okay. All right. Thank you.
Representative Frances Cavenaugh [00:05:38] Members, any other questions? Seeing none, do I have anyone to speak against the bill? I've got one person signed up to speak for the bill. Constance Tullis, if you'll come down and introduce yourself. Please tell us who you're with.
Constance Tullis [00:06:04] Good morning, Madam Chair and members of the committee. I'm Constance Tullis, and I'm a traumatic brain injury, a TBI survivor.
Representative Frances Cavenaugh [00:06:19] Thank you for being here, You're recognized.
Constance Tullis [00:06:21] Thank you. All right. My name is Constance Tullis, and I'm here to share my story and advocate for an important change to the Arkansas ABLE program from 26 to 46 years of age. I sustained a traumatic brain injury whenever I survived a gunshot to the head in southwest Little Rock on September 28th, 2011. Since that time, I've worked hard to rebuild my life, overcome challenges, and achieve goals I once thought might be out of reach.
My TBI is an invisible chronic disability. I'm proud of how far I've come. I've done so well navigating the complex world of resource limits and benefits, which often feels like a balancing act with no room for error. And the anxiety it causes, like whether I'm going to overdraft my account or have to use my credit card, it's just-- anyways. The Arkansas Able program is a vital resource for individuals with disabilities, offering a chance to save for our futures without jeopardizing the supports we rely on.
Fortunately, I missed the program age eligibility requirement by just a few days, turning 26 shortly before I could qualify. It's difficult to put into words how devastating it felt to realize that something so arbitrary like 20 something days could keep me from accessing this life changing program, especially those of us who rely on Medicaid. At that time, I was given just a 2% chance of living. And I was med flighted to Baptist. I was paralyzed, unable to walk and talk. I had to relearn everything from speaking to walking. To this day, I live with a severe traumatic brain injury and I still carry the bullet in my head. I require Botox injections in my leg to currently maintain my ability to walk.
Without Medicaid, I wouldn't be able to afford this treatment. Medicaid has been a lifeline for me, but the restrictions to maintain these benefits have made financial independence nearly impossible. Let me repeat that. Medicaid has been a lifeline for me, but the restrictions to maintain these benefits has made financial independence nearly impossible. I'm here today by the grace of God. I'm here today. I believe no one should face such a barrier. Updating the ABLE plan to align with federal IRS guidelines and expand access is not just a matter of fairness.
It's a step towards empowering more individuals with disabilities to achieve independence and stability. The ABLE account would have provided me with the opportunity to save for essential expenses like buying this device, which the doctor said improved my walking like night and day. But Medicaid has been paying for Botox for years because I couldn't save up for this device and assistive technology like dictation and even my service dog expenses and housing without fear of losing benefits that sustain my daily life.
For many of us, these accounts are not a luxury. They're a lifeline. I'm grateful for my colleagues like Chris Scott and Representative Mayberry for supporting this effort and urge you to pass this bill. By doing so, you will help people like me and countless others who are striving every day to build better lives. Thank you for your time considering this important issue.
Representative Frances Cavenaugh [00:10:14] Thank you for being here. Members, do we have any questions? Seeing none, thank you for your testimony. Thank you for coming. Is there anyone else signed up to speak against the bill? For the bill? Thank you. Representative Mayberry, would you like to close for your bill?
Representative Julie Mayberry [00:10:32] Members, I realize that you are not taking a vote on this today, and I understand the reasons why. I just want to stress, if you look at the fiscal impact on this, it's less than $20,000. And you can see that this can make a huge impact and allow people to support themselves and give that independence that we all want. The other part is that this is just helping us align with the federal guidelines. And so I urge this committee, when we are at a point where you will take a vote, to please vote in favor of this, to allow this to be one of those that does get through. Thank you so much.
Representative Frances Cavenaugh [00:11:21] Thank you, Representative Mayberry, for presenting. As you know, as Representative Mayberry said, we won't be able to take a vote today, but we do thank you for presenting. Thank you all so much for coming. With that, we're going to move down to HB 1065. And Representative Ray, if you'll go to the table and you introduce yourself and you'll be recognized to present your bill.
Representative David Ray [00:12:15] Thank you, Madam Chair, and good morning, committee.
Representative Frances Cavenaugh [00:12:20] Please introduce yourself for the record.
Representative David Ray [00:12:22] State Representative David Ray, House District 69.
Representative Frances Cavenaugh [00:12:24] Thank you.
Representative David Ray [00:12:26] So House Bill 1065 is a bill that I have called the Inflation Reduction Act. You probably remember a piece of legislation by that same name that passed in Congress a few years ago. Unlike that piece of legislation which made inflation worse, this one actually would help alleviate some of the effects of inflation. We often think of inflation as a hidden tax because it decreases the value of our money. And if your tax policy doesn't properly account for inflation, then it results in what I like to call an unlegislated tax increase.
And that's why Arkansas, as a matter of policy, indexes both our tax brackets and our standard deduction to account for inflation. The problem is, and what this bill addresses, is the maximum adjustment that our law allows for is a 3% adjustment. There's a cap on it. And normally this would not present really a big issue. I
f you look at the years from 1994 through 2020, we had two and a half decades of pretty low inflation where we never really peaked above 3%. But in recent years, as we all know, because we've lived through it, we've seen much more aggressive inflation. 2022, for example, was the worst year where we had inflation north of 8%. And so when you have a year where you have 8% inflation, what happens is the tax brackets adjust by 3%. And the taxpayers just have to eat the other 5%. And when that happens, it harms workers. And the workers that it harms the most are middle and low income Arkansans, those people who can least afford to absorb the effects of inflation, who are already paying higher prices on pretty much everything.
So this bill would eliminate the 3% cap on the inflation adjustment for income tax brackets and for the standard deduction. You'll also notice that the bill changes to a regional inflation metric as opposed to a national inflation metric. And the reason I included that is because sometimes nationwide inflation numbers can sort of be skewed by things that we see happening on either the East Coast or the West Coast. And regional numbers is probably just a better and more accurate picture of what Arkansans are experiencing.
So I want to move to the fiscal impact statement that you have there. You can see on the fiscal impact statement, it says there is a reduction of general revenue by $3 million. But I think it's worth drilling down just a little bit and looking a little bit closer at what this fiscal impact statement shows, because by definition, if we experience a year where inflation is less than 3%, there cannot possibly be a fiscal impact.
The only way in which you would experience fiscal impact is if inflation came in north of 3%. The last 12 months, the committee staff sent around a handout that I pulled from the Bureau of Labor Statistics' website, and I guess I neglected to bring one of those down here with me. But you can see on the sheet that inflation for the past year-- thank you, Representative Wing-- inflation for the year 2024 came in at 2.6% for our region.
So that was below the 3% threshold. And if you look specifically at the second half of 2024, it came in at 2.0%. So while I know it's impossible to say with 100% certainty what inflation would be over the next 12 months, I think it's more likely than not that we're going to experience another 12 months similar to the last six months. And this bill would not have any fiscal impact. With that being said, I think I'll answer any questions that folks have at this point.
Representative Frances Cavenaugh [00:17:09] Thank you, Representative Ray. Members, do you have any questions? Representative Wooten, you're recognized.
Representative Jim Wooten [00:17:17] Thank you, Madam Chairman. Representative Ray, you wouldn't have any cap? You'd just do away with the 3% and it would be whatever the rate of inflation ended up being.
Representative David Ray [00:17:35] Yes, sir, that is what I'm proposing. So like I mentioned historically, throughout modern history, you would not regularly experience inflation above 3%. But we do have periods of time periodically where inflation spikes. And in those instances, I do think it's warranted to fully adjust for inflation because the only alternative is to stick it to the taxpayers. And I don't think that's appropriate when people are already suffering from paying higher prices due to said inflation.
Representative Jim Wooten [00:18:16] Thank you. I understand how it affects them. And my question was just you wouldn't have any cap at all?
Representative David Ray [00:18:29] That's right.
Representative Jim Wooten [00:18:29] Okay. Thank you. Thank you, Madam Chairman.
Representative Frances Cavenaugh [00:18:33] Representative Wing, You're recognized.
Representative Carlton Wing [00:18:35] Thank you, Madam Chair. So I always like to look at historical norms and kind of see, you know, what kind of trends there are. Did I hear you say, is it just like one year in the last 30 or so? Did you date back to 1994 and we've had one year that exceeded the 3%?
Representative David Ray [00:18:51] So from 1994, if I'm remembering correctly, from 1994 to 2020, we did not have a year that exceeded 3%. Since 2020, in 2021, we were at 4.9 in our region. And then in 2022, that was the really bad year. We were at 8.9% in our region. In 2023, we had dipped back down to 3.9.
And then for 2024, we were back down to more of a historical norm at 2.6. So if you look at the fiscal impact statement, what DFA is saying is that if this bill had been in place for all of the last ten years, then it would have had approximately a $30 million impact. But the entirety of that impact would have occurred in those three years.
Representative Carlton Wing [00:19:47] So it is kind of like catastrophic taxation insurance for when a really severe event comes that we experience during those very high inflation rates.
Representative David Ray [00:19:58] That's a great way to put it.
Representative Carlton Wing [00:20:00] All right. Thank you.
Representative Frances Cavenaugh [00:20:03] Representative Rye, you're recognized for a question.
Representative Johnny Rye [00:20:05] Thank you, Madam Chairman. Representative David, let's just say that you had a year that would be 6%. What would we do, just pull that back to 3%?
Representative David Ray [00:20:15] No, if you had a year where inflation came in at 6%, you would adjust the income bands in the tax bracket by 6%. And you would adjust the standard deduction by 6% as well.
Representative Johnny Rye [00:20:30] So it would come off the taxes?
Representative David Ray [00:20:32] It would have the effect of lowering the net taxes that people paid. Yes.
Representative Johnny Rye [00:20:38] Thank you, sir. And thank you, Madam Chairman.
Representative Frances Cavenaugh [00:20:41] Members, any other questions? None. Do I have anyone that would like to speak against the bill? For the bill? Seeing none, Representative Rye, would you-- sorry. Representative Ray, would you like to close for your bill?
Representative David Ray [00:21:02] Sure. So knowing that we're not taking a vote today on this bill, what I'm trying to do right now is build political support for this idea. And I would just ask that if you agree with me on this, if you think that this is a commonsense pro taxpayer policy, I do have a sheet with me to add co-sponsors. I would love to amend the bill and add as many co-sponsors from this committee as possible. And so if that's something that you're interested in, please see me afterwards. And with that, I'm closed.
Representative Frances Cavenaugh [00:21:35] Thank you, Representative Ray. Members, with that, we're going to keep Representative Ray at the end of the table and we're actually going to hear his bill, HB 1066. And Representative Ray, if you would recognize yourself again or introduce yourself and you are recognized again.
Representative David Ray [00:21:53] Thank you, Madam Chair. State Representative David Ray. I'll be much quicker on this one. House Bill 1066 is a bill that would increase the standard deduction of our personal income tax from $2,200 per taxpayer to $4,400 per taxpayer. The bill would also increase that for spouses. So if you are married filing jointly, it would increase the standard deduction there as well. The estimates that the fiscal impact on this change would be a $57.8 million reduction in general revenue for the 2027 fiscal year.
What I would say about this bill is we've done a really good job over the past 11 years of lowering our state's top income tax rates, and that is something that I have been fully supportive of and that I hope we continue to do as much as possible in the years ahead. The reason I'm offering this bill is because I think an increase in the standard deduction is something that we should consider in addition to lowering the top personal income tax rates moving forward. A couple of reasons for that.
Committee staff shared a list of all of the various states that have a standard deduction and what the value of that deduction is. Of the 32 states that offer a standard deduction, you might notice that Arkansas is the third lowest. Only Hawaii and Mississippi have a standard deduction that's lower than ours. And so if we basically doubled the size of our standard deduction, we would leapfrog five other states on that list.
Secondly, one thing I would point out that increasing the standard deduction is a very broad based way to administer tax relief. If you look at the fiscal note, DFAestimates that approximately 895,000 taxpayers would benefit from an increased standard deduction. That's the better part of a million taxpayers. That's one of the most broad based ways you could administer tax relief. And then the third thing I would point out is that it helps simplify taxes.
I filed an identical bill in the previous legislative session. And in that fiscal note, DFA noted that if it were adopted, over 100,000 additional Arkansans would take the standard deduction. So that's a significant number of people who could give up on itemizing. They wouldn't have to keep track of all those receipts and searching for last minute deductions. And so it's sort of a win win. It's both tax reform and tax relief all in the same measure. So that's what the bill does. And we'd be happy to take any questions.
Representative Frances Cavenaugh [00:25:00] Members, are there any questions? Representative Wooten, You're recognized.
Representative Jim Wooten [00:25:08] Representative Ray, I agree with you relative to tax cuts and tax reductions, but do you agree that any time we react and pass legislation that reduces by 57 million or 100 million or whatever, we need to be conscious of what we would do in the event that we get in a serious situation. And I realize we've got over $5 billion relative to a rainy day or a catastrophic event occurring.
But don't you think we need to be mindful? Would you agree that we need to be mindful of what are we going to do in the event that we get in a situation where it continues on? What will we do? Will we cut taxes? Or will we cut services or increase taxes? And that's my major concern relative to reducing the tax burden on our people. We need to be conscious, do we not, that what will we do? Will we increase taxes or will we cut services?
Representative David Ray [00:26:38] Representative Wooten, your point is well taken, and I think that is why it's important that when we make decisions to provide tax relief, that we do so in a responsible manner and make sure that all the numbers balance and the budget looks healthy. And if you look back over the last 11 years of the work that the legislature has done, we have been able to significantly deliver very robust tax relief to the taxpayers of this state, and we've done so without jeopardizing essential services and without putting ourselves in serious financial strain.
And so I think we just ought to continue that approach. I would just add one more thing. I filed this bill as sort of a standalone measure. But what the purpose in filing it this way was really just to draw attention to this particular aspect of income tax relief. And I would hope that if there's enough support for this type of idea that it might be included the next time we do some sort of large income tax relief package. That would be my hope for it.
Representative Jim Wooten [00:27:49] And I agree with that. I think that we need to be conscious and mindful of the amount of money that people are paying. When I was at DFA, we attempted to index the salary increases to the point that we had a situation, and I think it is still occuring in some instances where a person gets an increase in their take home pay and it puts them in another tax bracket and consequently they don't realize anything. So I think we need to be conscious of all this. Madam Chairman, a question for you, if I may.
Representative Frances Cavenaugh [00:28:28] Yes.
Representative Jim Wooten [00:28:29] On the holding of the vote, which I totally understand and agree with, I'm sure we will take into consideration all the amounts of money that we give as it relates to tax cuts or this type of proposal here relative to the final analysis of the voting that we take?
Representative Frances Cavenaugh [00:28:54] Yes. So until we actually know what we have, what the budget's going to look like, we won't be able to determine what we might be able to use as far as tax cuts or anything. So until we get that number, we're just going to present and then we'll come back and meet as a committee and determine.
Representative Jim Wooten [00:29:10] Thank you. Thank you, Mr. Ray. Thank you, Madam Chairman.
Representative Frances Cavenaugh [00:29:14] Representative Eaves, you're recognized.
Representative Les Eaves [00:29:17] Thank you. Representative Ray, just a couple quick questions. How did you come up with the 4,400 from 2,200?
Representative David Ray [00:29:26] Basically, I just doubled the number. I thought we should have a much more robust standard deduction than we do have. And I thought that if we doubled it, that would be a good start.
Representative Les Eaves [00:29:38] And you may have answered this a little bit with Representative Wooten, and I think you and I have talked about this in times past. You know, every time we do something like this that has a general revenue reduction, it could potentially make it more difficult for us to lower income tax rates across the board. And you may have answered it with your comments about this bill being in conjunction with a further income tax rate, but just wanted to get your thoughts on, you know, $57.8 million is no small amount.
And we kind of know how that relates to 1/10th or 2/10th reduction in the top rate. So just want to get your thoughts on doing something like this and how it might affect future ability to cut the rates that top rates especially.
Representative David Ray [00:30:21] Sure. Well, I guess I would respond to that by saying that increasing the standard deduction is an income tax cut. You're correct. It would make it incrementally harder to lower the top rate. But I don't see this as being in conflict with cutting income taxes. I would say it is cutting income taxes. And it's a step toward what I think is many of our ultimate goal, which would be to phase out the income tax entirely. It just moves us closer to that ultimate goal by about $58 million.
Representative Les Eaves [00:31:00] I think, we can talk about it off line, but I think that also shifts the burden a little bit more to those that are in the higher income tax brackets. And by that I mean, making over, whatever it is, 25 or 30,000. But anyway, we'll talk some more. Appreciate you on this.
Representative David Ray [00:31:17] Sure. And I'll just add, reiterate, I guess, what I said in response to Representative Wooten's question, which is I proposed this as a stand alone measure to sort of draw attention to it. But the way I would hope it would be implemented would be along with the reduction in the top rate so that both goals could be achieved.
Representative Frances Cavenaugh [00:31:40] Thank you. Representative Lane Jean, you're recognized.
Representative Lane Jean [00:31:45] Thank you, Madam Chair. Representative Ray, I'm looking at your sheet on the standard deduction. So there's 19 that has NA. Of course, there's ten states I think that have no income tax at all, which that wouldn't apply to them. And my curiosity, since I'm down there on the Louisiana border, do they not have a standard deduction or does that mean they're not applicable or not available, that you could find the information on the standard deduction?
Representative David Ray [00:32:12] I downloaded that table from the Tax Foundation's website. I assume that means that they don't have a standard deduction.
Representative Lane Jean [00:32:20] Okay.
Representative David Ray [00:32:21] I couldn't say that was 100% certainty because I have not drilled down on each individual state.
Representative Lane Jean [00:32:29] That's my question. Thanks.
Representative Frances Cavenaugh [00:32:30] Thank you. Representative McClure, you're recognized for a question.
Representative Rick McClure [00:32:34] Thank you, Madam Chair. Representative Wooten and Representative Eaves bring up good questions that are valid and need to be considered. I think as we have looked over the last few years, when we cut taxes, we grow the economy. We know that DFA has to provide us the number that is as they look at the cut. There is no way to project how much of this cut might be put back in the economy, generate money. Do you have access or know of any one that could run the numbers to give us a projection of how much of this money might go back into the economy and generate more tax?
Representative David Ray [00:33:23] So I might defer that question to the chair. I think we have a method now that we can ask folks to do some sort of dynamic scoring on these proposals.
Representative Frances Cavenaugh [00:33:36] As everyone knows, ALC went into a contract with Remy to help us do dynamic scoring. So probably what you're talking about. And they give us a little further details about how that dynamic scoring is going to work, I'm going to let the chair of ALC, Representative Eaves kind of discuss how that works so everybody will kind of understand it.
Representative Les Eaves [00:33:57] Thank you very much. So what Representative Chairman Cavenaugh said is correct. We are finalizing a contract with Remy, which will allow the Bureau of Legislative Research to do some dynamic scoring of exactly these kind of ideas. We're still probably several weeks away from being able to have that tool up and running.
Things we all have to consider about the guardrails on it and who can ask for fiscal impact and how it gets asked, what the guidelines are or what the input data looks like. So, yes, to answer your question, finally, I think we'll have a tool that we'll be able to access that will give us some information just exactly as you described. But I think we're still a couple of weeks away from that.
Representative Frances Cavenaugh [00:34:47] Thank you. Can you turn your mic off for me? Thank you very much. And Representative Rye, you're recognized for a question.
Representative Johnny Rye [00:34:55] Thank you, Madam Chairman. Rep. David, there's one thing that I haven't seen in this, and I just heard Mr. McClure, Representative McClure, tap into this. You know, I've heard and I don't know this exactly to be right, but I know there is something to this. When you cut taxes, especially something like this one and you put this back in the hands of the taxpayers, David, I've heard that it could be something like a 7 or 8 to 1 ratio that it actually would generate. But have you done anything on that that you could kind of give us a little information on that?
Representative David Ray [00:35:35] I would just say generally, I think there's broad agreement among economists and tax policy experts that income taxes are some of the most economically damaging because they're punitive toward labor, work and productivity, all things that we want more of, not less of. And when you lower those taxes, you incentivize all of those things.
And that's why cutting the income tax is often described as a pro-growth policy, because it does lead to economic growth. And I think that's what we've experienced over the last 10 or 11 years in the state. Where our economy's grown, as we have simultaneously lowered income taxes significantly, our revenues have increased. We're now a net plus in terms of inbound migration. So I think all of those things are true.
Representative Frances Cavenaugh [00:36:33] Thank you. Any other questions, members? Representative Wooten, you're recognized.
Representative Jim Wooten [00:36:40] Will we have an opportunity to make a statement? I just want to share with the committee, Madam Chairman, we need to be conscious that we're not going to continue to have $1 billion 780 million, whatever surpluses. And this will be directly impacted by the actions that we take as a committee. I'm not opposed to cutting the tax burden of our citizens. I hope that comes through clear.
But you need to keep in mind, any time that we do anything, and this proposal here is well deserved, I mean, the taxpayers, when you look at other states. But we sure need to be conscious of the fact we're still living on some of the increases, are we not, Mr. Secretary of DFA, we're still living on some of the Covid money and funds that we got from Washington, and it has had a tremendous impact on Arkansas. And we were in a good financial position before, but that made us even better.
But with the good comes the bad part, to be careful and be fiscal managers and good stewards of what we're given to work with. And we need to be mindful that any time we take any action. This is not speaking against Representative Ray. Like I said, I agree. But we need to keep these things in mind. Remember two things. Are you going to increase taxes or are you going to cut services if you get into a bind? That's all I have, Madam Chairman.
Representative Frances Cavenaugh [00:38:32] Thank you, members. Any other questions? Seeing none, do we have anybody who would like to speak against the bill? For the bill? Seeing none, Representative Ray, you're recognized to close for your bill.
Representative David Ray [00:38:48] Okay. I will just close by saying the same thing I said on the last one. I would love to amend this bill to add co-sponsors. If this is a policy that you support, please come find me and I'd be happy to add your name. And with that, I'm closed.
Representative Frances Cavenaugh [00:39:01] Thank you. With this, we're going to move down to HB 1074. And this is going to be the only bill that we're going to be able to take a vote on today because there is no fiscal impact. And after Representative presents his bill, I'm going to ask that Paul Gehring come down and explain why that there's no fiscal impact and why you don't see one. So, Representative Ray, if you'll introduce yourself again for the record and you'll be recognized.
[HB 1074: Increasing Vote Threshold to Raid Property Tax Relief Fund]
[Outcome: Passed]
Representative David Ray [00:39:27] State Representative David Ray, District 69. Committee, this is House Bill 1074. This bill is an idea that had been in my mind for several years, and I finally decided to put it into bill form and introduce it for your consideration. What this bill would do is it would require a three fourths vote threshold to utilize funds from the Property Tax Relief Trust Fund for a purpose other than Property Tax Relief.
And the reason I think this would be beneficial is because there have been times in the past when legislators have gone in and taken money out of the Property Tax Relief Trust fund in order to spend it on various projects. And I just don't think that's what the voters had in mind when they approved Amendment 79. I think the voters intended for the Property Tax Relief Trust fund to be used for, wait for it, Property Tax Relief. And so having that three fourths threshold, I think would provide a meaningful protection for those funds that the voters intended to be used for Property Tax Relief. It's the same threshold that we have for appropriations.
And so I think it would still make it possible to move money, you know, in the event of emergency when there was, you know, three fourths consensus on doing so. But I think it would send a strong pro taxpayer message that moving forward, regardless of what previous legislators have done, we intend to use these funds for exactly what they've been intended for.
Representative Frances Cavenaugh [00:41:10] Thank you. Committee members, do we have any questions? Representative Wing, you're recognized.
Representative Carlton Wing [00:41:18] Just a quick question. What's the current balance of the Property Tax Relief fund?
Representative David Ray [00:41:23] I'm going to defer that question to our friends at DFA. I will tell you, I think the half cent sales tax that goes into the Property Tax Relief trust fund generates on average about $333 million a year. So those are the numbers that BLR sent me last year when we were having the debate about the Property Tax Relief Trust Fund. But if somebody has those numbers or wants to share them from DFA, that would be great.
Representative Frances Cavenaugh [00:42:03] Does anybody from DFA want to venture down to the end of the table for us? And if you will introduce yourself for the record, please.
Paul Gehring [00:42:19] Thank you, Madam Chair, members of the committee. Paul Gehring, DFA.
Representative Frances Cavenaugh [00:42:23] You're recognized.
Paul Gehring [00:42:24] Thank you, Madam Chair. DFA is preparing a report of the Property Tax Relief Trust Fund. We'll be providing that report by the end of the week. I don't have the number of the current balance in front of me, but we certainly will provide that information to the committee.
Representative Frances Cavenaugh [00:42:37] If you don't mind, please get that to the committee, please. Could you give that to staff and they can get it out to the committee?
Paul Gehring [00:42:43] We certainly will as soon as it's ready, Madam Chair.
Representative Frances Cavenaugh [00:42:46] And while you're down there, do you mind to go ahead and explain why there was no fiscal impact report? I just want the committee to understand sometimes why we don't have them.
Paul Gehring [00:42:55] Yes. Madam Chair and members of the committee, we reviewed House Bill 1074 when it was initially filed, just like we do any type of bill that might end up in this committee to determine if a fiscal impact statement was required. In reviewing the bill, we saw that the vote requirement was increased to three fourths for any purposes other than providing Property Tax Relief.
So this was a type of bill that even though it's going to arrive in this committee, was not a bill that would impact the administrative processes of the revenue division of DFA. So we did not issue a fiscal impact statement, but I can tell the committee that we do not believe it would have any type of fiscal impact on the state.
Representative Frances Cavenaugh [00:43:36] Thank you. Representative Lundstrum, do you have a question?
Representative Robin Lundstrum [00:43:41] Thank you, Madam Chairman. Do you know how much money we've taken out of that fund in recent years?
Paul Gehring [00:43:49] We certainly do have that information and will provide it with the other information that we're providing regarding the current balance. Okay.
Representative Robin Lundstrum [00:43:56] This is for Representative Ray. My understanding of that 0.5% tax was the taxpayers meant it for the property tax fund and not for us to raid it for things that we can't get passed otherwise. Isn't that correct?
Representative David Ray [00:44:08] I believe that is 100% accurate. You know, the most notable instance that I can recall was in 2019 when there was a little over $8 million taken out of the trust fund to pay for some of the counties that wanted or needed new voting equipment. And, you know, that may be a perfectly legitimate expense, but there are certainly other buckets of money that can be utilized. And I just think it's inappropriate to go into a fund that has been designated for Property Tax Relief, that's been approved by the voters for that specific purpose, and then to use it for something other than its intended purpose.
Representative Robin Lundstrum [00:44:47] I couldn't agree more. Can't wait to vote on it. Do pass at the proper time.
Representative Frances Cavenaugh [00:44:51] Thank you. Representative Wooten, You're recognized.
Representative Jim Wooten [00:44:54] Yes. Representative Ray, why do we not just say it cannot be used for anything other than tax relief?
Representative David Ray [00:45:08] I wouldn't necessarily be opposed to that idea. I thought it might be prudent to leave it at a very high bar just in case there were some sort of catastrophic reason that we should need to access those funds. But I don't have any objection to just saying that it can't be used for anything other than that.
Representative Jim Wooten [00:45:29] Okay. Well, I'll just offer that as a suggestion because, like you say, that was the intention. It has been there for several years. And I think that is what the voters expect. And I don't think that we should dabble in that fun at all. But thank you for running the bill. But thank you for your consideration.
Representative David Ray [00:45:53] Thank you, sir.
Representative Frances Cavenaugh [00:45:54] Thank you, Representative Wooten. And any other questions, members? Seeing none, Is anybody signed up to speak against the bill? For the bill? Seeing none, Representative Ray, would you like to close for your bill?
Representative David Ray [00:46:10] I appreciate the feedback from everybody. The only thing I would add is that I did get a message that the Association of Counties and the Assessors Association support the bill. And I appreciate Representative Lundstrum's motion and I'm closed.
Representative Frances Cavenaugh [00:46:26] Thank you. Representative Lundstrum, You're recognized for a motion.
Representative Robin Lundstrum [00:46:30] I move to pass.
Representative Frances Cavenaugh [00:46:32] We have a motion to pass. All in favor say aye. Opposed. Congratulations. Your bill has passed.
Representative David Ray [00:46:40] Thank you, committee.
Representative Frances Cavenaugh [00:46:41] Thank you, Members. With that, that's all the bills that we have to hear today. Watch your calendar. We'll have a, scheduled to have a meeting on Thursday and we'll watch the calendar and see what happens. I appreciate it. Thank you. With that, we're adjourned.
