Legislative Audit: Oct. 10, 2025

Representative Robin Lundstrum Take your seats and let’s get started. Okay, the chair calls the Legislative Joint committee meeting to order. We have the adoption of the minutes from September 12. Motion. I have a motion and a second. Who said the motion and the second? All right, thank you, gentlemen. All in favor? Any opposed? Motion adopted. Next we have the adoption of the reports for the Executive standing committee. Senator Dotson. 

Executive Committee report

Senator Jim Dotson Thank you, Madam Chair. The Executive Committee met Thursday, October 9, 2025, and adopted the minutes from the meeting held September 11, 2025. Staff reported to the committee the audit and special reports scheduled to be presented to the standing committees and the full Legislative Joint Auditing committee this month. Staff also noted reports that are anticipated to be completed soon. 

In new business, no action was taken regarding the request for a special report on the Conway School District maintenance department. A request for a special report on selected procedures for the Hot Springs County Solid Waste Authority was approved. In other business, the committee reviewed information provided by staff regarding the population of acts with fiscal impact statements passed in the 2021 regular Legislative session and the categorization of those acts by impact amounts provided. 

The committee voted to approve a special report regarding fiscal impact statements for acts passed in the 2021 regular Legislative session. The committee directed staff to review for accuracy nine fiscal impact statement amounts exceeding $10 million provided by the Department of Finance Administration, Bureau of Legislative Research, and Arkansas Sentencing Commission. 

Additionally, the committee moved to send a request to the Joint Public Retirement and Social Security Programs Committee to review the contract with Osborn Carriero and Associates and to review for accuracy the two fiscal impact statements, statement amounts exceeding $10 million prepared by Osborn, Carriero and Associates. The committee also approved a calendar for 2026. With no additional business to discuss, the meeting was adjourned. The next meeting of the committee is scheduled for Thursday, November 13, 2025, or at the call of the chairs. 

There was also, after the meeting was over, we found out that the Legislative Council is where the referral for that needs to go to rather than the Joint Public Retirement and Social Security Programs. So I move for an amendment to the chair report to substitute the Arkansas Legislative Council for this Joint Public Retirement and Social Security Programs committee within the report. And I think we have to adopt that amendment before we adopt the full report. 

Representative Robin Lundstrum I need a motion to adopt that amendment. Thank you. Second? Thank you. All in favor? Opposed? Amendment passes. 

Senator Jim Dotson And I move for adoption of the chair report as amended. 

Representative Robin Lundstrum I need a motion. A second? Discussion. Senator Gilmore. 

Fiscal impact statement review services

Senator Ben Gilmore Thank you. So I guess I just have some questions. So I heard that report will then go to ALC. And I guess it’ll go to the full ALC or go to a subcommittee. Or I guess we’ll figure that out when it gets there. So what is the scope of this study, audit, whatever it is? Can we have some discussion on that? 

Senator Jim Dotson Madam Chair? So the presentation was brought forward a couple of months ago earlier in the summer to look at fiscal impact statements that are provided to the legislature during sessions. 

Senator Ben Gilmore And this is a look in arrears, right? 

Senator Jim Dotson A look in arrears to see what statements became acts and the accuracy of those statements. So if the fiscal impact statement said it was $3 million and it turned out to be $200,000, it’d kind of be good to know the accuracy or get a range of how well we’re actually making our decisions on the front end, what the impact results are on acts that are actually passed. 

And so we looked at the whole universe for 2021 and saw how many fiscal impact statements were totally done. Many of them– actually, I think the vast majority of them said zero fiscal impact.  Most of them or a lot of them were education. They were mandated for K-12. Some of them for other committees. There are a few that– there was only nine in 2021 that exceeded $10 million  that were not retirement committee actuarial reports. There were two that were in excess of $10 million that were actuarial reports for the retirement committee. 

So the referral to ALC is just so the Bureau can talk to our actuarial and have them go back and look at those two reports specifically to say how accurate were we in our actuarial statements before these bills were passed. 

Senator Ben Gilmore And I appreciate that. And I guess I don’t know that I even disagree in the sense of sometimes we get fiscal impact statements that are all over the place. And I think any of us who serve in the legislature understand that. And I think we get some that, in some regards, we probably think that agencies are maybe not friendly to our legislation and therefore provide fiscal impacts that therefore say that. 

My only concern, and the only reason I raise it here, is my concern is, are we asking Audit to get in the business of helping decipher policy if we are asking them to audit fiscal impact statements. Because fiscal impact statements are based on policy. And I feel like, from my standpoint, I’m not sure that this is the scope of Audit. I’m happy to hear chair’s thoughts or anyone else that wants to participate in this discussion. But that’s just a concern I have. 

Senator Jim Dotson Well, the representative who originally brought this before the Executive Subcommittee is no longer a representative. So we can’t exactly ask him. But Representative Lundstrum or Chairwoman Lundstrum, might be able to answer it. 

Representative Robin Lundstrum I think the concern is not the policies. The politics are irrelevant. If the fiscal impact comes back a million– and we’re asked to make a monumental decisions on the amount of money– did it over the next three years, did it end up being $10 million or 20 million? That’s something we need to know as legislators so we can make better decisions or ask better questions. The politics are irrelevant. This is simply the math. And then wherever the math leads, that’s up to y’all. 

Senator Ben Gilmore Well, and I appreciate that. And thank you, Madam Chair. My thought on it is if we disagree with a state agency, we get to disagree on a state agency and therefore hold them accountable in some way, whatever. I just think that oftentimes we do disagree when it comes to fiscal impact statements with an agency. Are we going to have the same disagreement with our own staff at Audit? 

Representative Robin Lundstrum I don’t think so. They’re just reporting the facts and we can decide where that takes us. 

Senator Ben Gilmore Okay. Well and I think our state agencies would also say that they’re reporting the facts when they do a study on fiscal impact. 

Representative Robin Lundstrum I would agree. But I also think we get fiscal impacts that are worst case scenario. Sometimes they don’t turn out to be that. Sometimes they’re best case scenario. The bottom line is, when you look back, you find out what the truth was. And I think that’s important for us to ask those questions. 

Senator Ben Gilmore And one final, and I appreciate the latitude, does Audit staff have the capacity to do this? 

Representative Robin Lundstrum Yes, they do. And in fact they have done things in the past that have really been useful. And I’ve kept a copy of one of their reports I thought was one of the best ones I’ve ever seen. They’re just reporting the numbers. Where we take it is up to us. 

Senator Ben Gilmore All right. Thank you, Madam Chair. 

Representative Robin Lundstrum Thank you. Any other questions? Senator English? 

Senator Jane English I guess one of the same things along with my colleague here is I guess the other thing I’ve seen too is that sometimes the fiscal impact statements are huge. And it’s almost like an attempt to make sure that we don’t pass this legislation. And as it turns out, I had one with a $20 million fiscal impact statement, which if we’d had less than a million dollars, I’d have been surprised. 

For me, it’s kind of looking at both sides of it. Did we pass it or did we not pass it? What was that fiscal impact statement? Pro or con. It kind of concerns me sometimes when we have just somebody out there deciding on a figure and it’s really not based on anything. 

Representative Robin Lundstrum Thank you, Senator English. I hope this will give us some truth in that information. Any other questions? Let’s see. Howard Beaty, whoever you are over there, Beaty. You’re up. I think I just turned him off. Light you back up again, sorry. Yeah. Don’t give him any ideas. 

Representative Howard Beaty Now we’re feeling the love. Thank you, Madam Chair. My concerns are with Audit going in to, I guess, audit the fiscal impact statements, a lot of times those fiscal impact statements, the assumption that the agency utilized to prepare those, there are factors that affect and change over time, either through additional legislation that we run and pass through this body that could drastically change those numbers. 

So I guess my concern is when you get that fiscal impact statement, if you don’t agree with it or you think that it’s wrong, then that’s on the member and the legislative body to take those issues up with the preparer of that fiscal impact statement. I don’t know what benefit it provides me after the fact and after we’ve enacted legislation to know that that estimate and that analysis was incorrect, other than maybe lack of confidence. 

But I don’t vote for legislation strictly based on the price tag of that legislation. It’s gotta be good policy to go with those numbers. So at this point, I mean, I think it’s a waste of our resources to go back and look at something that’s two or three years after the fact, to go back and look at what that agency or our department did to prepare on a fiscal impact statement. We’re living with it. We know the real time. 

A lot of times we know that there are other areas. Dynamic scoring. I thought we spent some money and expended a couple hundred thousand dollars on a software that would allow us to do some dynamic scoring. Are they going to go back and audit those as well? 

Representative Robin Lundstrum I don’t think we should be afraid to audit anything. The more facts we have, the better judgments and decisions we can make. But that’s an opinion. And you and I can disagree. Senator– 

Representative Howard Beaty Well just a follow up. My comments were not made out of fear of an audit. My comments were strictly based on what the entire purpose of this was, to look at the fiscal impact and the cost of actions we take. And I think this would be a waste of our resources of Leg Audit to go back and look at something that two or three years down the road to see what the actual numbers are. So with that, I thank you for recognizing me in multiple ways this morning. 

Representative Robin Lundstrum You’re just lucky today. Senator Love. 

Senator Fred Love Thank you, Madam Chair. I guess I’m not going to belabor the point, but can I get a clarification of the actual motion that we’re going to be voting on? 

Representative Robin Lundstrum Yes, sir.

Senator Fred Love Because I heard that it was an amendment, but what actually are we voting on so that I can speak to– 

Representative Robin Lundstrum Just adopting the report. 

Senator Fred Love Just adopting the report. 

Representative Robin Lundstrum As amended. 

Senator Fred Love Okay, so it’s the adoption of the report? But I thought I heard Senator Dotson say that there was an amendment in the report. And I’m asking if we need to amend it or if the motion is going to be to amend the report and then adopt the report or to–? 

Representative Robin Lundstrum We’re done with that. Yes. 

Senator Jim Dotson We voted for the amendment to change the name of the committee from Joint Public Retirement and Social Security programs committee to Legislative Council that the request by the Executive Subcommittee of the agency for Osborn Carriero and Associates. The contract’s through Legislative Council, not through Joint Retirement Committee. So Legislative Council is who actually has to make that final determination of their contract. 

Senator Fred Love Okay, so Carriero is now going to audit the impact statements? 

Senator Jim Dotson Yeah, the two impact statements that became law based off their actuarial report in the 2021 session that exceeded $10 million. Their estimation of what it was going to cost, they’re going to go back and look and see if it actually cost more than $10 million or or less than $10 million. That’s what we’re going to ask them to do, which is outside the scope of their current contract with us. 

Senator Fred Love How much is this amendment going to cost for them to do this work? 

Senator Jim Dotson That’s going to be a question– this is just simply authorizing the Bureau to go talk to them to see how much it will cost. According to my understanding of it, it probably won’t cost us anything because we contract with them for a certain dollar amount up to so many hours. So it’ll probably be included in their scope. But I don’t know for sure. The Bureau is going to have to negotiate that with them and then bring it back to Council for final authorization. 

Senator Fred Love And for them to do this report, I guess, what are we trying to glean from this? 

Representative Robin Lundstrum Sir, basically, did they give us accurate information? How accurate was that? It’s a chance, if they’re doing their job, they can brag all day long. If our actuarial who handles our retirement is off a whole lot, we need to know. And we need to be able to ask those questions. No one ever goes back and says, Did we get it right? Did we get it wrong? Are we getting good information to make good decisions? This is simply asking, did we get good information to make good decisions from somebody we’ve contracted with. 

Senator Fred Love Okay. All right. Thank you. 

Representative Robin Lundstrum Senator Dismang. 

Senator Jonathan Dismang Thank you. Could someone just state the motion that happened in committee in regards to auditing the fiscal impacts? What is the wording of that motion that we’re asking Legislative Audit to undertake? 

Senator Jim Dotson Senator Dismang, I can’t remember the exact wording of the motion, but the summation of it is there was a motion to have Legislative Audit look at the nine fiscal impact statements from, some of them from DFA, some from the Bureau of Legislative Research, and some from the Arkansas Sentencing Commission– to look at those nine. And then there was a separate motion that was made to have Legislative Joint Retirement committee talk to our actuary that we contract with about the two that they did. 

And so what we’re talking about is, after the meeting concluded yesterday, it was determined that ALC was the appropriate committee to ask that question of our actuary, not Joint Retirement. So that was the amendment to the report from the committee. But there are two separate motions in the Executive Subcommittee yesterday. 

Senator Jonathan Dismang Well the actual language of that motion I think matters a lot. And so I would like the actual– I think the members need to hear the actual language of the motion. Because, for instance, we said that we would be auditing these fiscal impact statements. Well, we can’t do that. 

Fiscal impact statements are based on assumptions and economic forecast and a number of items. They’re not something that’s auditable. I mean audits follow standard procedures and processes and are pretty clearly dictated on how we do that. And so what to look at is different than audit. 

And so maybe if it said audit, we could kind of move along for that. But in this committee today, we’ve mentioned the word audit numerous times related to these statements. I’m a little bit nervous about heading this direction with the Audit committee, because I think it’s out of their jurisdiction. I mean, historically, that’s what they do is look at historical things that have happened based on true hard, fast numbers. And now we’re asking them to look at really policy as much as we are anything else. 

And so again, if I could hear that language, I think that would be incredibly helpful. Because if it’s worded incorrectly, we’re going to be asking Audit to do something very political, which I think we need to steer away from. 

Representative Robin Lundstrum Bear with us just a second. 

Senator Jonathan Dismang And while they’re looking that up, so then my question is, to staff, how do we see ourselves carrying out, reviewing, or whatever the word is that’s been in this motion for things that are, I mean, it’s policy. How  things are going to impact and the number of people participating in a program or taking advantage of a tax cut or moving to the state of Arkansas because of something, all of that is, that’s economics. And that’s not a science. That is someone making assumptions. And so how do y’all see yourselves figuring that out?

Representative Robin Lundstrum Senator, if I could interrupt for just a second. They’ve been asked to take a fiscal impact statement that’s $1 million and look at it three years later. And did it, was it $3 million dollars per year, or was it $9 million? They’re not asked to delve into anything political, just apples to apples. Look at the numbers. So if that’s not clear, then we need to make that clear so that we have good information. So let’s read the original– 

Senator Jonathan Dismang Why  would Legislative Audit do that? I mean, that’s a simple request from– but, again, there’s lots of things that go into that. I mean, the economy impacts the revenues. And we would not have known at the time that an impact statement was created what the economy was going to do three years later. 

And so I don’t know why is it Audit’s role to look at that and maybe not letting DFA present, come back, and say, well, this is what happened. Because, again, there’s a lot of factors that go into changing what we thought on one day to be the impact of what may actually happen three years later. 

Senator Jim Dotson Senator Dismang, to your original question, let me reread what the committee, the Executive Subcommittee directed staff in their motion: To review for accuracy nine fiscal impact statements amounts exceeding $10 million provided by DFA, BLR, and the Arkansas Sentencing Commission. And additionally, the committee moved to send the request to the Joint Public Retirement Committee to review the contract with Osborn, Carriero and Associates and to review for accuracy the two fiscal impact statements that exceeded $10 million. 

The committee report as amended would change that from Joint Retirement to ALC to have ALC talk to Osborn, Carriero and Associates for those two impact statements. So those were the two motions that were made. As far as the reasoning behind, I think part of the reason that Audit is the one that is looking at this is, obviously, that’s where former Representative Wing brought the motion to Audit to look at it. 

Could ALC do something like this with BLR potentially? As far as what we’ve learned so far– and this has gone on for a few different months within the Executive Subcommittee. Because when we initially looked at this, the universe that was being asked of Audit to look at was huge. And so trying to get it narrowed down to, hey, what are we even looking at? Are we looking at, out of 1,500 acts during a session, are we looking at a thousand of them that have fiscal impact statements? Are we looking at a hundred or however many there are? 

And so initially we sent them back to do a little bit of research. And it came back that, let’s look at one session, a session from a few years back, 2021, and see how many fiscal impacts happened at that time. And I think the universe was 240-ish– I can’t remember– acts actually had a fiscal impact. If I recall correctly, BLR put together 78 of those for education alone, 73 of which had zero fiscal impact. 

And so some of them were from DFA, some of them were from Arkansas Sentencing Commission, a large amount was from retirement, the actuarial. And so looking at that universe, how many of them had zero fiscal impact? It was a very large number. There’s only, I think, 50 some odd that had anything over a million dollars worth of estimated fiscal impact. 

And so we narrowed it down to just those that exceeded $10 million in their estimate, to kind of look at those that had significant fiscal impact and say, okay, give us a report on, did they actually have $10 million plus fiscal impact or not. And that’s kind of what’s led us to where we’re at today. Whether or not we decide to move forward or not, that’s up to the committee. But that’s kind of a synopsis in my opinion. 

Senator Jonathan Dismang So then the question for staff is, let’s just say– I don’t know what we’re talking about exactly, but just say we’re talking about the income tax cuts that we’ve done historically here. If that’s going to be one of the impact statements that we’re going to review to see how accurate they were in that, of course, ours don’t take into dynamic scoring. But the reality of the world does take into account dynamic scoring. 

And so when we look at it for accuracy or whatever we’re going to call this review, how do y’all see that playing out? Because again, if we cut taxes three years ago, we have a new president, we have tariffs, we have economic changes, we have growth in the state of Arkansas, we have historically low soybean prices, we have all of these things that no one could have predicted when they did an impact statement. 

So I just am trying to understand what is it that y’all are going to do exactly that you should be doing? Because that isn’t an audit function. It’s not a review function. It’s a look back on economic analysis. I don’t know what it is we’re trying to accomplish. So if you could walk me through what you think a report might look like and what you’re going to take into account to determine what’s been accurate or inaccurate. 

Representative Robin Lundstrum I think the report is going to put a pretty simple report. We’re not asking for anything political. We’re simply asking if the fiscal impact was a million, did it cost a million or did it cost 10 million? And if it cost 10 million, then we need to look at what’s the soybean prices, what was the economics. So this makes lots of sense. 

We have asked Bureau of Legislative Audit to look back at a number of different things over time and look at costs, look at procedures. It’s not a political look back. It just gives us information so that we know if we’re making the right decisions or maybe we should ask other questions. That’s something the members can take that information and do with as they will. 

I actually have five other people in the queue. So if we could end with that and go to the next question. I can circle back to you, Senator. You’re quick. Senator Dees. 

Senator Tyler Dees Thank you, Madam Chair. I think if it’s appropriate, I would love to submit a substitute motion to take out anything of the report involving fiscal impact statements and send it back, to refer it back to Executive Committee for review. 

After hearing the questions and conversation today, I think it’s probably wise for us to chew on this a little bit longer. And so I would love to entertain a substitute motion to refer back to Executive committee the portions related to fiscal impact studies. 

Representative Robin Lundstrum I need a second. Second. All right. We’ll refer it back and chew on it some more. Moving on. Oh, wait a sec, we need to vote on that. I’m sorry. Got a little ahead of myself. Those in favor? Those opposed? Okay. All right. Then we send it back. Thank you. We do need to adopt the rest of the report. 

Senator Jim Dotson I move, with the exception of the part that was taken out, we adopt the remainder of the report. 

Representative Robin Lundstrum Those in favor? And, oh, excuse me. I need a second. Those in favor? Those opposed? All right, moving on. Okay. Representative Womack, I believe you have a report for us. 

Cities and Municipalities report

Representative Richard Womack Thank you, Madam Chair. The committee adopted the minutes of the meeting held September 11, 2025. The committee was updated on the status of the December 31, 2022, delinquent private water and sewer audits. Five entities’ turnback funds have been reinstated after all required reports were submitted. 

Letters were delivered to the Treasurer of State requesting restoration of turnback funds to 24 of the remaining delinquent entities that have filed a December 31, 2022, report or have provided an engagement letter stating that the reports for December 31, 2022, and 2023 will be filed by the end of the 2025 calendar year. 

Motion was approved to recommend the full committee expunge the action taken at its July meeting to withhold turnback funds from the cities and towns that have not completed their water and sewer audits for 2022 and 2023. A motion was approved to recommend the full committee expunge the action taken at its September meeting regarding the 43 affected municipalities that had not completed their water and sewer audits for 2022. 

The committee was notified that letters were sent to 23 entities with delinquent reports for December 31, 2023, indicating that their reports are to be filed before the end of 2025. Officials from the City of Rockport were present to address substantial noncompliance with municipal accounting law. The city provided documentation of corrective action and the committee filed this report. 

The committee approved a motion to notify the state treasurer that the town of Gilmore has complied with Act 709 of 2021 and to request the release of the town’s escrowed street revenues. The committee reviewed eight deferred reports and 141 current reports. Officials from six entities were present to address repeat findings. Four previously deferred reports were filed and four were deferred. 

Of the 141 current reports reviewed, 13 were referred to prosecuting attorneys and the attorney general, and two were certified to the governmental bonding board. The committee filed 134 reports and deferred seven reports to allow officials to answer questions or provide further information at a future meeting. I move for adoption of this report. 

Representative Robin Lundstrum I have a second. All right, any discussion? Representative Ladyman. 

Representative Jack Ladyman Thank you, Madam Chair. And this may be a question for staff, but I believe we need a motion to expunge that vote outside of the report. Is that true? 

Motion to expunge turnback vote

Representative Robin Lundstrum That depends on the body. If you want to leave the report as is, that’s what has been recommended. Or you can make a motion to expunge. That’s up to this body. 

Representative Jack Ladyman So if we vote the motion as is, then everything in the motion is approved? Everything in the motion is approved?

Representative Robin Lundstrum Mr. White. 

Staff Thank you, Chair. Speaking on the parliamentary thing, the situation here is that– what is in the chair report and what happened in the standing committee yesterday was a recommendation to this full committee. If the desire of the body– so adoption of this report is just the adoption of that. There is no action that’s taken. If this body desires to make that motion, then that needs to be taken up separately and be made. 

Representative Jack Ladyman All right, if I understand you, then we’re just approving the recommendation. So a motion would need to be made separate. 

Staff Yes, sir, Representative Ladyman, that’s correct. 

Representative Jack Ladyman Madam Chair, I have a motion at the proper time. 

Representative Robin Lundstrum All right. We have a motion on the floor. Let’s get the committee’s report accepted and then we can move to your motion. Do I have a second on receiving the committee’s report? All in favor? Opposed? All right. Now we need to accept a motion if we want to. Senator Love? 

Senator Fred Love Thank you, Madam Chair. So I thought by accepting the committee’s recommendation then we would have already– we didn’t need a separate motion. 

Representative Robin Lundstrum Yes, sir, we do need a separate motion. We’re just accepting the report. The report doesn’t have any standing for expungement. If we want to expunge, then this body has to decide that separately. Do you need to chew on that for a second and then get back in line? 

Senator Fred Love Well, here’s the thing is, if the standing committee is the one that made the initial action in the first place. So if they’re expunging, if they’re expunging that by accepting the report, that means by default we expunge it. That’s accepting the report. So there should not have to be a separate action. 

Representative Robin Lundstrum No, sir. They don’t have the authority to override what this committee did in the last meeting. 

Senator Fred Love What did this–? Okay. Alright. I get it.

Representative Robin Lundstrum The light bulb just went on. I saw it. 

Senator Fred Love Wait a minute. Hold on though. By accepting the report though, we accepted the report by the full committee. We did not take an action. When we initially accepted the report to uphold the taking of the turnback, we did not make an act. We just made the action of accepting the report. So now they’re making an action to actually expunge what they did and so by accepting the report then that  should expunge the action. 

Representative Robin Lundstrum Hang on just a second. They made a recommendation. It has no standing in this committee other than they made a recommendation. This committee made the vote last time. So it would be this committee that chooses to expunge if they choose to do that. If they don’t choose to expunge, then the turnback funds would stay turned off and the process would keep working. 

Senator Fred Love Okay, but madam chair, it’s in the report. So by accepting the report, then that should be– 

Representative Robin Lundstrum That’s the recommendation in the report. It’s just a recommendation. 

Senator Fred Love Okay, thank you. 

Representative Robin Lundstrum Senator Johnson. 

Senator Mark Johnson Thank you, Madam Chair. And Senator Love, we talked about this in the committee yesterday. And our counsel, Ms. White, explained to us that the Counties and Municipalities committee did not have that authority to expunge the action of the full Legislative Joint Auditing committee, that it had to be done here today or at another time. But today is when we’re going to do it or not do it. 

But it might be, if I could ask Madam Chair to have Ms. White sort of repeat her statement yesterday, to clarify it for Senator Love and others that might. Because I didn’t know until she did yesterday what we had the authority to do. Thank you.

Representative Robin Lundstrum All right, we can do that. Ms. White.

Authority of subcommittee in full committee votes (part 1)

Audit Staff Thank you, Senator Johnson and Madam Chair. Senator Love, a subcommittee’s actions are either accepted, adopted, or rejected by the full committee. A subcommittee’s actions don’t become effective until they’re adopted by the full committee. 

A subcommittee doesn’t have the authority to undo an action of this full body. This full body in July took action with regard to these 43 municipalities. And this full body took action against those 43 municipalities in September. 

Therefore, in order for this full body to take action to undo or expunge any of that, this body would have to vote. The only thing that the subcommittee did yesterday was make a recommendation to the body to do so, but it could not act for the full body in that capacity. 

Representative Robin Lundstrum Senator Love. 

Senator Fred Love Okay, the initial action was predicated on a vote taken by the subcommittee. Is that not correct? 

Representative Robin Lundstrum That’s correct. But this committee has authority over all those committees. 

Senator Fred Love Okay, I understand that. But the initial action we upheld by adopting the report. That’s what we did. So then we referred it back. The initial action is predicated. It’s the initial action of the subcommittee. And so by accepting this report, then we should be accepting the action of the subcommittee. I’m confused by the fact that we keep saying that– it’s the body is saying by accepting the report that that is, that’s the will of the body. 

Representative Robin Lundstrum I understand the confusion. Unfortunately, the motion was made to recommend. It does not dictate whether this body chooses to act or not. It just is a recommendation. 

Senator Fred Love Okay. All right. Thank you. 

Representative Robin Lundstrum Thank you, sir. Senator Gilmore? 

Senator Ben Gilmore Thank you, Madam Chair. And for staff and Council, the action in July, was it a recommendation from the subcommittee? In the form of a motion as a report? 

Audit Staff My recollection, Senator Gilmore, is that it was that an action actually passed out of the subcommittee and then was adopted by the full committee. Therefore, it became effective at the point of adoption by the full committee. 

Senator Ben Gilmore Correct. 

Audit Staff Yes, sir. 

Senator Ben Gilmore That action that we’re talking about, was it similar to the action taken yesterday to use the word quote recommendation? 

Audit Staff My recollection, Senator Gilmore, from the July meeting– I believe it was Senator Crowell that moved in the subcommittee. And his motion was to withhold the turnback of the 44 municipalities. At that point in time we believed it to be 44. 

Senator Ben Gilmore Correct. 

Audit Staff And that was the nature of his motion, almost verbatim if I recall. 

Senator Ben Gilmore Correct. So in the report that was read in this body, was that a recommendation? 

Audit Staff Well, he did not say recommend.  

Senator Ben Gilmore And neither did Representative Ladyman, I don’t believe. 

Audit Staff Yes, sir, I believe he did specifically say recommendation. 

Senator Ben Gilmore Thank you, Representative. Would you turn him on, please? 

Representative Robin Lundstrum I’ll try that. Yes, he’s on. 

Representative Jack Ladyman Thank you, Madam Chair. 

Senator Ben Gilmore Would you restate that, Representative? 

Representative Jack Ladyman Yes, I will. My original motion yesterday was a motion to expunge. And by legal counsel, I was told that it needed to be ‘recommended’ and not ‘moved.’ So I changed my motion because of counsel. 

Representative Robin Lundstrum Mr. White. 

Attorney General opinion

Staff Yes, sir, to maybe try to help clarify the situation, if given the latitude. Since the September meeting, there was the attorney general opinion that was issued and provided kind of a route for this body to take a desired course of action. 

Our recommendation is that this body would kind of follow that AG opinion as literal as possible to make sure there’s no ambiguity at all and there’s no questions or concerns as far as the action and the desire of this committee. We’re trying to assist the committee the best way possible. Our understanding, and we consulted with others as well, is that a standing committee cannot undo the action of the full committee, which is why that action needs to occur in the full committee. I hope that helps answer your question. 

Representative Jack Ladyman I’d like to add a comment, that’s all it is. But this is the Legislative branch of government. We have our own rules. I don’t believe we should take opinions from the Executive branch in our rulemaking. And to me, that’s what’s happening here. We went outside of our Legislative branch to the Executive branch to get an opinion on how we operate. I don’t believe that is the way our system is established. That’s just a comment. 

Representative Robin Lundstrum Thank you. That was not requested by us. It was actually requested by the Treasurer to make sure that they were following the law. Regardless, I think we’re getting off in a rabbit hole here. 

Representative Jack Ladyman But the treasurer is part of the Executive branch as well. 

Representative Robin Lundstrum Yes, sir, I agree. But we’re trying to get to a vote on your motion. So I’ll take the rest of these questions, but I think we can get to where you want to go if you’ll just let us hang in there for just a second. Senator Hammer. 

Senator Kim Hammer Is this discussion on the motion, Madam Chair? I mean, it needs to be discussion on the motion. 

Representative Robin Lundstrum We will discuss the motion once we get to that motion. We’re still in the, which rule do we take at which time. So if we could get to the motion and get past this, we will get to discussion. 

Senator Kim Hammer All right. So we don’t actually have a motion on the floor right now that we are confined to have discussion on motions? 

Representative Robin Lundstrum The only motion we have on the floor is a motion to accept this report from this committee. That’s it. We’re not making a decision on whether or not to turnback funds. 

Senator Kim Hammer Have you got a second on that motion? 

Representative Robin Lundstrum Wait, just a second. We’ve got some confusion. And I’m sorry. We have voted on the committee report. We have a motion. Let’s make that motion now. Wait, we’ve got an objection. Point of order. Senator Gilmore. 

Recommendation versus adoption

Senator Ben Gilmore Well, so just for clarity, I don’t think we’ve settled. And again, I hate to belabor the point. But I don’t think we’ve actually settled this. Because I think we are arguing semantics of what a recommendation from the committee is. So a couple of things. 

The actions taken in a subcommittee and then further adopted by this body, then set policy, however you want to say it– maybe I’m not using the correct terminology. But that action comes in a form of a motion that is read, which has been read, and then the adoption action taken here then adopts that action of the subcommittee. Okay. So we agree on that. 

What I think is interesting is now we’re saying it was just a recommendation. Well, then was Senator Crowell, not to invoke his name, but was Senator Crowell’s action in July just a recommendation? So I think that’s the question. And what I heard the representative say was he was given guidance to change his motion to include the word recommendation. 

In September, we were in committee, and I literally asked, would this be an expungement action? To which now the AG’s office has said that was the appropriate action to take. So I think we just need to slow things down for a second and figure out what is the proper path forward. And I just think that we have to be very careful here because then what’s the point of the subcommittee’s meeting? We should just do our business here in this body. Is there a response to that? 

Representative Robin Lundstrum  No, there’s not. I’m just listening and I’ll take it all in. We just need to follow the procedure. 

Senator Kim Hammer Madam Chair. 

Representative Robin Lundstrum Yes. 

Senator Kim Hammer Could I go back? Because you gave him a point of order when I had the mic. Can I come back now? 

Representative Robin Lundstrum Yes. 

Senator Kim Hammer Thank you. And maybe this is a dialogue between chair and the staff there to just help me get clarity in my mind. There was an action that was taken in a previous committee meeting, of which a decision was made based on what happened then. And then there’s the attorney general’s report that has come out. And then yesterday there was an action that came out of the committee, including a recommendation.

 And listening to the discussion, it seems as though there’s a conflict between what was determined in the first meeting and what was determined yesterday, that it was okay for one, but it was not okay for the other. Because we were advised the subcommittee could not have greater authority than the overall committee. And so it needs to be addressed in here. Am I tracking right or not? 

Representative Robin Lundstrum Senator Hammer, I think we’re off track so much, I’m not sure which way is up. What we need to do is we need to accept the report, which we’ve done. And then we need to move on to the motion. I think otherwise we just interject more confusion. Senator Dotson. 

Senator Jim Dotson Thank you, Madam Chair. Senator Hammer, I was in the meeting yesterday, City County Local Subcommittee, and did ask the question very specifically and directly to ensure that we were doing the right thing. The subcommittee did not have the authority to expunge the action of this committee. The subcommittee had the authority to recommend to this committee that we take up expungement. 

And so consequently, it was very clear, and it was even asked, what is the vote threshold before finalization. It was a simple motion, which if we’d taken up a motion to expunge, it would have been a two-thirds vote within the subcommittee. It was a simple majority motion to recommend to this committee to take action. 

So that’s what was adopted in the report was a recommendation to this committee to take up the question of expungement. So it put it on the agenda for today. But counsel also, it was asked and answered, that whether we passed that out of committee yesterday or we didn’t pass it out of committee yesterday, that recommendation motion, we could still, as this full committee, take up the action. The actions of the subcommittee were kind of irrelevant with it regards to whether or not we took up that action today separately. 

Senator Kim Hammer Thank you. Then my question is because something was said in all this discussion, was the committee advised of that after the decision was made? Or was that inserted into the discussion while the decision was being made? Because I kind of got the impression of something that was said a while ago, it was after that decision was made that then the committee or somebody was advised, hey, you need to know this. Was all that contained into one conversation during that committee meeting discussion? I was there for part of it, had to leave, so I don’t know. 

Senator Jim Dotson It was before the vote. 

Senator Kim Hammer It was before the vote? 

Representative Robin Lundstrum Yes, it was before the vote. 

Senator Kim Hammer Okay, thank you. 

Representative Robin Lundstrum Senator Dismang. 

Authority of subcommittee (part 2)

Senator Jonathan Dismang Thank you. I do think it’s important that we kind of clarify how we’re going to move forward with this type of vote. I went back and looked. You know, the motion that Senator Crowell made was made in committee. And it was purely an adoption of the committee report is how we got to where we are today with an expungement. 

So to everybody’s point in the room, there was not a separate vote in the full Legislative Audit meeting on the Friday. It was just an adoption of the report. If it was, it was not on the agenda, and y’all would have had to suspend the rules to have that vote. And I don’t believe that that happened. And because this would be very different than the procedures and what we accept in Legislative Council. 

All any committee can do is make a recommendation. You are correct. They have no authority unless it is delegated to them by law to make a final action. So there is no Legislative Council committee that can take a final action on anything unless we’ve allowed them to have it because of an emergency issue or whatever it may be. The same is true for this committee. You’re absolutely right. 

But when you adopt the report, you’re adopting the recommendation, which you’re adopting the recommendation to expunge. Now that’s different, and what maybe should have been noted, was when you made the vote on your committee report, there was a different threshold for adoption because there was an expungement involved. But I don’t understand how we’re going to move forward if this is now the procedure that what the committee does is only recommend and then we take separate votes. 

We don’t do that on any ALC committee. And if Audit’s going to take that position, what is that going to mean for contracts and everything else in the future? I don’t know. So I do think the question needs to be settled. 

Representative Robin Lundstrum Okay. Representative Duke. 

Representative Hope Duke Thank you, Madam Chair. I guess I have a little, I don’t know if frustration is the right word for this. I appreciate the discussion we’re having, but it seems like some of this discussion should have happened before we had the vote on the report. Because I was in the meeting and I went back and watched it again last night and had pretty good clarity on the fact that it was going to be a recommendation to the committee to expunge it. 

And then there was going to have to be a motion following that separately. And so then we’re having this discussion now when, I don’t know how many members were in there, how many people had time to go back and watch it, but now we’re having a discussion after we voted on the reports, which might have changed how some members might have voted on this. 

And it also kind of brings to me, I guess my question for staff is, we are so far away from that vote. What can be done procedurally as far as roll call and those types of procedures when we had this happen in the last meeting, whenever we got in the middle of a discussion and then came back and roll called? So what does that look like? 

Because this discussion right now, I would have liked to have seen happen beforehand if we were going to question what the committee was told yesterday was the proper procedure in which to do this. Because I do think that was all relevant information to people as they voted on that report. So I guess that’s kind of my thoughts on that. 

But I would also like to know and also on the expungement, I’m not a freshman anymore, but I’m not as great on rules as some of you guys in the committee as well. I think that had an impact there, too, is I guess the committees can expunge. I think that there’s a lot of muddiness here on whether they can come back and expunge what we did as a body as well. So I mean, my personal opinion, I think these are all great points. Probably should have happened before we voted on the committee report, so we all had that clarity to begin with. 

But at this point, to at least keep clarity to everybody, because there was one discussion yesterday and recommendation, and my understanding was it was a recommendation, not let’s expunge it, those are two different things. I think there’s a point to be made as far as how we’ve done it procedurally. But at this point things are just so muddied. I think the best way to keep it clean is to let the representative make his motion and vote on it that way as well, so that at least it’s clean and then clean it up moving forward. 

Or I guess, go back and vote on this again or give the opportunities for roll calls or whatever need to be done where people have the opportunity to understand they were voting for expungement when they voted for that report. Because if you listen to that meeting yesterday, that is not what you thought was happening in the adoption of that report today. So if staff could speak on as far as the procedural process when we’re this far minutes wise away from that original vote. 

Representative Robin Lundstrum Ms. White.

Audit Staff Thank you, Representative Duke. So the vote threshold to pass a chair report is a majority. And the vote threshold needed to expunge the action of the committee in July or in September would be a two-thirds of the members present or authorized alternates present. And that’s why it was our recommendation to the subcommittee to make a recommendation only, because that vote threshold is different. 

And there again, it’s our belief, based on our rules, your rules of this committee, and Mason’s manual, that the subcommittee does not have the authority to undo an action of the full committee. And that’s why we made the recommendation that we did. 

Representative Hope Duke Okay, and I think, again that clarity, if we were going to be voting, adopting that amendment was going to have the  expungement on it, then there needed to be clarity of what the vote was for that because it is a higher threshold. 

So again, I think it kind of goes back to, I think there’s a lot of lack of clarity on what was going on here. I operated on what I thought the recommendation was yesterday. I think we should just proceed with this vote and on his motion so that we all know what we’re voting on and have clarity on it and have the different thresholds that we recognize are needed for these two different votes. Thank you. 

Representative Robin Lundstrum Thank you. I think there’s some wisdom in that. I would ask that we do move on and get to the actual vote because that’s going to be where the real discussion is. 

And I do think we need to review this and spend some time looking at the rules and the proper procedure to make sure that we do have some clarity on this particular issue. If it’s all right with the body, there’s three people left. I would ask that you just make your comments short and then we move to the actual motion. Senator Johnson. 

Senator Mark Johnson Thank you, Madam Chair. I appreciate the discussion. I don’t think it’s that critical of how we get here, but I think it’s important that we not set a bad precedent. I see this situation as analogous to when a bill is introduced. And bills are Constitutional. The Constitution recognizes bills. Committees, which are formed by the two houses of the General Assembly, are not in the Constitution. And if a bill goes to a standing committee, and that committee is basically sending a recommendation to the floor saying do pass or do not pass, or the rarely used thing ‘without recommendation’– that is exactly what it is is a recommendation. 

And the full House and the full Senate must pass that for it to move forward. And then it goes to the other house and goes through the same procedure. But again, the Constitution didn’t create those committees. We did that by our own rules, and that’s fine. That’s a good procedure. It appears that this is analogous to that. The difference being that the statute that allows this full committee to make that, to send that information to the treasurer and instruct him to withhold these funds, the language in that statute probably is what governs. 

Now, on one hand, I think that Representative Duke’s point was exactly right. We can go ahead and do this and it’s clear. And I like that. On the other hand, I see what some members are saying that we may be setting a bad precedent here. Now, I think it’s important that the staff clarify the language in the statute that causes this committee to send that information to the treasurer saying, Don’t send out this turn back money. 

Once we know that, I think we can go forward with a clear distinction. I don’t think in the whole scheme of things it makes a difference. I’m going to vote for the motion because I see it as a way to clear things up based on the advice, the advice, the advisory committee, the advisory opinion from the attorney general. He didn’t tell us what to do. He gave us advice based on his reading of the law.

But I think we need to know what the statute that gives us this authority to direct the treasurer to withhold the funds says. And once we know that, then I think we can resolve this without either setting a bad precedent or doing something else that we might regret later. I just wanted to ask that. So if Ms. White would be able to just tell us, Am I right on that or am I way, way off base? So I’ll just leave it up to staff. Thank you, Madam Chair. 

Representative Robin Lundstrum Let’s take a five minute recess and we’ll get right back to you. Stay tuned. 

[Recess]

Representative Robin Lundstrum Staff is passing out a copy of the actual legislation for your review. And I would remind everyone, this is not the only order of business and we need to move along. So if you’ve got a question, get in the queue. If you’ve not, please let’s move along. Members, if you’ll just take a minute to actually read the bill. The guts of the matter are section 1C. And then we’ll move on. So if you’re in the queue, if you could get out if you don’t have a question. Stay in if you do. Senator Stone, I believe you had a question. 

Recommendation versus adoption in report (part 2)

Senator Matt Stone I do. I want Audit to explain to me why the original motion that Senator Crowell made to withhold the turnback funding was made not as a recommendation but as a statement of fact and then it was affirmed in a vote by this committee. Any legislature has the power to ask for something to be pulled out and voted separately. 

So why did this have to be made as a recommendation instead of Representative Ladyman’s original vote? Because what happened is Audit forced this out to a separate vote instead of allowing the legislature to make that decision which would raise the vote threshold for this item to be passed. Can you explain to me why Senator Crowell’s motion was handled differently from Representative Ladyman’s?

Representative Robin Lundstrum Ms. White. Mr. White. 

Mr. White So the precedent and the way Legislative Audit has operated is that those actions of the standing committees are included in the chair’s report, and when approved by this full committee, are actions of the full committee. In this situation, there was a different threshold that was provided via that AG’s opinion and via the rules for that approval. 

Representative Robin Lundstrum Senator Stone. 

Senator Matt Stone  I disagree with that. I’m not an attorney. But I just know that we’re breaking precedent and for what reason I don’t know. But it has occurred to me that Audit is forcing this out to a separate vote and that’s what the legislatures have the right to do is to pull it out. It should have never been. I’m saying Representative Ladyman’s motion shouldn’t ever been changed yesterday. 

I’m just thinking back, Senator Gilmore got counsel and was told that he couldn’t make a motion to expunge a vote. And then the AG turned around and overwrote that advice. So I’m just wondering what we’re doing, our advice and what we’re coming in here. I’m a little bit confused about what’s going on, the purpose of Audit and the purpose of the Legislature. 

So I’m just being really cautious about what kind of precedent we’re setting. Does Audit answer to the Legislature or do the Legislatures answer to Audit because that’s what’s at stake here if we’re not careful. 

Representative Robin Lundstrum Thank you, sir. Senator Dismang. 

Senator Jonathan Dismang And my question is, in some ways, how do we reconcile that? Because the way that I look at this particular issue, it is bigger than: It’s difficult and let’s just move on. Because all any subcommittee can do is make a recommendation and then we adopt those recommendations. In Council, for instance, we don’t utilize the argument of different vote thresholds because, take Rules Committee. I

t’s a wonky set of circumstances that you have to go through to pass a rule or adopt a rule, right? And inside that same report there may be 15 other things with a different vote threshold. But at the end of the day, when we sit down in Council, we say, We adopt the report. When we adopt the report, we adopt everything in it. Whether or not the vote threshold was one or 20. It’s all the same. 

So I don’t understand some of the logic of where we are. Originally I heard that the vote for expungement needed to happen in this full committee. It did not. All we did was adopt a report. Now there was a recommendation for expungement that we adopted, and I would agree that’s expungement. 

But now we’re saying the opposite can’t be true, and I think it’s imperative that the legislators of this body make a determination of how things are going to look moving forward and set that precedent or you’re going to fight this every single time that you have a meeting that something semi-controversial comes up. That’s my opinion. So I hope that y’all are able to get a reconciliation, as difficult as it is to have the conversation, and not just punt this to the next meeting. 

Representative Robin Lundstrum Senator Crowell? 

Treasurer’s response on turnback fund notice

Senator Steve Crowell So in July when I made the motion, did we withhold the money immediately? 

Representative Robin Lundstrum Upon the Friday meeting, I believe we did. 

Senator Steve Crowell Okay. So when this committee voted to give the money back on September 12, why was the money not given back immediately? 

Representative Robin Lundstrum My understanding is the Treasurer asked for a Attorney General’s report. Once we voted to re-send that to the Treasurer, it became a ‘shall’ in the bill. Section 1C, line 3. ‘Given notice the fact the Treasurer of the state, who shall then withhold turnback funds.’ He wanted clarification because the law goes to ‘shall’ and he wanted to know if that was the correct procedure. 

Senator Steve Crowell So right now on the books we have a passed motion to give these cities their money back. Is that correct? 

Representative Robin Lundstrum This body did vote for that. 

Senator Steve Crowell So and we also have an outside opinion, the Attorney General’s, that said we can do that. 

Representative Robin Lundstrum No sir. No, sir, we do not. The Attorney General position is that we have to vote to expunge that vote if we want to do the turnback funds. 

Senator Steve Crowell So okay, I’m just trying to get clear that if we make a decision to do something that somebody can not do it and ask for an opinion. That’s what happens, right? 

Representative Robin Lundstrum Well, let’s back up just a second. That it was a separate–

Senator Jim Dotson Madam Chair. Thank you. As I understand it, Senator Crowell, there’s two separate motions. The one you made in July, which according to the law, was the one that gave notice to the Treasurer of State. The one that was made last month in September is not in accordance with the lines of the law. 

There’s nothing in the law that says, Hey, we can pause this till December, like the motion that was made in September. And I think that’s what, as I understand it, the AG’s opinion was referring to was that we have the authority to expunge the July motion that gave notice. But we don’t necessarily have the authority under the statute to pause the action from July like what happened by this committee in September. 

So I think that’s the difference. We’re talking about expunging the July motion and resending the notice that was given to the Treasurer, thereby freeing up the Treasurer to not follow the law where it says they ‘shall withhold.’ Because there would be no notice at that point, technically given. 

Representative Robin Lundstrum Senator, I believe the biggest important thing that we do is make sure that we follow the law as it’s written. And I think has been twisted around and we need to make it either correct and move to expunge or leave it and let it ride. So that’s where we are in the crossroads. We’ve got three left in the queue. Senator Johnson, and then we’ll go to Representative Ladyman and Representative Beaty. 

Senator Mark Johnson Thank you, Madam Chair. I appreciate the staff getting us the copy of 14-234-120 and highlighting the point that this committee, Legislative Joint Auditing committee– it didn’t mention our standing committees. It just says this committee may give this notice of fact to the Treasurer. So may is permissive. The Treasurer doesn’t have permission. It says the Treasurer who ‘shall’ then withhold the turnback funds. 

Now, I believe that the Attorney General’s advice to the Treasurer is correct, that with a direction which is discretionary by this committee, then he must do this. And then we give him some conflicting vote in our September meeting. Well, I appreciate the fact that everybody’s trying to get this right and not set a bad precedent. 

On the other hand, the fact that it says ‘may, gives us, this committee only, some discretion. And I think our counsel’s advice that to follow what was advised to the Treasurer by the Attorney General, that we still have that may, we may do things, and the definition of expungement is that it’s if it did not happen. Now, we can go back and forth, and this is a good lesson in making sure that we follow this because words do mean things. 

But I’m in support of kind of dotting the I and crossing the T by supporting Representative Ladyman’s motion, for no other reason than, most people in this state are not going to be concerned about how we arrived at this. They’re going to know, did the turnback get back to these cities or did it not? And we may make that decision, however. And I think that the AG giving advice to the Treasurer gives us that discretion. And we can stick with our original July recommendation, not recommendation, order to the Treasurer. Or we can not do it. We can undo our own. Gave us a mechanism to do it. I think we should take advantage of that mechanism if we want to do so. 

And I respect my colleagues who say, no, we follow the law. They didn’t follow the accounting law, and so we’re going to stick with what we did in July. I think that’s what we need to do is make a decision in your own minds about which policy we should do. And let’s not get carried away with this because the statute clearly gives us the authority, may. We make the decision. Once we’ve made that, which we can expunge according to the AG, and I agree with him, but the Treasurer has no options. 

So we’re kind of like that breakfast thing. You know, the chicken is involved in breakfast, but the hog is committed. So we’re the hog. We have to decide up or down, and I think we need to do that today. I have an opinion. But if y’all disagree on whether it’s a good idea, I certainly don’t hold anything against anyone that sees it a different manner. But that’s how I see this and I appreciate the staff getting us the law because the law affects us differently than it does the Treasurer. Thank you, Madam Chair. 

Representative Robin Lundstrum Thank you. Representative Ladyman, you’re up. 

Representative Jack Ladyman Thank you, Madam Chair. Well, I find it very difficult to think that this body who controls the budget cannot, cannot give the cities the money that they are allocated by law. There’s no way we can do that directly without a two-thirds vote. 

Representative Robin Lundstrum Representative Ladyman, if I could interrupt, let’s deal with your motion that’s on the floor. 

Representative Jack Ladyman I am dealing with my motion. I’m just introducing my motion, ma’am. 

Representative Robin Lundstrum Okay, well, we have one more question on the procedure, and then we can go and I’ll entertain your motion and then we can make a vote. So if you’ll pause for just a moment. Representative Beaty, you were in the queue. And that’s the last one. 

Representative Howard Beaty Thank you, Madam Chair. I guess my question is going to go more for Leg Audit staff and for the chairs of committee. In relation to the AG opinion requested by the Treasurer, did any member of Legislative Audit or the chair of this committee suggest or encourage the Treasurer to seek an AG opinion in this matter before doing the wishes of this committee? 

Representative Robin Lundstrum I know there were a variety of discussions. Those private discussions will stay private. I don’t think that’s relevant to this discussion at this time. 

Representative Howard Beaty I’d like to hear from staff. 

Mr. White Representative, I did not request any AG opinion of the Treasurer’s Office. 

Representative Howard Beaty Did anyone else from your staff encourage or ask the Treasurer to seek an AG opinion? 

Mr. White I am aware of no staff at Legislative Audit that requested or encouraged the AG opinion request. I am aware of none. 

Representative Howard Beaty Thank you. Thank you very much for answering that question.

Representative Robin Lundstrum Representative Ladyman. 

Representative Jack Ladyman Okay. Thank you, Madam Chair. I may proceed. I’m looking at the law here. And, again, this is relevant to my motion. And maybe I can do it in discussion, but I think it’s relevant to do this before the motion. Because if you look at this law, which I’m reading here word for word, and the Treasurer of state ‘shall’  is in response to the ‘may,’ as Senator Johnson said. So we may do this, and that’s in response. 

And the Attorney General opinion is not law. That is an opinion. So we don’t have to go by that as a body. We are a separate Legislative body. We do not have to comply with what that opinion is. That opinion is not law until it goes to court and is proven in court, or we go into legislation session and change that. 

So we could do whatever we want. We take the opinion, we evaluate that, and then we do as a body what we want to do. So in my opinion, that’s what we should do. But it seems like the body differs on their opinion. So I will be happy to make a motion. I move to expunge the vote taken by this committee at its July meeting to withhold the turnback funds from cities and towns that had not completed their water and sewer audits for 2022 and 2023. 

Representative Robin Lundstrum Okay, that is a proper motion. Now we move– and we have a second. And now we move into discussion. Senator Hammer. 

Senator Kim Hammer Thank you, madam chair. If chair would allow, maybe Representative Ladyman to respond to some of this because now we have that motion and second. So the discussion of the motion would be this: Does this mean and include all cities, even those that are actively responding to the pressure that’s been put on them by this Legislative body and are doing due diligence because they got the message and they are actually putting forth the effort to get it done? 

And also what I understand are the 15 towns, give or take a few, that have put forth no evidence and have given no evidence that they are doing anything to be responsive as the other ones who are being responsive. Is it the entirety of the group or are we going to split the doers from the not doers out? 

Representative Robin Lundstrum Senator, just for a point of clarification. Currently we have 357 cities that have completed their Audits for 2022. For 2023, we have 340 that have completed both 2022 and 2023. And for the 2024, we have 171. So we have a large number of cities that have complied and have done that. We are dealing with only 39. We originally had 43 municipalities. 

Since then, a number have completed. We have 21 that have completed their 2022 reports. We have 15 that have completed their 2023 reports. And we have six that have completed their 2024 reports. So these cities are working on their compliance. They’re not done yet, but they did take it seriously once we made that action in July. I suspect we’ll see over the next few months even more completions. 

So that kind of gives you the numbers. But let me get to this again. For 2022, we have 357 that completed. For the year 2023, we have 340. And for 2024, we have 171. 

Senator Kim Hammer Okay, Madam Chair, may I ask you a question, seeing how you got the numbers there in front of you? 

Representative Robin Lundstrum Yes sir. 

Representative Jack Ladyman Madam Chair, can I respond? He asked me a question. I’d like to respond. 

Representative Robin Lundstrum All right, let me finish with his question. So Senator, would you please state your question? 

Senator Kim Hammer My second question is, how many have not, do not have active letters of engagement and have shown no effort to initiate getting their audits done? Is there a single number in that group that fit that description? 

Representative Robin Lundstrum Yes. We have 13. 

Representative Jack Ladyman Can I respond to his question? 

Representative Robin Lundstrum Yes. Does that answer your question, Senator? 

Senator Kim Hammer Yes, but if the chair would allow, I’d like to give Representative Ladyman an opportunity– 

Representative Robin Lundstrum Yes, that’s where I’m going. 

Senator Kim Hammer Thank you. 

Representative Robin Lundstrum Representative Ladyman. Let me turn you on. All right, you’re up. 

Representative Jack Ladyman Senator, thanks for your question and thanks for the promotion. 

Senator Kim Hammer You’re welcome. 

Representative Jack Ladyman The number is 13, but let me add to that. You know, I think Senator Crowell, his motion was very good. And I think it’s been successful. Of the 40, I believe the number was 46, somewhere in that range. 85 percent of those 46 water departments that were non-compliant are now compliant. 

So that leaves, as of the day before yesterday, there were 13 cities that had not complied. These 13 cities, with the exception of one, which has a population of 700, the other 12 have a population of 200 or less. One of them, I think, has 70 population, or maybe it’s 170. So these are very small cities. 

And from discussion with a lot of people, some of these cities are, as you said, Senator, they’re not doing anything. And those cities need to have their money withheld at some point. But there are other small cities. A city of 200 people that has to pay either $3,500 or $10,000 for an audit, that puts them in a bad situation, especially since they haven’t got turnback for two months. That may be keeping them from complying. I don’t know. 

Here’s the other point, and I think Senator Gilmore made this point yesterday in the meeting. In September, this body took a motion and told these cities that you’re going to get your money. They probably made adjustments. Speaking as a previous mayor, I would have done this. And I’m sure they did, and said, Hey, we’re going to get this money. So then they changed their financial plans. And now we’re telling them 30 days later, No, sorry, you’re not going to get your money. You know, we told you you were going to get it, but you’re not getting it. 

So now we’re telling them they gotta go back and make changes again. And why are we doing this? We’re 85 percent compliant. And the motion had the effect, and I appreciate the Senator making that motion. I think it was necessary. It was successful. So we’ve got a short list that we can work with. 

And I spoke to Municipal League, and they say these cities are coming in. Every other day, they get another city that’s compliant. They’re working on this. So let’s give them a little leeway here to maybe the end of the year by expunging this vote. Still gives them till the 31st of December, and then we take another action if we need to. 

So, Senator, I hope I answered your question. But the number is 13. And most of these cities have a population of less than 200. And I’m sure they’re struggling without their turnback money because  that’s only one of two sources that they probably have. They get rates from their water users, but they don’t have sales tax. They don’t have businesses. These are little towns of 200 or 100 people. So I hope I answered your question. 

Senator Kim Hammer Madam Chair.

Representative Robin Lundstrum Yes. 

Senator Kim Hammer Would you allow Representative Ladyman to restate his motion? And I’d like the privilege that before we take the vote, I may want to come back with a substitute motion. But I’d like to hear the rest of the discussion from other members. But would he restate his motion? 

Representative Robin Lundstrum When we get close to the end, we will definitely have him restate the motion. The actual number of cities besides the ones that haven’t done anything is 13. The total number is 39. The law says that they have to have 22, 23, and 24. We have 10 that have 22 and 23, but not completed 24. 

We have 20, excuse me, have six that have filed their 2022 only. And then we have eight that have engagement letters for 2022. So but we have– they’re not completed yet. And then we have the 13 that have not engaged. So it’s a little more than just 13. We have Tyler– excuse me, Senator Dees, and then Representative Hope Duke. Senator. 

Senator Tyler Dees Thank you, Madam Chair. I appreciate the discussion and appreciate the motion. I think for myself there was a lot of side conversations through this last week and last few days, especially about setting a bad precedent or even changing law through this committee outside of a session, which that concerned me of those types of conversations. 

But everything I’ve heard today, this motion and voting for this expungement does not set a new precedent, does not set new law. I believe it’s completely in accordance with statute 14-234-120, which we see here today, that this body does have the ability to do that. And so my main discussion point is that I have complete confidence that the law is clear, that we may, we have the ability as a body to vote in this way that it does not– I wanted to encourage you, just like I needed encouragement before I voted on this, that voting for this motion does not set new statute into law. It actually just follows it. Now you can vote for or against, but your conscience can be clear is my point. And so I’m encouraging members to vote for this motion. 

Representative Robin Lundstrum Thank you, Senator. Representative Duke. 

Representative Hope Duke Thank you, Madam Chair. I guess I have a little bit of a question on what the effect of the expungement of the July motion on the July action has on September. If July didn’t in effect take place, can September action? 

Because it sounds to me like the September action, from what the representative is saying, would stand. And this says, it’s for staff to begin with, would stand. But I don’t understand how it stands if you expunge the action, which my understanding is what happened in July never took place. So how can you take action in September on something that happened in July? So can we get some– well I asked and asked staff initially, please. 

Representative Robin Lundstrum Let’s let staff respond. 

Ms. White Representative Duke, if I understand your question correctly, you’re concerned about, if the expungement occurs for the July action, how does that affect the September action of this full committee? Is that accurate? 

Representative Hope Duke Yes, I believe so. 

Ms. White Okay. In the way that we interpreted the advisory opinion of the Attorney General, if this body wants to undo the legal effect to the Treasurer’s office that occurred with your July action, then you would want to consider expunging both the September and the July action of the body. Because if I recall correctly, there was sort of an amendment to what was done in September. 

And it gave those 43 entities until December 31 of 2025 to get either an audit in for 2022 or a letter of engagement that promised completion of an audit for 2022. And so I think the cleanest way– but there again, this is just up to the body– the cleanest way would be to try to expunge both if it’s the will of the body to go back and undo that July action. Because it’s that July action that had a legal effect for the Treasurer based on the reading of that statute. Have I answered your question, Representative Duke? 

Representative Hope Duke I think so. It’s brought up a lot of different questions. Because I had issue in and of itself with what we did in September on whether this body had the authority to do what it did in September in light of what we did in July. So there’s just so many layers to this. 

And I think what gets us in trouble sometimes is everyone, if we’re not necessarily engaged from the very beginning and we come in halfway or we try to make some of these decisions on the fly. 

Representative Ladyman, if the chair will allow, is your intent to just expunge the July? Do you intend on doing another motion for September? Because my understanding also would be, I guess, the September, if you expunge the July one, then they have till December. If you expunge both, then all bets are off. Is that correct? 

Representative Jack Ladyman Thank you, Madam Chair. Yes, I have a second motion when this one is dealt with to expunge the vote for September. Does that answer your question? 

Representative Hope Duke May I, Madam Chair? So then in effect with that, if your best case scenario happens and both expungements happen, then those cities have no deadline at all. 

Representative Jack Ladyman Right. 

Representative Hope Duke Unless the committee came back and– 

Representative Jack Ladyman Based on legal advice from the staff on how to handle this, that’s what I was told, that we need to expunge both votes. And then it would go back to like no action was ever taken. So the turnback would go back to the cities. 

Representative Hope Duke Okay. And Madam Chair, if I may, 

Representative Robin Lundstrum Yes, finish your question. You wanted to ask about the end date? Would there be a cutoff date? 

Representative Hope Duke On these funds, right? And I think he answered it. There’s not going to be one. The September one will also be expunged. So there is no accountability unless we come back at a different time. There’s no end date for them to have these audits completed. 

Representative Jack Ladyman There would be no date at this point, but it would clean the slate so that a new motion could be made and any date could be put in there. 

Representative Hope Duke So a motion could be made today?

Representative Jack Ladyman It could be made at any time. You have to ask staff that. In my opinion, yes, it could be made any time. 

Representative Robin Lundstrum Let’s chew on that and then get back in the queue. Senator Murdoch. Well, I like that. Senator Hammer. 

Senator Kim Hammer I want to make a substitute motion. It may just get blown out of the water, but I want to make a substitute motion. 

Representative Robin Lundstrum Let’s finish the discussion before we entertain any other motions. There are those members that have been waiting in line that have not asked a question. Representative McElroy. 

Representative Mark McElroy Immediate consideration. 

Representative Robin Lundstrum I’m not going to entertain that motion just yet. Representative Dalby. 

Message sent to cities

Representative Carol Dalby Thank you, Madam Chair. The good thing about lawyers, one will starve to death, two will make a living. And so it appears to me, and my part of the discussion is I think if we expunge the July vote, there’s no reason to take up anything else because at that point there’s nothing in the law that has given us the authority to set any date on these folks. 

And so we expunge it, they’re free to do whatever they want to. They don’t have to do it until we start bringing them in individually and addressing each one of them individually. So what we’re going to do if we vote for this, we’re going to tell the cities that are dealing with this and those who have already dealt with it, never mind. 

Don’t worry about what we did. We’ll change our mind and you can take whatever amount of time you want to file your report because there will be no deadline. And we don’t have an authority to set a deadline. All we’re going to do is say, Kings X, we’re not doing this anymore. Take your time and some of you have taken your time since 2022. And so I think that we need to stick with what we’ve done and not expunge. But that’s just my thought. Thank you. 

Representative Robin Lundstrum Thank you. I appreciate that. Senator Johnson, you’ve been in the queue quite a bit and if you could make it short. 

Senator Mark Johnson Thank you, Madam Chair. On this motion, I go back, again, I wanted to know what the law said. And I think we can all remember that this bill was sponsored by Senator Wallace and Representative Gazaway. Senator Wallace is not here today, so I’m going to be careful in interpreting what he said when he set these wheels in motion for us to undo what we had done in July. Representative Gazaway is here, and if he wants to weigh in and say I’m all wet on something, that’s okay too. 

And I respect him enough to sure hear that. But it appears to me that this bill was to address a specific problem. And it gave some teeth to this committee to enforce what these cities are supposed to be doing. And I think we got their attention.  I really do believe we got their attention. 

Now, if you look at the seal of the state of Arkansas, on one side you’ll see an angel holding something that says mercy. And on the other side, you’ll see the sword of justice. And that’s really what we’re trying to do here is counterbalance justice and mercy. I think we want these cities to comply. That’s the justice side. The mercy side is we’re going to give you a little bit of leeway and a little bit more time. I think we got their attention. 

The numbers that were stated that a whole lot of these cities got after it. But that doesn’t mean we don’t keep that sword of justice to use later. So I’m going to vote for the motion by Representative Ladyman, even though I had many reservations about it. This is like parenting. When do you give your kids licks and when do you just give them a stern lecture and say, straighten up? 

And that is kind of how I feel about this. But I’m going to vote for it for those reasons and I encourage us to clear the deck. We can always come back and paddle them, so to speak. Thank you, Madam Chair. 

Representative Robin Lundstrum Thank you, Senator. 

Validity of committee votes

Senator Fred Love Thank you, Madam Chair. So I just have a question, I guess, for you or staff. So when we first initially took up the action, we sent it over to the Treasurer’s office. And the Treasurer’s office held the funds. Then later we had discussion. Senator Crowell made a motion out of here and we accepted the motion to actually reinstate the funds. 

By default, would that not be an action to actually that cancels out the first initial action? And then so then we went and got an AG’s opinion that says, Well, we have to go back and expunge. But by default of the second action, it was already expunged. 

Representative Robin Lundstrum No, sir. 

Senator Fred Love But how would that not be? 

Representative Robin Lundstrum We have to follow the law as it’s written. And the committee ‘may,’ and that’s what we’re working on the may part right now. But the Treasurer has nothing to do with this. They work for us. They follow the law. 

Senator Fred Love Hear me out, madam chair. Once we took up Senator Crowell’s motion and we voted to reinstate the funds, we reinstated the funds in here. That was the motion and that was the action. So now I’m confused as to why we needed a AG’s opinion to say we needed, it was necessary for us to expunge it if the initial motion was to stop the funds, then we took up a motion in here to actually reinstate the funds. 

So therefore by default of this body taking up the second motion, it cancels out the first motion. That is how this body is predicated. That’s just like us passing a bill and it’s taken up in January. We pass it, and then we pass another bill in February that cancels that bill. That is how this body works. 

So I’m unsure why the AG is saying that the second action that we took needed to– it’s an actual motion that we took. So why do we need to expunge when by default that is expungement? This body took it up. That is, that is expungement. 

Representative Robin Lundstrum Ms. White.

Ms. White Senator Love, I can’t speak to the reasoning. I don’t know why the AG opinion was requested. But I can tell you that based on the way that we read the Attorney General’s advisory opinion, that the Treasurer’s hands were tied, based on the legal effect of the action that was taken by this body in July. 

Senator Fred Love Okay. But the legal effect of us actually reinstating it, we took that motion up. This body passed that motion. So why would we need an expungement? You all, come on, like, this is not making any sense at this time. Because we took a motion to actually hold the funds. Now we took another motion and passed it to actually reinstate the funds, but now we need an expungement. 

By default, that is an expungement when we took the motion up to reinstate the funds. Now if we’re going to say that a motion that we take up in here is not valid and that we need the AG’s opinion to make sure that this body is valid, then what are we doing? Was that motion not valid by Senator Crowell that we took up and we passed? 

Representative Robin Lundstrum Senator, hang on just a second. Mr White. 

Mr. White Senator Love, I think you have a valid point. The situation I see is Legislative Audit can interpret the law. That’s going to be for the courts to make that final decision. What I think we have before us is one executive branch agency who is not going to act until they sought another executive branch agency’s opinion. 

For this body to get that agency to act, we would recommend following what their attorney told them, the AG said to the Treasurer’s office. As far as whether the vote we had in September is valid and held, that’s a decision to be held by the courts. And I couldn’t– I’m hoping I’m trying to help answer your question. 

Senator Fred Love Well, I hear what you’re saying. But what you’re saying is now we have to change the voting threshold. If there was a motion made to actually hold the funds that was made on one threshold, okay, now we made another motion, a second motion, to actually reinstate the funds. But now you’re saying that there’s a different threshold for the expungement. And I understand that. 

But the motions that we made were both valid because they came out of this body. And if we’re going to say that the AG has to validate us, you all, then we are in trouble because we are the ones that the people elected to do the will of the people. 

So any motion that this body takes up should be a valid motion. That is how it works. If we pass a bill and then we pass another bill that cancels that first bill out, that is it. That is how this body is predicated, that is how this body works. So we should not need an AG’s opinion on if we need to have an expungement or not. Because Senator Crowell’s motion that we took up was a valid motion of this body. 

Now if some people do not like the way that motion falls, then that is fine. But the motion that we took up was a valid motion and it should have reinstated the funds. That is not an argument. That is a fact of record. So that’s what we should follow. What this body does, by law, that is what you just handed out says. 

Representative Robin Lundstrum Thank you, Senator. We’re working on that. Let’s get to the couple of other people in the queue and then we’ll get back at it. Representative Mayberry. 

Representative Julie Mayberry Thank you, Madam Chair. I’m going to make this really short because we’re spending way too much time talking about this. I’m sorry. Think about the cities out there, the majority of them, watching this discussion, and they’re sitting there saying, We’ve done it right. We have followed the law. Why are we going to allow others to not follow the same law? And I just want you to think about that, the message that that sends. Thank you. 

Representative Robin Lundstrum Thank you. Representative Brown. 

Representative Karilyn Brown Thank you, Madam Chair. According to Senator Love’s statement and comment, if we leave things just exactly the way they are now, then the cities will get their turnback? No, they won’t get any turnback money unless or until they are up to date by December 31. Is that correct? Thank you. 

Representative Robin Lundstrum Wait, wait. 

Representative Karilyn Brown They won’t receive any money unless they get their reports filed. 

Ms. White That’s correct. 

Representative Karilyn Brown Well, no, I didn’t say that was his motion. I was talking about Senator Love’s discussion point. I understand if we just follow what’s already been voted on, then that would mean that none of these cities would get their money until the end of the year and unless or until they file their audits, correct, or make some progress? 

Representative Robin Lundstrum Once they filed the 2022 audit. 

Representative Karilyn Brown Or a letter. 

Representative Robin Lundstrum No, they have to have an audit. And let’s let staff clarify. 

Ms. White Representative Brown, would you restate your question?

Representative Karilyn Brown If we, as Senator Love stated that he believes, that what we have done in this body is okay, that what we’ve done is correct, that we are within the law. If we leave things just the way they are, the way we’ve already voted and don’t expunge these votes, don’t make any more motions, the effect of that would be that the cities that are not in compliance, they would have their funds withheld until the end of December, unless or until they file their 2022 audits. Is that correct? If we just leave things the way they are now, they won’t get any money until they get that filed. 

Representative Robin Lundstrum Mr. White? 

Mr. White Where we are right now is when entities, when municipalities that were on that original listing have filed the 22, 23, and 24 Audit reports, we are providing a letter to the Treasurer stating that they have filed reports through the most recent calendar year. And then the Treasurer acts in their authority or– that’s their decision. 

We provide the letters to that effect. Anytime we have a municipality who has either filed a 22 report, a 23 report or has provided us with a letter of engagement with a promise to complete by the end of December, we are sending also a letter to the Treasurer’s Office in accordance with September’s motion. We can’t– 

Representative Karilyn Brown That they will get their money? They’ll get their money then?

Mr. White Our direction and guidance to the Treasurer’s office is that they release those funds. And it is the Treasurer’s office that then acts or doesn’t act. 

Representative Robin Lundstrum Once they complete, they get their funds. And their funds are held in escrow until they do complete. 

Representative Karilyn Brown So we’re fully within our purview just to leave things the way they are. 

Representative Robin Lundstrum Yes, if we leave things the way they are, the cities will continue to complete. Once they complete, they get their money. The process is working. We will get to an end of the line though where there will be a list of probably 14 cities out of the 390-something that have not done anything. And we’ll have to deal with that in a separate– I don’t know how we’ll deal with it, but we will have to deal with it then. In the meantime, the process is working. 

Representative Karilyn Brown As a further point of discussion on this, these cities that are so tiny, that are so small that they do not have the fund– I’m giving them benefit of the doubt– they do not have the money to hire the auditor to do this work, is the ultimate conclusion of this that they would just simply lose their charter and quit struggling? 

Representative Robin Lundstrum That is not something this committee can decide. That’s something Legislatively we would need to have a process for them to surrender their charter. But that’s not for us to decide. We are just looking at whether or not they’ve completed the audit. 

My question would be if they have a water and sewer department and you don’t pay your water bill, what happens? You get your water cut off. At some point they’ve got to be able to do an audit, but that’s a discussion we have to decide down the road. Senator Murdock, sorry. I gotcha. Yep, try it. 

Senator Reginald Murdock Thank you, Madam Chair. This is for staff. Could you please state Senator Crowell’s motion from September, please? 

Representative Robin Lundstrum They’ll need just a minute. 

Senator Reginald Murdock The reason I’m saying that is because Senator Love, when he mentioned the second passed motion taking the place of the initial motion, I think we need to be clear on what that second motion was. 

Representative Robin Lundstrum Okay, thank you. They’re working on it. Senator Dotson, you were in the queue. 

Senator Jim Dotson Thank you, Madam Chair. My question is just for staff. Before we take a vote, I just want to make sure we’re all crystal clear. If the motion is to expunge, that is a two thirds majority vote or is that a simple majority vote? I just want that clarified for all members before we vote on any motion. 

Representative Robin Lundstrum Okay, so we have two questions for staff. Let’s give them a moment to answer. Are we ready? 

Mr. White Senator Murdock, you asked about the motions that occurred in September, if I understood you correctly. There’s one that had– there was one principal motion that Senator Wallace made that was a little bit of– 

Senator Reginald Murdock Senator Crowell’s. So the September motion took the place of the July motion. 

Mr. White There was a motion in July by Senator Crowell to withhold turnback for the 43 municipalities completely. 

Senator Reginald Murdock Okay. 

Mr. White Then in September, there was a motion made by Senator Wallace, and that motion– and I can read it for you here if you so desire. But there was a motion to reinstate the turnback funds for those remaining December 31, 2022, delinquent entities that have filed a December 31, 2022, report or have provided an engagement letter stating that the December 31, 2022, report will be completed by a date before December 31, 2025. The cities must also complete their 2023 audit by December 31, 2025. That was the September motion. Thank you. 

Representative Robin Lundstrum Representative Gazaway. 

Rep. Gazaway explanation

Representative Jimmy Gazaway Thank you, Madam Chair. So in discussion of Senator Ladyman’s motion, I just want to make a couple of points. We have a lot of issues going on here, and this is a lot to sort through. And I appreciate staff for the work that they’ve done trying to sort through this and follow the proper process and procedure. 

One, I think there’s an initial question that’s been brought up about Arkansas Code 14-243-120 and whether or not we’re changing the law, if something that we do here is changing the law. We’re not changing the law. That law is very clear. So I don’t think there’s any issues with any action that we take here in terms of changing law that we’ve previously passed. 

There’s been an issue brought up about subcommittees and motions that are made in subcommittees and how they bind the full committee. And the way I understand that, the argument’s been made– Senator Dismang’s point is that Senator Crowell’s motion to withhold the money, the turnback funds, was a motion that was made in a subcommittee. 

That motion that was made in the subcommittee and made it into the report was adopted by the full committee when we adopted the report. And that’s how the turnback funds were withheld because of an adoption of a report. I think Senator Dismang’s point is if we can bind, if a subcommittee’s report adoption binds the full committee, then wouldn’t a motion to expunge in a subcommittee, wouldn’t the adoption of that report also bind the full committee and essentially be a motion to expunge or the adoption of a motion to expunge? And I think that’s a fair point. 

The problem is, that’s not the motion that was made in the subcommittee. What it sounds to me, the motion that was made in the subcommittee yesterday was a motion to recommend that this committee expunge the vote. I think we’d have a different story if the motion in the subcommittee would have been to expunge and then we subsequently adopted that report. But that’s not what it was. The motion yesterday was to recommend that the full committee expunge. 

I also want to say I agree with the Attorney General’s opinion, and this goes to Senator Love’s point about whether or not the action that was taken in September was legally valid or not. And the issue there is really kind of one of parliamentary procedure. The issue there, the action that we took in September, was to rescind the notice. 

And I think the question that the Attorney General had was whether or not we had the power to rescind a notice that we had given. And the Attorney General essentially answered that by saying, Yes, but the proper way to do it, the proper procedure to follow to do that is by a motion to expunge the vote where the notice was initially given, which would be the July notice that was given based on Senator Crowell’s motion that was adopted in the report. 

And so I think Senator Ladyman’s motion to expunge is proper. Now it’s a question of where you stand on whether or not we should expunge that vote and whether or not this money should go back. That’s a fair question for the body to debate. I personally am in favor of expunging it. I’m also fully in favor of accountability and enforcing the law. 

But this is the first time, so just to speak on the policy of it, this is the first time that we’ve ever really had the ability to enforce this particular law. And we took advantage of it at the first opportunity. And I think we got a lot of the cities’ attention when we adopted that motion in July to withhold their turnback funds. 

I think we sent a strong message, and I think we’ve seen a lot of compliance. And my understanding is there’s 13 cities that are not in the process. And out of those 13, there may only be four that haven’t responded to anything. So we definitely have gotten people’s attention. 

And I think, at this point, if we just allow them a little grace period to get into compliance, and then we can always come back and we can send that notice again when we believe it’s appropriate. So if we come back in December or January and we see that there’s some cities that have just completely ignored this after we withheld their turnback funds, then we have the ability to send another notice and withhold those funds and take the appropriate action. 

So I’m in favor of the motion to expunge at this time. I think it’s the proper way to handle this. I agree with the Attorney General’s opinion. Don’t think that we’re changing the law here. 

I think Senator Dismang makes a good point. And I would agree with him that we could have expunged the vote by a subcommittee vote if the motion in the subcommittee would have been to expunge. But that wasn’t the motion in the subcommittee. The motion in the subcommittee was to recommend to this committee to expunge, which I think is a different thing. So with that, I’m in favor of Senator Ladyman’s motion and hope you’ll give it due consideration. 

Representative Robin Lundstrum Thank you, Representative Gazaway. I believe we left Senator Hammer hanging with a substitute motion and then we will go to the original. Senator Hammer. 

Substitute motion by Sen Hammer

Senator Kim Hammer Thank you, Madam Chair. And if I may, to Representative Ladyman through the chair to make this comment, knowing that there’s a second motion that you’re going to bring, this one may align with yours. So the committee can just use your discretion. Vote for or against it. 

I’d like to offer a substitute motion. Substitute motion to expunge all previous votes to withhold turnback funds and instruct the Treasurer to release funds to cities that are actively showing efforts to comply with the law as determined by a list provided to the Treasurer from Legislative Audit staff and the chairs, but not to cities who, as of the date of this motion, have produced no evidence of actively complying with the law. 

If a city who is actively proceeding stops effort to comply, they will be called before the full Legislative committee. Cities who have not shown effort as of this day of this vote are required to attend the next full Legislative Audit meeting, at which time a full report of all activities will be made to the committee. And if I get a second, I’d like to speak to my motion and the rationale, Madam Chair. 

Representative Robin Lundstrum The chair will entertain a second. Is there a second? We have a second by Senator Cooper. All right, let’s discuss that motion. 

Senator Kim Hammer May I speak to my motion? 

Representative Robin Lundstrum Yes. 

Senator Kim Hammer Thank you. I’m struggling between, having listened to all this, I’m struggling between grace, mercy, rewarding effort, but not rewarding those who are blatantly disregarding the law. Because I think that is an injustice to the cities that have gotten the message and are making an effort. And what I see this motion doing is saying to those that have effort, we heard you, we’re doing what we got to do, we’re trying to get it done, let’s go ahead and reward them. 

But yet there’s an element of accountability that if you stop doing what you’re being asked to do by the law, you’re going to come in front of this full committee. At the same time, those cities, 13, whatever the final number is, that have shown no effort, they don’t need to be given the same treatment as those that are putting forth effort. 

And they need to come in front of this committee and they need to explain themselves. And at that time, if they got a good explanation, we may choose to release. But they don’t need to be able to sit out there without any accountability and thumb their nose at the legislature or this committee. 

And I think this establishes a protocol for them to have to come in front of us. That’s the intent of the motion. I appreciate a good vote. Understand if you don’t want to vote for it. Thank you. 

Representative Robin Lundstrum Thank you, Senator Hammer. I believe Senator Dotson, you have a discussion point. 

Senator Jim Dotson Because I’m in agreement. I think to a large extent with what you’re trying to do. I’m concerned, however, with the actual statute that we have in front of us, 14-234-120. 

Under C1, where it says the Legislative Audit committee may quote give notice that in effect, that notice, whether it was July, September, or today, triggers the Treasurer holding these funds for all municipalities. And so I don’t know that it would change the status quo. The Treasurer sent out an AG’s opinion on the September deal to say, Did this actually rescind the notice? 

And I think with your motion, while we might have expunged the vote on all previous motions, in effect we’re giving a new notice to the Treasurer to hold. I don’t know that we can turn the spigot on partially. I think it’s an on or off switch with that give notice. Well that’s my opinion of it. I’m sure the Treasurer’s office will get to make that determination if we do anything other than just fully expunge or leave it as is where we gave notice. 

But just wanted to give you that consideration and everybody in the committee that consideration before considering your motion.

Senator Kim Hammer  Could I respond, Madam Chair? Thank you. And Senator, I’m looking, the language has an element of permissiveness utilizing the word may. And whether it is this way or not, it is my intent through this motion that what we are doing is saying that the Treasurer may go ahead and release to all these, but in the motion it keeps the element of accountability that as long as they keep complying, then they can keep getting the money. 

However, if they don’t, the motion has in it– I realize members don’t have the benefit of this being written out to see in front of them– but those cities that cease to be compliant with trying to get to what the law is asking them to do will be in front of this full committee, at which time we could say to the Treasurer, Stop it. Because they have stopped their effort. That’s the intent, whether it aligns with your concerns in the law or not, I’ll defer to the full committee’s wisdom. 

Representative Robin Lundstrum Thank you. Representative Ladyman, would you state your motion for the record? So we have both these motions in front of us. Okay, you’re up. 

Representative Jack Ladyman Yes, I would. Thank you, Madam Chair. My motion was, I move to expunge the vote taken by this committee at its July meeting to withhold the turnback funds from cities and towns that have not completed their water and sewer audits for 2022 and 2023. 

Representative Robin Lundstrum Thank you. We do have to take the alternative motion first, but I want you to have both of those fresh in your mind. So we have Senator Hammer, if you could give us the short version, we need to vote on that unless there’s any further discussion. 

Senator Kim Hammer Would you light me up? Oh, sorry. 

Representative Robin Lundstrum Yes, give us the short version again. 

Senator Kim Hammer I’m sorry, Madam Chair, would you restate what you’re asking me to do? 

Representative Robin Lundstrum Your motion. 

Senator Kim Hammer Restate my motion? 

Representative Robin Lundstrum Yes. 

Senator Kim Hammer Okay. 

Representative Robin Lundstrum You’re on. 

Senator Kim Hammer Yeah, I know. I’m reading something somebody sent me aligned with this. The motion was to expunge all previous votes, to withhold turnback funds, which addresses the multiple dates that are in question. The motion to expunge all previous votes, to withhold turnback funds and instruct the Treasurer to release funds to cities that are actively showing efforts to comply with the law based on a list provided by Leg Audit and concurred by the staff and the chairs, but not to cities who, as of this date today of this motion, have produced no evidence of actively complying with the law. 

If a city who is actively producing stops efforts to comply, they will be called in front of the full committee. The intent of that is you’re working on it now, don’t take this as a signal that you can stop because you’re going to come in front of the full committee. Cities who have not shown effort of this day are required to attend the next full Legislative Audit meeting, at which time a full report of all activities will be made to the committee. 

I would think that this would also clarify that we are giving notice that these 14 cities are not in compliance. Therefore the money would only be withheld for those 14 cities. Everybody else’s money is going to be released and would continue to be released as long as they continue to make and show effort. Otherwise they’re going to be in front of this committee, which I don’t think any of them want to be. 

Representative Robin Lundstrum Thank you, Senator Hammer. My understanding is this is a two thirds vote. Is that correct? Okay. 

Senator Kim Hammer Is that two thirds of the quorum or two thirds of members present? Would staff clarify that, please? 

Ms. White Senator Hammer, pursuant to your rules, you have always operated on members or authorized alternates present. 

Representative Robin Lundstrum Okay, let’s make sure we understand. We are voting on Senator Hammer’s motion and it has to be a two thirds vote. So those in favor– wait just a second. 

Senator Reginald Murdock Thank you. I think this is germane to the motion. Certainly it’s going to be an effect of the motion. So if we pass this out, the Treasurer department then has the duty to do what we’re saying or not. It says shall. That’s a good point, Senator. It says shall. Okay. 

So what I don’t want to see happen, and what I’m throwing this out here publicly is that if someone is looking for a reason not to because they don’t agree with this being passed, then that shall become something else and then becomes another submission to AG or whomever else after this body does what it has done. I just think this body, this should be respected whatever we do throughout. 

Representative Robin Lundstrum I think we’re there. Representative Ladyman, I saw you come up. 

Representative Jack Ladyman Yeah. Thank you, Madam Chair. I’ll try to be brief. But Senator Hammer, I agree with what you’re trying to do and I understand. But my concern is that who determines whether they’re actively pursuing? Is it going to be in the Treasurer’s office and they’re trying to decide and who defines who’s actively pursuing? And what is the definition of that? 

So I just think there might be a lot of gray area here and then nothing happens. That’s my concern with your motion. I know you’re trying to do the right thing and I agree with what you’re trying to do, but I’m afraid it would create some misunderstanding and people making decisions based on something they don’t have a definition for. So that’s just my comment. 

Representative Robin Lundstrum All right, Senator Hammer, you can respond. And then we’re going to need to go to the vote. 

Senator Kim Hammer Yes, senator– I keep wanting to make him a senator. 

Representative Robin Lundstrum Don’t give him ideas. 

Senator Kim Hammer Representative Ladyman, that’s why I put the phrase in there ‘as determined by Legislative Audit staff and the chairs.’ We’re putting a lot of trust, a lot of authority in them that evidently there’s an identified list by some protocol that has been included in discussion day. We’re down to 13 cities that have nothing. 

I think if somebody’s name is on the list, we can as individual legislators go to the chairs and Leg Audit and say, Hey now, wait a minute, here’s evidence that they’re doing it. That’ll create maybe a little back and forth. But it seems like the content of the discussion today, we have narrowed it down that there are certain number of cities, 13, maybe around that number, that haven’t done anything. 

There’s evidence that everybody else is doing something to move toward it. So whether that’s a good explanation, satisfies your concerns or not. But that’s why I put that phrase in the motion. 

Representative Robin Lundstrum Representative Beaty. 

Representative Howard Beaty Madam Chair, that motion had a lot of moving parts in it. Could you restate that motion and just hit the highlights? 

Representative Robin Lundstrum Oh, all right. Senator Hammer, let’s make it short. No sidebar, no discussion, just a straight motion. 

Senator Kim Hammer Thank you. Motion to expunge all previous votes to withhold turnback funds and instruct the Treasurer to release funds to cities that are actively showing efforts to comply with the law as determined by Legislative Audit staff and chairs, but not to cities who, as of this date of this motion, have produced no evidence of actively complying with the law. 

If a city who is actively proceeding stops efforts to comply, they will be called before the full committee. Cities who have not shown effort of this date of this motion being passed are required to attend the next full Legislative Audit committee meeting at which time a full report of all activities will be made to the full committee. That’s the substitute motion. 

Representative Robin Lundstrum Thank you, Senator Hammer. We have a second. Cameron made a second. Excuse me, Senator– Representative Cooper. All right. So we’re all thoroughly confused. Let’s go vote. All in favor of Senator Hammer’s substitute motion, please signify by saying aye. Those opposed? 

We have a roll call by division of chambers. I rule it fails, but let’s go ahead and do a roll call. Remember it has to have a two thirds vote, and we’ve had a request for a division of the House, division of the body. This was made by the House, so we’ll start on the House side. 

Staff Representative Gazaway as having signed in. Yes. Representative Rye is having signed in. Representative Rye. Representative Mark McElroy. No. Representative Wayne Long is not having signed in. Next. Representative Karilyn Brown. Yes. Representative Karilyn Brown is a yes. Representative Fred Allen having signed in. Representative Fred Allen. 

Representative Cameron Cooper. Yes. Representative Cameron Cooper is a yes. Representative Tony Furman. Yes. Representative Tony Furman is a yes. Representative RJ Hawk is not having signed in. We go to first alternate. Representative Paul Childress. Representative Paul Childress. Next, Representative Robin Lundstrum. No. Representative Robin Lundstrum is a no. 

Next, Representative Mindy McAlindon having not signed in, we go to first alternate, Representative Rebecca Burkes. No. Representative Rebecca Burkes is a no. Next, Representative Hope Duke. No. Representative Hope Duke is a no. Next, Representative Stephen Unger. No. Representative Stephen Unger is a no. 

Next, Representative Womack. No. Representative Womack is a no. Next with Representative Sonia Eubanks Barker not having signed in, Representative Howard Beaty. Yes. Representative Howard Beaty is yes. Next, Representative Carol Dalby. Representative Carol Dalby. 

Next, Representative Stan Barry. No Representative Stanberry, No. Next, Representative Julie Mayberry. No. Representative Julie Mayberry is no. Next, Representative Matthew Brown is having signed in. Representative Matthew Brown. Next, Representative Brian Evans not having signed in. Representative Keith Brooks. Representative Keith Brooks. Next, Representative Jack Ladyman. Yes. Representative Jack Ladyman, yes. 

Representative Robin Lundstrum Seven yes, eight noes, four present. The motion fails. Now we’ll entertain the motion by Representative Ladyman. Representative Ladyman, would you please state your motion? 

Rep. Ladyman’s motion to expunge

Representative Jack Ladyman Yes, thank you, Madam Chair. I move to expunge the vote taken by this committee at its July meeting to withhold the turnback funds from cities and towns that have not completed their water and sewer audits for 2022 and 2023. 

Representative Robin Lundstrum Okay, we have a motion and a second on the floor. All in favor? All opposed? Let’s have a roll call vote. I couldn’t tell. So I don’t think it rises to the two thirds. So motion fails. Let’s have a roll call vote. We have one, two, three, four, five, six. Separated by the house– I mean it’s by the chamber, house. Start on the house side. 

Staff Representative Jimmy Gazaway. Representative Jimmy Gazaway is a yes. Representative Johnny Rye. Representative Johnny Rye is a yes. Representative Mark McElroy. Representative Mark McElroy is a yes. Representative Karilyn Brown. Representative Karliyn Brown is a yes. Representative Fred Allen. Representative Fred Allen. Representative Cameron Cooper. Representative Cameron Cooper is a no. Representative Tony Furman. Representative Tony Furman. 

Representative R.J. Hawk is not having signed in. Representative Paul Childress. Representative Paul Childress. Representative Lundstrum is a no. Next Representative Mindy McAlinden not having signed in, we go to Representative Rebecca Burkes. No. Representative Rebecca Burkes is a no. Next, Representative Hope Duke. No. Representative Hope Duke is a no. Next, Representative Stephen Unger. No. Representative Stephen Unger is no. 

Next, Representative Richard Womack. No. Representative Richard Womack is no. Next, Representative Howard Beaty. Yes. Representative Howard Beaty is yes. Next is Representative Carol Dalby. Representative Carol Dalby is no. Next is Representative Stan Barry. Representative Stan Barry is yes. Next is Representative Julie Mayberry. No. Representative Julie Mayberry is no. 

Next is Representative Matthew Brown. Representative Matthew Brown. Next with Representative Brian Evans as not having signed in. Representative Keith Brooks. Representative Keith Brooks. Next, Representative Jack Ladyman. Yes. Representative Jack Ladyman is yes. 

Representative Robin Lundstrum They’re going to give us a vote total. Yes sir. It’s two thirds. Yes, sir. Seven yes, eight no, five present. The motion fails. All right, moving on. Next item on the agenda is the Education committee. Senator Dees, if you would read that report on the Education committee. 

Education Committee report

Senator Tyler Dees Thank you, Madam Chair. The Standing Committee on Education Institutions met on Thursday, October 9, and adopted the minutes from the meeting that was held on September 11, 2025. Seven education audit reports for the year ended on June 30, 2024, were included on the agenda with no recommendations from the subcommittee, I might add. Sorry for the joke. 

Officials from the Mammoth Spring School District were present to answer questions from the committee related to findings in their audits reports, which was deferred from the September meeting. Three school districts audit reports had findings and were referred to the applicable prosecuting attorneys and attorney generals. The committee filed seven audit reports that were brought before it. And Madam Chair, I move for adoption of this report. 

Representative Robin Lundstrum I have a second. Is there any discussion of the education report? I believe there was a member that had a discussion. Representative Duke. Oh, I’m sorry, that was Representative Unger’s committee. All right. Got a lot of notes up here. All right. We have a motion and a second. All in favor? All right. All opposed? All right. Motion passes– or committee report is accepted. And too soon, Senator Dees, too soon. All right, standing committees for State Agencies. Representative Unger. 

State Agencies Committee report

Representative Steve Unger Committee’s agenda yesterday, three reports with the following findings were presented. The Department of Agriculture had an unauthorized payroll disbursement. The Department of Education did not have adequate controls in place to identify students with Educational Freedom Accounts for duplicate enrollment in a public school. 

Additionally, the department used one of its appropriations for a different purpose than specified in its appropriation act, made an overpayment for a national board for professional teaching standards incentive, and reported a stolen utility vehicle. The Department of Health did not properly prepare bank reconciliations, reported that an employee had falsified travel expenditures, and did not properly obtain bids for a capital asset addition. 

Various agency staff members were present to report how the agencies intended to address the audit findings and then answer committee questions. During the meeting, the committee filed 10 reports. I moved to adopt this report. 

Representative Robin Lundstrum All right, do we have a second? And then we’ll have discussion. We have a second by Senator Dotson. We have two in the queue right now. Representative Mayberry and then Representative Ennett. Representative Mayberry? 

Deferral of Education report

Representative Julie Mayberry Thank you, Madam Chair. I’d like to make a motion to extract the Department of Education annual financial report and vote on that separately. 

Representative Robin Lundstrum Okay, we have a second. Discussion. Okay, all in favor? Opposed? Let’s hear this, let’s– it passes. And we’ll have a separate vote on that. Representative Ennett, you got cut off and didn’t get your question. You got okay, thank you. Representative Mayberry, could you restate your motion, please? 

Representative Julie Mayberry Restate the motion or make a second motion? Because I think my first one passed. 

Representative Robin Lundstrum Yes, you’re passed. Thank you. 

Representative Julie Mayberry Okay. So what I would like to do is, since that did pass, to defer that finding or that report to be discussed by the full Arkansas Legislative Audit at the next meeting. 

Representative Robin Lundstrum So you’re just asking for– 

Representative Julie Mayberry To be deferred. For that to be deferred and to be discussed before the full Legislative Audit at the next meeting. 

Representative Robin Lundstrum Okay, that’s a proper motion. All in favor? Oh wait, wait, wait. Staff’s waving me. So we need a second on that. We have a second by Representative Duke. All in favor? Aye. Opposed? All right. Thank you. We’ll take that up and put it on the agenda for next time. Representative Ennett, you’re still on. Did you need something? Okay. Let’s hear it.

Representative Denise Ennett Thank you, Chairwoman. I have a question. I don’t know if this is out of line. What measures is Arkansas taking to prevent duplicate enrollment among students with EFAs? 

Representative Robin Lundstrum Representative Ennett, you’re going to get to be the first up in the next session or the next meeting for that exact question. You can ask those questions there. 

Representative Denise Ennett Thank you. 

Representative Robin Lundstrum We still need to adopt the rest of the report. Is that correct? Okay. Let’s go ahead and adopt the rest of the report. I need a motion to do so. I need a second. Thank you, Representative Ennett. All in favor? Opposed? Okay. A report is adopted. All right. 

School Employees insurance report

Next we have a special report, a review from the Arkansas State Public School Employees Health Benefits Fund. And I would ask members that you please stay for this because we need to make sure that everything is going well with our employees’ benefits funds. And I’d like for you to listen closely and then we will get in. If those members could come up with the, you’ll need to be sworn in. Mr. Spivey, would you come up and bring us the report? 

Mr. Spivey Thank you, Madam Chair. Arkansas Code requires Legislative Audit to conduct an annual review of the Employee Benefits Division and the performance of the health and benefit plans. The primary objective of this report was to analyze the fund balances of both the state and public school employee health and benefit plans at June 30, 2024. 

EBD administers the health and benefit plans for both the state and public school employees. Benefits are provided through self-funding, a method by which the state takes in contributions from both the employee and the employer. Separate funds are set up for each plan to pay health and pharmacy claims and to serve as reserves to prevent dramatic rate increases for subscribers. 

Since January 2023, EBD has paid UnitedHealthcare to manage the Group Medicare Advantage Plan, commonly referred to as the MAPD plan for Medicare eligible retirees. This exhibit, which is found on page two of the report, shows the plan enrollment for both subscribers and members for each plan. The term subscribers refers to both employees and retirees who are enrolled in the plans, while the term members refers to subscribers and their qualifying dependents who are enrolled in the plans. 

As detailed in this exhibit, from fiscal year 2023 to 2024, the number of subscribers decreased by 12 for the ASC plan and increased by 2,216 for the PSE plan, creating a net increase of 2,204 for both plans. The exhibit shown on this slide and on page two of the report provides Medicare eligible retirees by enrollment in a retiree plan. As indicated in the bottom row of the exhibit, the MAPD participation rate at June 30, 2024, was 62% among ASC subscribers and members, and 41% among PSE subscribers and members. 

As shown in the exhibit on the slide, and on page three of the report, the ASC plan had just over $360 million in fund revenue for fiscal year 2024. State contributions provided 65% of total revenue. Subscriber monthly premiums made up 26%, and other revenues accounted for 9%. Other revenues included FICA savings, investment income, and pharmacy rebates, and a $1.8 million decrease in the actuarial incurred but not reported health and pharmacy claims. Revenues were higher primarily due to the increase in employer monthly contribution rates. 

Exhibit four on this slide and on page four of the report provides a five-year comparison of cost per subscriber for the ASC plan. As indicated by the blue line in the exhibit, the health and pharmacy claim cost to the fund per subscriber totaled $688 per month, a $5 decrease from the prior year. As indicated by the red line, the out-of-pocket cost to subscribers increased from $359 per subscriber per month in fiscal year 2023 to $366 in fiscal year 2024. 

This exhibit is provided on page 5 of the report. The blue line indicates changes in claims and administrative costs for the ASC plan for the past five years, while the red line indicates changes in premiums and other revenues for the same period. It should be noted that premiums and other revenues for fiscal year 2023 included one time funds from the American Rescue Plan Act, commonly known as ARPA. 

Schedule 3 on page 14 shows health and pharmacy claims by plan type. Shown on this slide is the portion of the schedule related to the ASC plan. For fiscal year 2024, health and pharmacy claims paid from the fund totaled $183 million and over $99 million, respectively, while MAPD plan costs totaled over $17 million. 

Additionally, Schedule 4 on page 15 provides a four-year comparison of health and pharmacy claims. A factor contributing to the change in health claims for retirees was the utilization of United Healthcare’s MAPD plan for a full year. The next few slides contain information regarding the PSE plan. 

The exhibit on the slide and on page six of the report shows over $459 million in fund revenue for the PSC plan for fiscal year 2024. Legislative funding provided 31% of the total. Contributions from school districts amounted to 29%. Subscriber monthly premiums made up 30%, and other revenues delivered 10%. Other revenues included performance guarantees, penalties, investment income, pharmacy rebates, and FICA savings. 

Exhibit eight on page seven and on the slide provides a five-year comparison of cost per subscriber for the PSE plan. As indicated by the blue line, health and pharmacy claim cost to the plan per subscriber totaled $527 per month, a $35 increase from the prior year. As indicated by the red line, out-of-pocket costs to employees increased $13 from the prior from the previous fiscal year to $347 per subscriber per month. 

This exhibit is provided on page 7 of the report. The blue line indicates changes in claims and administrative cost for the PSC plan for the past five years, while the red line indicates changes in premiums and other revenues for the same period. It should be noted that premiums and other revenues for fiscal year 2023 included one-time ARPA funds. Additionally, for fiscal year 2024, total claims and administrative costs exceeded premiums and other revenues. 

Schedule three on page 14 shows health and pharmacy claims by plan type. Shown on the slide is the portion of the schedule related to the PSC plan. For fiscal year 2024, health and pharmacy claims paid from the fund totaled $310 million and $106 million respectively, while MAPD plan costs totaled approximately $7 million. 

Additionally, Schedule 6 on page 17 provides a four-year comparison of health and pharmacy claims. Factors contributing to changes from the previous fiscal year included increases in plan subscribers, plan members, and plan utilization. ALA also reviewed the 13 members of the of the ASC plan and the 16 members of the PSC plan with cumulative claims exceeding $500,000. ALA tested these claims for accuracy and timeliness of case management services and noted no discrepancies. 

The 2024 total cumulative health and pharmacy claims exceeding $500,000 totaled to $26.1 million, a decrease of $6.6 million from the prior year. In accordance with R1-19-4-702 of the Department of Finance Administration Financial Management Guide, if an agency pays an invoice in the fiscal year subsequent to when goods or services are received, that invoice should be recorded as a payable. 

EBD paid $3.8 million for the ASC health claims and $6.5 million for PSC health claims in fiscal year 2025 that should have been recorded as a payable in fiscal year 2024. As a result, accounts payable and expenditures were understated at the end of fiscal year 2024. Amounts reflected throughout this report have been adjusted for these errors. Madam Chair, this concludes my presentation. Agency representatives are here to answer committee questions. 

Representative Robin Lundstrum Would the agency representatives please come forward to be sworn in? If you would, please rise. Please state your name and position. 

Grant Wallace Grant Wallace, Director of the Employee Benefits Division. 

James Caldwell James Caldwell, CFO, Shared Administrative Services. 

Representative Robin Lundstrum Okay, if you could raise your right hand, gentlemen. Do you solemnly swear or affirm that the testimony you are about to give will be the truth, the whole truth, and nothing but the truth? 

Grant Wallace I do. 

Representative Robin Lundstrum Thank you. Members, please jump in the queue if you have questions. I have one as well. On page fifteen of the report where it talks about the PSE health and pharmacy claims and premiums. I’ll give everybody a chance to get there, page fifteen. Page fifteen. 

If you’re looking at the report, I’m sorry, it’s page seven. On ours, it’s page fifteen. This is the slide that has PSE health and pharmacy claims and premiums for physical year 2020 to 2024. I’m concerned I’m seeing a rise in cost and then a decline in premiums. Can you explain this or delve into this one a little bit more? 

Grant Wallace Yes, ma’am, and I echo that concern. What happened during this time period is that the state match, the district minimum was cut from 300 to 234.50. So that’s why you’ll see the decrease in revenue. On the increasing in costs, we’ve experienced an increase in cancer diagnoses and treatments within this population that was outpacing the state employee side. 

So we’re diving into that just to see if it’s a one-time kind of blip or if there is something more long term that we need to kind of adjust our modeling for. We’ve not completed that work. And so that’s the study on the expense side. What we’ve done on the revenue side is during this past session there were corrections to get the district minimum back up to where it needed to be, and we continue to work with the Department of Education on our funding side to make sure that those issues get back on track and that we are seeing an increase in the revenues. 

So we do have a plan. We are addressing these things and are getting back on track with where we need to be. 

Representative Robin Lundstrum Okay, thank you. Representative Mayberry, I believe you had a question. 

Representative Julie Mayberry Thank you, Madam Chair. I’m just curious because it’s not necessarily in here and it may not be something that you all directly pay, but I don’t know where the money comes from to pay for it. 

So when we have a bill that affects the state employee plan or the public school employee plan, it has to go through fiscal analysis through Segal. And I’m trying to figure out, is that something that state employees are paying for or we paying for? Can you help me understand who pays for that report? 

Grant Wallace So we do not. It is not part of our bills. We do not receive any invoices from Segal or anything like that. So my assumption is that BLR covers those expenses. 

Representative Julie Mayberry Okay. BLR is paying for that. But before you all would do the analysis– because this was a recent change, I guess. Not last legislative session, but a special session before that. Is that correct? You all did some type of analysis? 

Grant Wallace Well, we do have our own actuary that does run or can do our own kind of modeling and any kind of impacts on potential legislation. So we do have that service, yes. 

Representative Julie Mayberry Okay. Just frustration with that process. I realize that that’s probably something that maybe I need to discuss with BLR then. But it takes a really long time to get those fiscal impact reports back. And I know I’m not the only one that was receiving the fiscal impact the last week or two of session, which makes it pretty impossible to get a bill that has anything in there through. So anyway, thank you. 

Representative Robin Lundstrum Senator Dotson. 

Senator Jim Dotson Thank you, Madam Chair. Going back to what Chairwoman Lundstrum was talking about on that expenditures for PSEs exceeding the revenues in 2024, the last slide that they were referencing said something about $6.5 million was inappropriately put in the wrong year, but it should have been in 2024. Is that on top of the number that’s being reported here? Or it may be for staff rather than–. 

Representative Robin Lundstrum I believe it’s staff. If you could help us out with that. 

Mr. White It was included in. 

Senator Jim Dotson So that’s included in this chart here on page seven of the exhibit?

Mr. White Yes, sir.

Senator Jim Dotson Okay, so in essence we basically almost broke even. It was about $4 million , which is 1 percent off. But things that we did in this session, where does that take us? Because this has been 15 months or so. The snapshot was June of 2024, I believe. 

Grant Wallace Right. So most of any kind of bills that were passed in this session that would have addressed plan design will go into effect in January. Some of those things might have kind of rolled out in August, but when it came to really like plan design and coverage of certain benefits, those will be in January of this upcoming year. So we will not see that impact probably until you audit FY26. You’ll get that kind of first six months run. 

Senator Jim Dotson So we can expect another further decline in 2025, more than likely. But if I’m reading correctly on page eight, the fund balance has what 206 million at the end of 2024? 

Grant Wallace Correct. 

Senator Jim Dotson So that basically, if we’re only 1 percent off, we have enough fund balance to maintain claims payments for a few years to where we can get the revenues back up?

Grant Wallace Right. We have a little bit of leeway. I want to kind of define a little narrow because it does take– a high cost claim come in and we’re eating into those really fast.

Senator Jim Dotson But as of the moment, there’s roughly $200 million in fund balance to help address those. We’re not building on that fund balance, but we’re not dipping into it enough to where we can’t make it to January and start collecting additional premiums based off planned design changes. 

Grant Wallace Correct. 

Senator Jim Dotson Thank you. 

Representative Robin Lundstrum Members, do you have any other questions? With the indulgence, I would like to hold this over a little bit. We need to catch this on– I’d like to see what’s going on next month and the next month. 

I’d like to avoid dipping into that fund balance too significantly and I’d like to hear what your results are on those that are having cancer, the one off thing. I’d like to get some more information on that. So could we ask you to come back? Would November work or December to come back and give us an update? 

Grant Wallace We’ll come back at any time that you ask. 

Representative Robin Lundstrum Hang on just a second. Staff recommends, or there’s two ways to do this. You could come back to this committee or we could ask that a motion to send it to the EBD committee and have them review it and then come back that way. I would entertain a motion either way. I think the EBD committee is a good fit for this. I would entertain that motion. Could I get that? I believe Representative Burkes. All right. And I have a second from Senator Dotson. 

Let’s move this to the EBD committee and take another look at a little deeper dive, and then you can keep us up to date that way. We have a motion and we need a vote. All in favor? Opposed? All right. We’ll see you in EBD. Thank you. All right. Thank you, staff. We do need a motion to receive that in this committee. To file a report. So moved. And a second. Second. All right. All those in favor? Opposed? Thank you. All right. We received that. Okay. 

Having no other business come before this committee, we will see everybody again on November 13 and 14. Thank you for your work today.