Arkansas Legislative Council
December 19, 2025
Representative Les Eaves Members, if you could go ahead and grab your seat, we’ll get started. All right, calling this meeting to order. Good morning, members. Glad to see everybody here. If we could at this time recognize Representative Les Warren for the prayer.
Representative Les Warren Dear heavenly Father, we thank you so much for this day. We especially thank you for the season, celebrating the birth of Christ and Father what that means to each one of us. We thank you for this incredible state that we get to come and serve. We ask that you would guide everything that we do, that what we do will be pleasing in your sight. Father, we ask that you help us be aware of those less fortunate around us, and especially during this season, so that we can look for opportunities to be your hands and your feet. Be with us now. We pray all these things in Jesus’ name. Amen.
Representative Les Eaves Members, first thing on the agenda is approval of the minutes from last meeting. I need a motion to adopt. Motion. A second. All those in favor say aye. Opposed. The ayes have it. At this time, we’re going to recognize Dr. Carlos Silva for the presentation of the November 2025 revenue report. Dr. Silva, you’re recognized.
November Revenue report
Carlos Silva Thank you, Mr. Chairman. Carlos Silva, Bureau of Legislative Research. And today we’re presenting the November 2025 revenue report. That’s the fifth month of this fiscal year. As we have a gross collections of $3.31 billion or $58.9 million above our last fiscal year to date for those first five months. That’s 1.8% above those first five months of last fiscal year.
As we move down, you see the last line here, we have $2.82 billion in net available for distribution. There’s also $81.2 million above the first five months of the last fiscal year. And there’s a 3% increase there when compared those two fiscal years.
As we look into page number two, we will find the cumulative deviation from DFA net general revenue available for distribution forecast. And you can see here, we moved from $90.5 to $108.7 million. So we have an increase there above the forecast for this month as well. Still progressing all the way from our September number from $73.9 million.
As we move from page number 3 and page number 4, we’re going to have our general revenue collections. And page 5 and above, we have our special revenue collections. In general, there’s not many movements here, other than we have some of those extensions that start showing up on this month.
And when we talk about what is going on now in the nation and in the state, we start receiving some updates again from the federal government after we have some of the agencies collecting data. And we saw unemployment in the nation has increased from 4.4 to 4.6.
We also received the data from the CPI. It has slowed down to 2.7 for the headline and 2.6 for our core. When looking to the state of Arkansas, we have data from September. That’s what we have at our unemployment, 3.9%. But as you look into more detail there we have seen that number of individuals working has increased by over 22,000 individuals. So we’re still going to be looking to this. We’ll have some, a gap on that, like I have said from the month of October. Now we have November. We start receiving more data for the state of Arkansas. And we keep the members updated in the new calendar year.
Representative Les Eaves Thank you, Dr. Silva. Members, any questions? Representative Wooten, you’re recognized.
Representative Jim Wooten Doctor, relative to the first page, I noticed corporate income tax refunds are down, and the individual income tax refunds, the last item, are down. Does that have to do with the change in the filing date?
Carlos Silva What does this have to do as well is also the percentage change that we have done, right. So we have changed the rates, so now we have to collect less. So we’re going to have less, as well, on those refunds.
Representative Jim Wooten So it involves the tax cuts and the late filing?
Carlos Silva That’s exact, sir.
Representative Jim Wooten Follow-up, if I may. There’s an awful lot going on at the federal level that could have an impact upon us. Let’s take, for example– and my question has to do with the forecast relative to it. The economic measures, the farmers are receiving 12 billion. That’s just $50 an acre and they lost 243. But that’s money coming into the state. That’s one.
Number two, there’s talk of a $1,500 to $2,000 per person check coming from the federal government to all of our citizens. The president announced the other night $1,776 per military person. And then we have the tariffs and impact of that. And in the last couple of times– and I gave you a break last month, I wasn’t here and didn’t ask you the question about the tariffs. But are you taking this money additional if it comes to bear into consideration in the forecast? And how will that impact our economic wellbeing?
Carlos Silva I can talk about the general. I cannot talk about the forecast, the forecast from the agency. So I can’t talk about. The agencies might want to talk about that. But if you look into the difference between the forecast and, on the second page here, we have $108.7 million above forecast.
But within the forecast, we have $185 million above, if you can say, right? So a total of $293 million. So if you end the fiscal year as of today, there’s $294 million above. You know, of course we have six months to go. But if things continue this trend, that’s how much we would have.
Representative Jim Wooten I realize what it says here. But what I’m asking is, Will this have an economic impact upon the economy of the state on the plus side, on the good side? But yet with the farmers losing $243 an acre versus getting only $50, that still impacts them. But my point being, will the per person income increase with the $2,000, what type of impact will this have on our forecast? Do you know?
Carlos Silva Okay, so there’s no computation on how that $2,000 would impact the state. But we can expect that to be positive, right? We have, in the short term, some positive things that could happen within that that would impact this fiscal year. Yes, sir. So assuming that money would come out within this fiscal year, we have some positive impact here. And we’d expect this to move in a positive direction faster than what we have right now. But again, assuming that that come in within this fiscal year.
Representative Jim Wooten Will you take that into consideration in the forecast?
Carlos Silva The forecast is from the agency, so I might need to talk to the agency. Yes, sir.
Representative Jim Wooten But will the agency take that and should take that into consideration?
Carlos Silva I don’t think I can respond to the agency, sir.
Representative Jim Wooten Okay. I apologize. All right. Director Hudson. Mr. Chairman, could the director come forward?
Representative Les Eaves Good morning, Mr. Hudson.
Jim Hudson Merry Christmas, everybody. Jim Hudson, Secretary, DFA. I heard the question. We’re going to present a revised forecast or an updated forecast– I don’t know if it’ll be any different– around February 1. We have to do that in advance of the fiscal session.
So at this time, I really can’t speculate as to what the next forecast will look like. I will tell you that when we do compute the forecast, we look at actuals. We look at what’s actually going to be happening. I think it can always get a little dicey if you’re just paying attention to what’s in the headlines, because some things just may not come to fruition.
Generally, I think at this stage, I would say that I’m no less optimistic about what the remainder of FY26 is looking like compared to what the forecast we had for it in May when we prepared the last forecast.
Representative Jim Wooten But if it does come to fruition, you will take that into consideration? That’s a considerable amount of money, $2,000 a person or $1,500, and then $1,776, and then the $12 billion, our portion of that.
Jim Hudson It would certainly have a stimulative effect. Question being timing of that. Would it be hitting in FY26 or would it be hitting in FY27? Those are the things we’d have to look at.
Representative Jim Wooten Thank you, Mr. Secretary. Thank you, Mr. Chairman.
Representative Les Eaves Thank you, gentlemen. I appreciate the answers. Members, any other questions? All right, seeing none, that takes us down to item F1, Administrative Rules. And I recognize Representative Matthew Shepherd. You’re recognized.
Rules Committee report
Representative Matthew Shepherd The Administrative Rules Subcommittee met on December 18. The Subcommittee filed a report from the Executive Subcommittee concerning the review and approval of an emergency rule. The Subcommittee received agency updates on outstanding rulemaking from the 2023 regular session and filed agencies’ monthly written updates on rulemaking for the 2025 regular session.
The Subcommittee accepted the recommendations of the Division of Elementary and Secondary Education concerning the extension and repeal of rules pursuant to Act 781 of 2017 and Act 65 of 2021. And all rules were reviewed and approved as noted in the report. And I move adoption of the report.
Representative Les Eaves All right, thank you. Members, any questions on this item? All right. Seeing none, we need a motion to adopt the report. Motion. Second? Any discussion? Seeing none, all those in favor, say aye. Opposed? The ayes have it. That takes us down to item 8– excuse me, item 7. Hospital Medicaid and Developmental Disability Study. I’m going to recognize Senator Jane English. You’re recognized.
Hospital Medicaid and Developmental Disability Study report
Senator Jane English Thank you. The Hospital Medicaid and Developmental Disabilities Study subcommittee met Monday to hear testimony on the following items. Overview of current status of TANF, an update on reimbursement rates under the Living Choices Assisted Living Waiver by DHS. Subcommittee met again on Thursday to discuss the Meant For More summit and the implications of benefit cliffs. I move adoption of the report.
Representative Les Eaves Thank you, Senator. Members, any questions on this item? Seeing none, do we have a motion to adopt? We have a motion. Second? Second. Any discussion? Seeing none, all those in favor say aye. Opposed? The ayes have it. Lottery Oversight. Your report is going to be given by Representative Justin Gonzales. You’re recognized.
Lottery Oversight report
Representative Justin Gonzales The Lottery Oversight subcommittee met on Monday and heard testimony regarding the Office of Arkansas Lottery monthly disclosures and directors annual reports, Arkansas Division of Higher Education Scholarship recipients reports, and received recommendations from the Arkansas Academic Challenge scholarship program. The subcommittee adopted the annual report and the report is attached. I move adoption of the report.
Representative Les Eaves Members, any questions on this item? All right, seeing none, we have a motion. Can I get a second? We have a second. Any discussion? Seeing none, all those in favor say aye. Opposed? The ayes have it. That takes us down to the Peer Committee. Senator Dismang, you’re recognized.
Peer report
Senator Jonathan Dismang Thank you, Mr. Chairman. The Peer Subcommittee met on Thursday, December 16. The subcommittee received reports, reviewed requests and approved the following various temporary appropriation and Infrastructure Investment and Jobs Act appropriation.
One item in the report is marked as held, C1, a $2.5 million fund transfer request by Environmental Quality for the used tire program. Another item failed to receive an action. That was F14, a $7 million appropriation request by Agriculture for the Maumelle watershed project, or purchase. Both items have been pulled from consideration by the agency request. I move for adoption of the rest of the report.
Representative Les Eaves Thank you, members. Any questions? All right. Seeing none, we have a motion. Can I get a second? Second. All right. Any discussion? Seeing none, all those in favor say aye. Opposed? The ayes have it. Review Committee. Representative Cavenaugh, you’re recognized.
Review report
Representative Frances Cavenaugh Thank you, Mr. Chair. The Review Subcommittee met on Tuesday and reviewed methods of finance, discretionary grants, one RFQ request, and services contracts, and received regular monthly reports. One contract was held pending further information from the agency under out-of-state contracts.
Contract number 7 for out- of-state contract, DHS DCFS with Evident Change, was held until Legislative Council pending further information and discussion. Mr. Chair, on Tuesday, the subcommittee also received one supplemental agenda item, Department of Commerce AEDC discretionary grants, which were subsequently referred to full Arkansas Legislative Council for review today. It is our understanding that there are some changes to the grant allocations and the revised schedule is on your desk.
Mr. Chair, I move for adoption of the report, including review of the DHS contract with Evident Change and the revised discretionary grant submitted to Legislative Council.
Representative Les Eaves All right, thank you for that report. Members, any questions? Representative Rose, you’re recognized.
Evident Change contract discussion
Representative Ryan Rose I’d like to make a substitute motion that we put that Evident Change contract to a separate vote.
Representative Les Eaves All right, hang on to that one second. Members, any other questions on the rest of the report? All right. Seeing none, just one moment. Representative Rose, your motion is to adopt the rest of the report except for the report that concerns Evident Change?
Representative Ryan Rose That’s correct, Mr. Chair.
Representative Les Eaves All right. All right, members, you’ve heard the substitute motion. We have a second? Do we have a second?
Representative Frances Cavenaugh Just for clarification. Okay, so is the motion that he’s doing, he just wants a separate vote on Evident by itself?
Representative Les Eaves That’s my understanding. Representative Rose, I’ll let you answer that question if you push the button.
Representative Ryan Rose Say again, Mr. Chair.
Representative Les Eaves Representative Cavenaugh, ask your question, if you don’t care.
Representative Frances Cavenaugh Representative Rose, are you just asking for a separate vote completely on Evident Change?
Representative Ryan Rose That’s correct.
Representative Frances Cavenaugh Okay, so we’ll do two different votes. Okay, thank you.
Representative Les Eaves Okay, members, as I understand the motion, there’ll be two votes. The first vote will be a motion to adopt the entire report without Evident Change. Then we’ll take a second vote on whether we want to review or not review Evident Change. Everybody clear with that? Representative Cavenaugh.
Representative Frances Cavenaugh Don’t we have to vote on his substitute motion first?
Representative Les Eaves No, that is the substitute motion.
Representative Frances Cavenaugh Okay, thank you.
Representative Les Eaves All right. So the first vote, to be clear, the first vote we’re taking is to review the entire report except for Evident Change. Is that clear? Anybody have any questions? Representative Beaty, you’re recognized.
Representative Howard Beaty Just a point of clarification, his motion was to have a separate vote. Do we not have to approve that motion for a separate vote first before we can proceed to have two votes?
Representative Les Eaves No, sir.
Representative Howard Beaty To have a separate vote. He’s got a motion we have to act on.
Representative Les Eaves The motion is to adopt the report without Evident Change and then take another vote, a separate vote, about Evident Change.
Representative Howard Beaty That’s not what the member said.
Representative Les Eaves Representative Rose, do you want to chime in here?
Representative Ryan Rose I defer to you procedurally, sir. My suggestion was a separate vote for Evident Change and retain all the rest of the review information in the initial vote.
Representative Les Eaves Yes, sir. Okay. So that’s what I said. The first vote would be to take up a vote on whether we want to approve the entire report without Evident Change. We’ll take a second vote that will decide whether or not we review or not review, separately and on its own, Evident Change.
Representative Howard Beaty After his clarification, I’m good with that, Mr. Chair.
Representative Les Eaves All right, members, so the vote we’re taking, again, is the entire report to be reviewed without Evident Change. That’s the first vote. Everybody good with that? And we already have a second on that. So all those in favor, say aye. Opposed? The ayes have it. Report is adopted with the exception of the portion that contains Evident Change.
Now his motion would be to take a separate vote on whether or not we want to review Evident Change. Representative Rose, is your motion to not review Evident Change?
Representative Ryan Rose Excuse me. Sorry. My motion was just simply for a separate vote, but I do have discussion at the proper time.
Representative Les Eaves Yeah. Okay. Thank you. Senator Hester, you’re recognized.
Senator Bart Hester My motion is that we do review the contract with Evident Change. Motion do pass.
Representative Les Eaves I think that’s the same thing Representative Rose is asking to review or not review. So, Senator Hester’s motion is to review the contract. Everybody understand that? That’s the motion we’re taking up now. We have a motion by Senator Hester to review the Evident Change contract. Do I have a second? Second. We have second. Any discussion? Representative Rose.
Representative Ryan Rose Yes, sir. Thank you, Mr. Chair. Appreciate the latitude. We’ve discussed this kind of at length over the last couple of ALC meetings in November and December. The long and short of it is, this contract is additional scope and expenses to DCFS for new work from this vendor.
As we discussed in Review, this vendor has more or less, for lack of a better term, vertically integrated themselves into DCFS. They recommend and provide consulting to implement and provide tools. We pay them for the consulting, we pay them the tools, and then we pay to grade how the tools function.
This has been an expansion over the last several years of their scope and our reliance on them. They now have 11 employees in the state of Arkansas. If you remember the Baxter County case with the 29 missed reports, we have discovered since, the division has 341 other similar cases. Eight of those have been referred out.
And Evident Change and their practices have been right in the middle of all of this. The report’s not entirely done. My concern is that we should not just keep throwing more money while we’re trying to figure out what the root of that issue is.
I think that Director Wright and her capable leadership team can look internally, try and find some of the issues that are causing these problems instead of being completely reliant on an out-of-state vendor. Representative Bentley filed an interim study proposal to investigate the hotline and the call center and has a working group for that. I think that’s going to reveal a great deal.
And the final thing I’ll say is that when I met with the vendor, when we interviewed in committee this week, they had said that they want to put their client, our state, in a position to where we don’t need them, where we can fire them. But when I asked for an answer on an off-ramp, is there a plan for an off ramp, they never would answer it.
Because there’s not a plan for an off ramp. The plan is to continue to deeply entrench themselves in DCFS and expand their contracts and their scope. So my suggestion to each one of you would be a no vote on this contract. Thank you very much, Mr. Chair.
Representative Les Eaves Thank you, Representative. Representative Cavenaugh, you’re recognized for discussion.
Representative Frances Cavenaugh Thank you, Mr. Chair. Although I’ve always been a proponent that we need to do as much inside the agencies as we can, this is a problem with the hotline that we’ve been having now for years and years, going into decades. We have lost children because of our inability to run the hotline correctly.
I do not believe that it is something DCFS can fix internally. Because DCFS has been part of the issue with the hotline. And I think for us to be able to know what the problem is, so that Representative Bentley can move forward with her study, she needs outside eyes looking at what the process is in DCFS and DHS on the hotline.
That’s what this scope will do. It will actually start doing quality control already on the hotline. They already do the middle and the end, but they don’t do the beginning. Although I’m not a proponent to spend money recklessly, as my record will show, over the eight years that Evident Change, even under their other name, they’ve only spent 11.6 million. And I know I say 11.6 million only.
So that’s about $1.4 million a year that they’ve been paid for multiple services in eight years. In the scheme of things with DHS’s budget, and with the other contracts that are in there, that’s not an exorbitant amount of money. For me, if they can help us find a way to stop the problems that we currently have in our hotline, the $300,000 amendment is worth that. Because if we can save one child, I’m glad to have spent that $300,000. And that’s my take on it, sir.
Representative Les Eaves Thank you. Representative Wardlaw, you’re recognized.
Representative Jeff Wardlaw Mr. Chair, I’ve been out town all week and I’m awful slow. But I’m trying to read this. And it shows the total projected here at 5.7 million and some change. We don’t have to get that specific. And under these amendments that Representative Rose just referred to, as he referred to their relationship, they’ve only spent 2.3.
So I don’t know if staff or department could answer that question, but it seems like we’re on track with the current contract. And we’re not amending it outside of what we agreed to from the beginning. So I really don’t understand the issue. So if somebody could–.
Representative Les Eaves Well, we’re in discussion, so I can’t get anybody to the table. Representative Cavenaugh has been dug in pretty deep. If she wants to respond to that, she’s welcome to.
Representative Jeff Wardlaw We can ask staff, our staff.
Representative Les Eaves Give me just a second. Representative Wardlaw, staff says that, you’re reading from the contracts. That’s also all the information they have as well. So they’re reading the same thing you’re reading.
Representative Jeff Wardlaw Thank you. That was my point.
Representative Les Eaves Yep, thank you. Well made. Representative Cavenaugh, are you good? Members, any other discussion points? All right, seeing none, we already have a motion and a second to review the Evident Change contract. All those in favor of reviewing the contract, signify by saying aye. All those opposed? The ayes have it. Thank you, members.
That takes us down to item 14. Representative Warren, Personnel. Representative Warren, push your button, please. Thank you, you’re recognized.
Personnel report
Representative Les Warren Thank you, Mr. Chairman. The Personnel Subcommittee met on Wednesday, December 17, and reviewed three growth pool requests, a miscellaneous federal grant, and four reports that required no action.
The committee also approved item 4, the reassignment of 51 positions from the Division of Correction to the Department of Correction, Shared Services for the new recidivism reduction system. I’ll be glad to answer any questions and move to adopt the report at the proper time.
Representative Les Eaves Thank you. Members, any questions? Representative Wooten, you’re recognized.
Representative Jim Wooten Thank you, Mr. Chairman. Representative Warren, this has to do with the positions that were approved for the Agricultural Department. There were three of them, I think. But my question has to do, are we still holding in abeyance Act 796 where it covered those that have been vacant for over two and a half years? Are we still holding that hostage, if you will, relative to how it impacts the benefits of employees?
Representative Les Warren All right. Just a moment. Representative, OPM and DFA are the ones that have the oversight on that. And they’re supposed to be looking at it on a continuous basis. And that’s all I can give you on that one.
Representative Jim Wooten So it’s DFA?
Representative Les Warren And OPM.
Representative Jim Wooten Okay. We passed that law. It became an act two sessions ago, and now we’re holding it in abeyance. Are we still holding it and not enforcing the two and a half year, that they can’t carry forward any position that’s vacant for over two and a half years? It has to be relinquished, given up.
Representative Les Warren I will have to get you in touch with some other folks that can give you more details on that. That’s all I know on that one.
Representative Jim Wooten All right. Thank you, Mr. Chairman. Thank you. Mr. Chair.
Representative Les Eaves Senator Irvin, you’re recognized.
Senator Missy Irvin Thank you, Mr. Chair. I just quickly wanted to express my appreciation for F12, the attachment. I appreciate them addressing that funding issue on behalf of the citizens I represent in Faulkner County
Representative Les Eaves Thank you, Senator. Members, any other questions on the Personnel report? All right, seeing none, we have a motion. Can I get a second? We have a second. Any discussion? Seeing none, all those in favor, say aye. Opposed? The ayes have it.
Members, that takes us down to item H1. This is Arkansas Children’s Hospital and UAMS Arkansas Infant and Child Death Review Panel. We’re going to need a motion to refer this review program to the Senate Interim Committee on Children and Youth and the House Committee on Aging, Children and Youth and Legislative Affairs. We have a motion. Second? Second. Thank you. Any discussion? All right, seeing none, all those in favor say aye. Opposed? The ayes have it.
Takes us down to item 2. This is a review of the partial equity ownership agreement with the Arkansas Teachers Retirement System. And we’re going to need a motion to file as reviewed. Motion. A second. Any discussion? Seeing none, all those in favor say aye. Opposed? The ayes have it.
That takes us on item 3. This is Department of Ag. This is just their report on the 2026-2027 biennium plan of work for the state of Arkansas water waste disposal and pollution abatement facilities. I need a motion to give favorable advice. Motion second. Representative Ladyman, you’re recognized.
Representative Jack Ladyman Can we ask questions on this? If the department could come down, I had a question.
Representative Les Eaves Can we get someone down from the Ag Department? Good morning. If you would just introduce yourself for the record, you can begin with the answers.
Chris Colclasure Yeah, Chris Colclasure, director of the Natural Resources Division at the Arkansas Department of Ag.
Arkansas water / wastewater facilities discussion
Representative Jack Ladyman Yeah. Thank you for being here. I’m not opposed to the report. I just had a question about, I was reading this and I think it’s on page 5 where it talks about the Sparta and the alluvial aquifers and how that’s being pulled down.
I know that’s been a problem for many years, but that’s very important to Northeast Arkansas. Well, all of the Delta really. Rice is one of our biggest exports and that affects that. But I know that you all and a lot of people have worked to convert from groundwater to surface water for irrigation of all crops, but specifically rice.
And I was just wondering how that’s going. Because this has been discussed and worked on for many, many years. So can you kind of give us an update on how that is going, where it’s at, what progress we’ve made?
Chris Colclasure Yeah, so I don’t have the exact numbers. But we have two major tools that we’ve been using for that conversion. One, we have a state tax credit program that incentivizes on-farm storage, such as reservoirs, pipelines, things like that.
So we have that program that’s running all the time in the background. And then we’ve got the investments that we made in the two large irrigation projects that, if they’re fully functional, they’ll irrigate about 500,000 acres with surface water. So those are our two big tools that we’ve been using.
And then we’ve got other partners such as NRCS that also incentivizes folks to convert. And so a lot of work going on. Don’t have the exact numbers, but there is progress being made.
Representative Jack Ladyman Well, I know some of the farmers in northeast Arkansas have done this. So what’s the overall response by farmers in the state to completing these projects or working with the department?
Chris Colclasure Yeah, I mean, overall there’s been a good response for that. Obviously, we’re trying to market our tax credit program, for example, so that more folks are aware of that as a tool and a resource. We also produce an annual groundwater report each year where we’re monitoring the actual groundwater levels, and then we push that information out. And that’s meant to be educational so that folks understand more about the particular issue.
Representative Jack Ladyman Thank you for that. Mr. Chairman, can I ask one more question? On page 11, where it’s talking about the water and wastewater treatment projects and you have four projects listed there. I know as well as a lot of people that we’ve got major problems with water treatment and primarily wastewater treatment in municipalities, especially small municipalities.
But what I was wondering, and I know we have limited funds, but I’m not sure that all of these small towns are aware of what to do or how to do it to get their problems fixed. Yeah, so if there’s a small town out there that maybe needs a water treatment system or expanded water treatment system, what is the procedure? I mean, where do they go? Can you just kind of tell us that publicly so that maybe if there’s people listening that needs to know that.
Chris Colclasure Yeah, you bet. So if they’re going to apply to us, and there’s multiple funders of water and wastewater, but I would say we’re primarily the main one that folks go to. What we ask of them is, one, that they submit a Water and Wastewater Advisory Committee application. And there’s a group of us that all fund water and wastewater that get together once a month to look at all of the needs and make recommendations. And this is just a preliminary recommendation.
So for example, it may be that you need to apply to us or that you need to apply to Department of Commerce or you need to apply to USDA Rural Development. We also ask that they submit a project priority list application. And that just allows us to rank projects so that we understand what are the issues that they’re facing, what are their needs. And then ultimately, if we’re the ones that are going to fund them, then we’re going to ask for a funding application from them, just like USDA rural development or one of the other funders.
The other thing that I’ll say is we are actively presenting all the time to Water Wastewater Managers Association, Arkansas Municipal League, trying to get out there. We work with the Municipal League regional folks so that when there are issues locally, they know to come to us and a lot of different other entities across the state.
We also have technical service providers, folks that we work with. So for example, if a community may not understand how to go all the way through the application process, we can call a technical service provider that can go out there and help them. Rural Water Association would be one of those. Communities Unlimited would be another that can actually go out and walk them through the process and get all their stuff in.
Representative Jack Ladyman I know there’s a lot of work that y’all have done, a lot of other people. Municipal League and others have done good work on this. But it’s still very confusing to a small town mayor on where do I go. So what would you suggest as their point of contact if they’ve got an issue? I mean, should they come to Natural Resources? Should they go to the Municipal League? What would you suggest for their first point of contact?
Chris Colclasure Yeah, I would suggest that they come to us because we can steer them.
Representative Jack Ladyman Department of Ag or Natural Resources?
Chris Colclasure We’re a division of Department of Ag. So if they’ll come to the Natural Resources Division, if they contact us, I don’t mind giving my business card. And if they contact us, we’ll get them all the information that they need to apply. I have a person on staff that works with communities every day, just trying to help them through that process.
Representative Jack Ladyman Alright, thank you very much. Thank you, Mr. Chairman.
Representative Les Eaves Thank you, Representative. Senator Payton, you’re recognized.
Borrowing vs drawing on surplus
Senator John Payton Thank you, Mr. Chair. And I think I’m probably going to want to ask Secretary Hudson to come to the table. And I may embarrass myself, but if I understand this correctly, Arkansas Natural Resources Commission’s asking to borrow $48.5 million. They call it issuing bonds. And I’m sure that these infrastructure projects are needed and necessary and probably warranted.
But my question to Secretary Hudson is, why do we have to borrow the money? We’ve been running surpluses. And as a state, why wouldn’t we budget this in a way that we don’t have to borrow the money by issuing bonds. It just seems like we’re running up our credit card debt instead of paying our way. So can you speak to that?
And evidently this is an act that was passed in 2007, which back then I don’t think they were running big surpluses. So they probably had a reason to give this borrowing authority. But I guess my question is, since Secretary Hudson typed a letter here saying that he doesn’t think it will put an undue hardship on any agency to borrow this money, would it put an undo hardship on the state to pay it out of our surpluses?
Jim Hudson Well, obviously, Jim Hudson, Secretary DFA. That’s a policy choice to make between the General Assembly and the governor as to how we’re going to allocate our surpluses. This is a long standing bonding program. As you know, a percentage of our overall budget size of the state’s budget, Arkansas is one of the least indebted states in the nation, one of the most well reserved states in the nation.
So this particular bonding program that is a general obligation bond that’s very targeted much like the highway program is, it does not strain our resources. We do cap the amount of the state’s budget that goes to debt service for this at roughly $15 million.
As I looked at it, and we had our folks just kind of do the cash flow analysis and figure out what the payback would be on bonds being issued consistent with the historical levels of issuing bonds, it would not stretch us. It would not impair the state’s budget, would not take money away from state agencies. So we can meet the obligations.
Senator John Payton Okay. And so when you say that Arkansas compared to other states, that our debt service or indebtedness is not out of line. Have you compared that to specifically states that have a balanced budget amendment? Because I don’t see how we can call it a balanced budget when we spend more than we took in and we do it by borrowing money.
Jim Hudson We don’t spend more than we take in. We don’t do that. That’s not an accurate statement.
Senator John Payton Well, if we issue bonds, then it’s because we need the cash flow.
Jim Hudson We issue the bonds in order to be able to provide capital to fund these projects. But that’s not the state spending money on the issuance of the debt, the general obligation bonds.
Senator John Payton Okay, well, I hope we don’t teach our citizens to budget their personal budgets that way, but thank you.
Representative Les Eaves All right. Senator Murdock, you’re recognized.
Senator Reginald Murdock Thank you, Chair. Going back to the previous representative that was speaking with Mr. Colclasure, I’d like to echo what he was saying, but also publicly give credit to you and your organization, your entity, for your involvement. As you state with communities, you’ve been in my district, specifically Helena-West Helena.
You came down and met with us on some very publicly and some tough issues. So I did want to say thank you for that and that though there is still the need for those lower capacity situations, there’s also a presence. And I want to thank you for that.
Representative Les Eaves Thank you, Senator. Representative Ladyman, you’re back in. You’re recognized.
Representative Jack Ladyman Thank you, Mr. Chairman. Secretary Hudson, Senator Payton touched a thought when he asked his question. So if we issue bonds, is there a cost to the state for the cost of money, interest, whatever you want to call it, the cost of getting that money? Does the state pay for that?
Jim Hudson The state pays for a portion of that. Some of these, the bond proceeds, are used to generate loans to local systems. Mr. Colclasure can speak more to what the relative mix is on that and they pay those loans back. Then we get, obviously, money coming back in that can go toward the debt service as well.
But we have allocated roughly $15 million of general revenue on a recurring basis. It’s not something new. None of this is new. This has been going on for quite some time, that we use to both pay for the debt service and also issue grants as well for water projects. It’s a combination of both.
Representative Jack Ladyman Well, I’m not opposed to the bond. But my question here is if we’re borrowing money and paying cost of money and we have $1 billion surplus, why don’t we loan our money and get that cost of the money into our state accounts? We just passed an energy bill to allow one of our major energy suppliers to do something similar to that. And they came to us and said that they would save a lot of money by reducing their cost of money. You understand what I’m saying?
Jim Hudson I understand what you’re saying. It’s just a question of choices and how you want to use the capital. That money that we have in surplus is not just setting idle. It is being invested. And we’re generating rates of return to the state for that, I think in excess of $400 million last year.
So, I don’t know that we’re going to necessarily get that rate of return if we start generating some loans, which may very well be impaired loans in some cases. Because sometimes these folks can’t pay the loans back.
Representative Jack Ladyman I understand. I understand the risk and I understand the income that we’re getting already. I just say that. I think we ought to be mindful of that idea.
Jim Hudson We’re very mindful, I think, of how to best utilize the capital. And I would say that the credit worthiness of the state of Arkansas is exceptional. We just had an increase in our rating by Standard and Poor’s, so I think we get a very attractive rate to borrow for these bonds, to issue these bonds under. And it is a much better rate than any of these local municipalities could secure standing on their own.
Representative Jack Ladyman Well, that’s great. And I know you’re right about that because I talked to people from other states and they look at Arkansas as a good state, somebody that they can follow.
Jim Hudson And partly because we have those reserves. And so by not spending the reserves and having reserves in place, they look at that to assess the adequacy of our capital reserves and to gauge what our credit worthiness is.
Representative Jack Ladyman Thanks, Mr. Secretary. Appreciate it.
Representative Les Eaves All right, members. We have one more. Senator Hickey, you’re recognized.
Senator Jimmy Hickey Thank you, Mr. Chair. Excuse me. My voice is not real good. One other thing of course, we’d have to pay a higher interest rate on the bond. Senator Payton does have a point. But we also have origination fees and things to that of issuing those bonds, right?
Jim Hudson Yes, sir. There are origination fees with it and underwriting fees that go with it, just like any other bond issuance.
Senator Jimmy Hickey So it’s really more than the rate. We also have to take that into account. And like I say, Senator Payton does have a good thought there that I’m not for sure. And I don’t know about loaning the money, but if we’ve got the money and we can– I don’t know that it makes a lot of sense for us if we can get– if we’re not going to get the rate that we’re putting it out for plus the origination, why we wouldn’t just look at doing this on most of our bonds? Again, I kind of agree with Senator Payton on this.
Representative Les Eaves All right, thank you, Senator. No other questions. You guys are excused. Thanks for coming down. Members, we have a motion and a second. We’ve gone through this. All those in favor signify by saying aye. Opposed? The ayes have it. Alright, members, the only thing left on here is several reports. I’ll give you a second to take a look at those and see if you have any questions. Senator Hammer, you have a question?
Senator Kim Hammer Thank you. I’d like to get the Insurance Commissioner to the table, please, for number 4.
Representative Les Eaves Can we get someone from the Insurance Department down, please? If you would just introduce yourself for the record and we’ll get started with the questions.
Daniel Holland Good morning, Daniel Holland, Arkansas Insurance Department, PBM Division.
Rule 128 and PBM report
Senator Kim Hammer Good morning to you. Far left over here. Just a question about your letter that you put out. Is it in Rule 128 that requires you to collect one year’s data in order to provide the report? I’ll just refresh my memory whether that’s a requirement or if that’s just something that y’all have decided one year is the time frame.
Daniel Holland Well, I think Rule 128 started where we had reporting for half of a year. And then we got reporting for the other half, this next round of reports that we’ll get from 2025 after Rule 128 had passed, after we had issued some corrective action plans to plans that seemed to be deficient.
And now that’s while we’re analyzing the data that we receive in March. I don’t think there’s anything in the rule that has any kind of requirement on a timeline like that for a certain report. Is that what you were asking, if there’s a timeline for a report?
Senator Kim Hammer I note in your letter that you have already determined that there are some activities that reveal that some of the PBMs are reimbursing under NADAC. Is that correct?
Daniel Holland That’s correct.
Encouragement of enforcement actions
Senator Kim Hammer Actions that have been taken against those PBMs would include what, as of this date?
Daniel Holland So when we get complaints from pharmacies that are against those PBMs paying under NADAC, we issue penalties, possibly get consent orders. There hasn’t been a large action under Rule 128 taken. It’s just enforcement of the NADAC statute. When we get the Rule 128 reports in March, our hope is that those deficient plans have increased their reimbursement rates so we can determine how many plans are actually deficient and then target any kind of administrative action to those plans once we get that info.
Senator Kim Hammer What would you anticipate that the time frame between the end of March when you’ll have one year’s data will be before you will actually have an across the board application of all the PBMs?
Daniel Holland It’ll be a shorter timeframe than what we’ve seen so far. Everyone– and by everyone I mean health plans and PBMs are more familiar with what’s happening, more consensus across the board on what is actually being reported and what Arkansas is looking for here.
So I don’t think it’ll be a situation where we need six months to a year again after we get the March data. It’ll be pretty quick. It’s a little bit hard to say how long it takes for our consultants to look through and compare the transactional and reimbursement data. But I would imagine, once we get that data in March, it’ll take us two or three months to review that. And then we’ll have a final number of deficient plans that are still operating in Arkansas.
Senator Kim Hammer Okay, last couple of quick ones. You’ve got two on the back that are refusing to cooperate. I notice Navitus and Express Scripts. At least my interpretation of the way your letter is written is that these have objected. Have they turned over the information at this time, as of right now?
Daniel Holland No, so Navitus has turned over some information. It’s just a portion of the plans that they represent, they don’t think that Arkansas has jurisdiction to get that reporting. So I’ve asked our consultants to go ahead and start analyzing what they do have and give me those results while we kind of figure out this self-funded plan problem.
For Express Scripts, we’re working with them. Hopefully we don’t have to resort to administrative action or subpoena to get information. I think we’ll probably be able to come to a resolution. But as of today, we have not gotten what we’re seeking.
Senator Kim Hammer Anything that prohibits you from suspending their ability to operate because of their lack of cooperation?
Daniel Holland Not at this point. It hadn’t risen to that level. They are cooperating. We just have a disagreement about this one particular issue.
Senator Kim Hammer Okay, last thing I’ll say is budget hearings are coming up in April. I hope you have that report finalized before budget hearings and before the budget when we have the fiscal session coming up. A lot of pharmacies have been strung out waiting for this, and I would just encourage you to get that report. Once you get it, don’t make it three months and push it past the fiscal section, would be my encouragement. And I appreciate it very much. Thank you.
Representative Les Eaves All right. Senator Mark Johnson, you’re recognized.
Senator Mark Johnson Thank you, Mr. Chair. Senator Hammer covered some of the things that I’m concerned about. In one recent report– I want to say the last report– you brought up some information about PBMs that basically just didn’t even register with the department.
And to call the– I was trying to find a word to describe the relationship between the state of Arkansas and the PBM industry and troubling was the only one I could come up with that I would use in a public forum. But I’m concerned when if a plumber or a lawyer or somebody went out and tried to do business without properly being licensed through the state of Arkansas, I like to think that those boards would come down hard on them. And it seems at this point that the Insurance Department has not been real strong with them. And that troubles me.
We’re not talking about a million dollar industry. We’re talking about multi-billion dollar industry. So the longer we’re delayed, to Senator Hammer’s point, the more money these people make off the backs of the consumers and the pharmacists in our state. So is there some reason why this has taken– I think the Rule 128 went in, what, 14 months ago, 16 months ago? I don’t know. Last year, it was in 2024. I know that.
Is there any reason why it seems to take this long to do this. And when you say they’re being cooperative, yeah, they sit down at the table and drag this out over a period of time. And while that’s going on, the cash register is running on their part. Will there be any way to recoup their ill-gotten gain once a final determination is made that that indeed is ill-gotten?
Daniel Holland Yes, let me address the first part about the unlicensed PBMs. So from what I know, AID had never found a PBM that was operating without a license in previous years. We found these two in, I think it was September of this year. We issued notices of public hearing to both of those.
Both of those responded and we’re working on a consent order and they’re going to pay a penalty for those activities that they conducted while they were unlicensed. We’re certainly not going to let that go or not penalize a PBM who’s operating in Arkansas without a license under the PBMLA. I can assure you that that will not happen. And the very month that we found those PBMs doing that, we started that enforcement action.
As far as the timeline for Rule 128, some states, they just say, all right, this is what a cost to dispense is going to be here across the board. Or maybe they limit it to a certain classification of drugs for Medicaid and federally regulated plans. CMS does that. In Arkansas, our concern with the passage of Rule 128 was making sure that we didn’t increase healthcare costs for Arkansas residents unnecessarily.
So to address that, we did it this way. And we look at each individual plan, which there are thousands of and then each PBM that those plans hire. And then we take in a tremendous amount of data to make that assessment. So it’s a trade-off. So if we’re going to keep cost impact or we’re going to keep that as low as we can, we have to do it this way.
And we have to take in all this data, analyze it, and then make individual determinations for health plans and PBMs. That process just inherently takes longer than just saying, all right, it’s 10.50 across the board cost to dispense.
But I think the Insurance Department and this body as well felt that this analysis was the best way to address the problem without creating unnecessary cost impact to Arkansas residents. And that’s what we’re doing. And it does take a while. And I certainly understand the importance of this and understand the desire to have this happen quickly. I can assure you we’re working as fast as we can, but it does takes time.
Senator Mark Johnson This is an industry that if they don’t like what the state of Arkansas does as far as regulating them, their answer is to sue us. They didn’t like the vertical integration ban that we put on. That was Senator Hammer’s bill, which I was proud to co-sponsor. And so when it passed, when the governor signed, they decided, rather than comply, they would sue us.
So I’m just not real sympathetic– thank you, Senator– for an industry that, when you say we’re sitting at the table, we’re negotiating this. If they come in with clean hands and want to negotiate, that’s one thing. But they don’t have clean hands. Their hands are very dirty on this. So I ask you to do whatever you can, both for our local pharmacists and our consumers, to expedite what you’re doing. Thank you. Thank you, Mr. Chairman.
Representative Les Eaves All right. Thank you. Senator Murdock.
Senator Reginald Murdock Thank you, chair. And a lot of my concerns were voiced by the previous two senators. But just knowing from people that worked on this for many years– I’m right here in front of you. Look right. There you go– that’s worked on this many years that it’s been a problem.
And we as a legislature, we gave the teeth, the stick to the AID to protect us in this situation, that the legislature a few sessions ago did that. So it’s our hope that we would be expeditious in making sure that the intended users, at the end of the day of this is being affected, are our constituents and our small businesses. So we really, really need that to be taken care of in an expedited fashion, as the previous two senators mentioned. So, we’re patient but we’re also pushing.
So we really need help and really need to make sure that these things are taken care of and that they are complying. Because some of these are just compliance issues and they’re just deciding not to do it. And because the information that you’re getting will help you determine whether they’re playing ball fair, which we are constantly being told that they’re not. So please help us help our citizens. Thank you.
Representative Les Eaves Thank you. Representative Wooten, it looks like you’re the last one.
Representative Jim Wooten Thank you, Mr. Chairman. I’m going to try not to use my coaching voice. But we’ve waited and waited and waited on y’all to do something out there. Now, are we going to have to take more action, get more stringent? Do you not have the people? Do you not have the capability? Do you not have– what is the problem?
They’re yanking our pharmacist around. They’re yanking our constituents around. And we keep asking y’all to help us out and we don’t get any help. Now what’s the problem? Why can’t y’all give us a report on the number of agencies, on the numbers of PBMs that are creating the problem?
Daniel Holland Well, it’s not just limited to the PBMs creating the problem. So Rule 128 asks for data from PBM and from plans. So we have to incorporate both of those together. There’s not necessarily a problem right now with implementation of Rule 128 or with PBM enforcement actions.
We’ve done more enforcement actions this year than we’ve done throughout the history of the PBMLA or any of the PBM statutes. And we’re going to continue to do that. And I imagine that’s going to grow every year, since we’ve kind of revamped everything this year. But the amount of time that this takes is, it’s part of the rule. And it’s part of the way that this rule was passed. We want to take in the data before we make these decisions. And we want to make sure that our approach is very targeted and doesn’t unnecessarily increase costs, especially in 2025 where there’s a ton of uncertainty and there’s just increased costs across the board.
So we need to be very exact about how we do this. And that’s what we’re doing. As far as what we need, right now we’re going to hire another attorney to help me. I took over the entire division once some other employees resigned. So once we get that additional help, I think our enforcement efforts will at least double, probably more. But I don’t think that hiring anybody else is going to make this go any faster when it comes to Rule 128. This is just kind of what the rule requires. That’s what we’re doing. And we’re trying to do it to the best of our ability
Representative Jim Wooten Well, the question about employees, Oklahoma, I understand, has twice, two times as many people working on it as we do in Arkansas, maybe three, four times the rate. And, but my question, the next question is, if I may, Mr. Chairman, is how many PBMs are we talking about? PBMs, how many are we talking about?
Daniel Holland Well, I guess there’s around 70 that are licensed in Arkansas. As far as PBMs that are contracted with health plans that we found paying below NADAC, I think we’re talking about seven or eight. I don’t have that in front of me, but that’s an accurate ballpark. But it’s really that we have to look at the plan and the PBM. So, it’s hard to– I think, does that answer your question?
Representative Jim Wooten Do you have the legal capabilities to be able to yank their chain and get the message to them? They’re yanking the chain every day on our pharmacists, every day. Delaying payment, overcharging them in fees. And we had one situation where we fined them. And they still consistently violate the law. Why can’t you yank their chain? Why can’t you get their attention? Do we need to do something from a legal standpoint, from a statute standpoint, to give you all the capability to deal with the situation?
Daniel Holland I would say we are dealing with the situation. It’s a problem that’s happening across the country. The federal government runs into the same problems that states run into. I understand that it’s very frustrating and I certainly understand where the pharmacists are coming from. I believe what they tell me and I see that bear out in the complaints that we receive.
But we do have to do this a certain way. And PBMs are, they get protection of the laws just like pharmacists do. So we have to follow the law and it doesn’t happen very quickly, unfortunately. I understand where you’re coming from, and I certainly want these things to move as fast as they can. But there’s only so much I can do to speed these processes up.
Representative Jim Wooten Dr. Harris, do you have any comment? We’ve had this conversation going on four years, if not longer.
Jimmy Harris Jimmy Harris, insurance commissioner. Yes, Representative Wooten. We hear you. And we are taking a very careful data-driven approach to make sure that we identify the plans that are actually deficient and take proper action against those plans. Yes, this is very, very frustrating. It’s frustrating for us. It’s frustrating for pharmacists. It’s frustrating for patients.
I have 100% confidence in the direction that our PBM division is headed. I have 100% confidence in our personnel. As late as yesterday afternoon, I was reviewing attorney applications. We are actively looking for an additional litigator. Daniel’s very, very good. But yes, we need help. And we’re going to get help. We’re going to complete this analysis. I understand it’s been going on a long time. We have another exam going on. I think we’re going to have a really clear picture after the first of the year. So I’m looking forward to presenting that to everybody here.
Representative Jim Wooten Thank you. Thank you, Mr. Harris. Thank you, sir, and thank you, Mr. Chairman.
Representative Les Eaves Thank you. Alright, members, got two more in the queue. These will be the last two for this group. Representative ladyman, you’re recognized.
Representative Jack Ladyman Thank you, Mr. Chairman. Well, this may be off base. I hope I’m not, but what we’re talking about here. But the act, I believe, said that the pharmacies could not lose money. In other words, they wouldn’t be charged more by the BPM than they can sell it for.
When you’re doing an analysis on that, do you take into account the cost of doing business for the pharmacy? I mean, if I’ve got a business and I sell a product for what I pay for it, I’m not going to be in business very long. And I’m looking at a text I got here yesterday. A pharmacy up in my area of the state, been in business for 50 years, a family pharmacy, they closed their doors yesterday. Last year we had a fairly large pharmacy down in south Arkansas did the same thing.
These are perennial businesses, been around a long time. Something’s going on. If they’ve been in business operating, making a profit for 50 years, they probably know how to make a profit unless they’re restrained by government or regulation. So we do need to do this speedily. But I think we need to make sure that when we’re looking at this, that we put in the formula, what does it cost this pharmacy to dispense this drug that they’re buying?
They need to at least be able to charge for their cost because they’re still selling at a loss if their cost is not covered. So I just put that out there, and I understand it’s a big problem. And I think we’re probably maybe doing better than some other states, but we’re not doing good enough. And I appreciate what y’all are doing. But we need to really, really put a lot of emphasis on getting this done.
Daniel Holland Appreciate that. And that is something that we talked about. I talk to a lot of pharmacists about that. We’ve learned quite a bit about what those costs are on the pharmacies’ end. So that’s certainly something that we have learned about and we will consider.
Senator Rice’s birthday
Representative Les Eaves Thank you, gentlemen, for coming down. Members, I’ll give you just a second. Any other questions on any of the rest of the reports? Seeing none, I’m going to recognize Senator Flippo for a point of personal privilege.
Senator Scott Flippo Oh, golly, it’s my turn already. I feel like I just got in the queue.
Representative Les Eaves No, you were skipped a few times.
Senator Scott Flippo Wow, this is moving. So, yeah, I was going to have a motion to adjourn. But before I do that, a point of personal privilege. My good friend and seatmate, Senator Rice, made the cardinal mistake of telling me today is his birthday. So, would ask you all to join me in extending our best wishes to Senator Rice on his birthday? Or as he likes to call it, Medicare eligibility day.
Representative Les Eaves All right. Happy birthday, senator. Members, seeing no other business, have a merry Christmas. Happy holidays. We’re adjourned.
