Arkansas Legislative Council
Peer Subcommittee
February 17, 2026
Senator Jonathan Dismang Members, if we can go ahead and take our seats, we’re going to get started. Let’s go ahead and clear the room so we can go ahead and get started. If you’re not a member, if you could, go ahead and make your way to the audience. And if you are a member and you need to have a conversation with someone that is not a member, let’s take you out to the side room. Members, Chair sees a quorum. We’re going to go ahead and get started with that. Off the bat, I’m going to recognize Representative McGruder.
Representative Jessie McGruder Thank you, Mr. Chair. Just want to ask this morning that we have a moment of prayer. We lost Mr. Jesse Jackson, Reverend Jesse Jackson last night, and we want to make sure we remember him today. Bow your heads.
Father God, we come thanking you because we know that we are grateful to stand in this position that we’re in today, Father. Father, we want to give honor to those individuals who have gone on who allowed us to serve in this positions. Father, we ask that you open up our minds that we were able to receive the information that we received today. And we ask especially that you are with the Jackson family who lost their loved one. These are the blessings we ask in your son Jesus’ name.
Senator Jonathan Dismang Thank you, Representative. Members, we will do this just like every Peer meeting. We’re going to go through each section, all items. So B1, C1 and 2, D1, 2, 3. We’ll come back and if you have a question on an item, I will say essentially D1, hit your mic then. If you have questions on D2, let us get through the questions on D1 first. Again, so we’ll kick things off with B1.
Staff Thank you, Mr. Chair. We’re in section B. These are various temporary appropriation requests. There’s only one on the agenda. This is a letter from the Department of Labor and Licensing. It’s for 273,000 in spending authority. This is to pay administrative costs for their enterprise licensing platform and supported by license and application fees.
Senator Jonathan Dismang All right, thank you. Members, do we have any questions on B1? All right. Seeing no questions, what’s the will of the committee? We’ve got a motion to approve. We’ve got a second. Any discussion on the motion? Seeing none, all those in favor signify by saying aye. All those opposed? Motion carries. All right, section C.
Staff Thank you, Mr. Chair. We’re in section C. These are Infrastructure Investment and Jobs Act appropriation requests. First one, C1, is a request from the Department of Transportation. This is for 280 million in appropriation. It’s to provide the IIJA appropriation for the final quarter of the fiscal year. Behind the request is a 20-page report showing all projects obligated with IIJA funds.
Broadband appropriation
Mr. Chair, number 2 is on page 22 of your packet. C2 is the last page of this packet. This is a request from the Department of Commerce State Broadband Office. It’s for 195 million in appropriation and to establish an extra help position.
This is to award broadband infrastructure grants to Internet service providers as part of the Arkansas Bead program. Online and on the screens at your desk is an almost 200 page report that shows colored maps of the provisionally awarded projects for the first tranche. We also received some physical copies from the agency this morning for the members of the committee. It should be at your desks. The report details how 15 Internet service providers serving over 51,000 locations request $126 million in grant funds.
Senator Jonathan Dismang Thank you. Members, do we have any questions on C1? Members, then we’ll move on to C2. Do we have any questions on C2? Representative Cavenaugh, you’re recognized for questions on C2.
Representative Frances Cavenaugh Thank you, Mr. Chair. Could I have someone from the agency come down real quick?
Senator Jonathan Dismang If you could just recognize yourself for the committee and then you’ll be recognized for your question.
Glen Howie Glen Howie, State Broadband Director.
Representative Frances Cavenaugh Thank you for coming down. I have just really two quick questions. On some of these proposed awardees or some of the ones actually not listed on the report, did they ask for any amendments on their contracts, maybe about the speed that they had previously agreed to or any other conditions that had to be changed on the contract?
Glen Howie Right, so you’re asking about certain providers that may not be on the list today, correct? Is that what you’re asking?
Representative Frances Cavenaugh On the list or not on the list, either one.
Glen Howie As far as I’m aware, no provider has reached out with wanting to update their project with different speeds or anything like that.
Representative Frances Cavenaugh Okay, but they have not asked for an amendment from the original agreement?
Glen Howie Okay. So Starlink has sent out to, I believe, most, if not all the states that they have been provisionally selected across the country, wanting certain adjustments to the grant agreement document and so forth. We have been strongly communicated to by the NTIA and US Commerce that we are not to consider that amendment.
Representative Frances Cavenaugh Thank you. And the second question real quick is, once the awards are made, what plans do y’all have to hold them accountable for their communication standards and the timelines to actually finish the projects? What are y’all’s plan for that?
Glen Howie Sure. We have a fully comprehensive risk-rated monitoring system that we’re going to apply equally across every provider in this program. A couple of the protections include milestone disbursements. So providers are only paid when they perform actions, regardless of how much money they have spent.
So as they perform and build out, they get paid out proportionally for the grant. That’s one way that we protect taxpayer dollars. And as far as the time frame itself, under the prior administration we were able to provide points and scoring based on projected timeframes of build out.
Under the current administration at the federal level, which changed the rules of the program last year, we were not able to score based on timelines. So there was a four-year build out timeframe for this program, which we will hold them to. It’s been my prerogative to these providers the whole time. I want it done in two years or less.
That’s my prerogative to them. I don’t care how small the project is or how large the project. And that’s our prerogative and we’ll do our best to get it done.
Representative Frances Cavenaugh And you’d have enough staff to be able to hold them accountable? And you’re not going to give out monies until they hit certain milestones?
Glen Howie Correct.
Representative Frances Cavenaugh Okay. Thank you.
Senator Jonathan Dismang Thank you. Representative Painter, you are recognized for questions.
Representative Stetson Painter Thank you, Mr. Chair. Glen, I know we talked a little bit last night, but I got just a couple of quick questions. There are 15 companies out of the 21 that are presented on the award list. What is the status of the other six?
Glen Howie Sure. Originally we had, I think, 20 was the actual number that we had. Since that time, we’ve had a couple of providers back out of their obligations under the program. Since that time, we’re working with NTIA to find a solution for those locations. And for three others, right, back in November, I mentioned to the greater body that this is an ongoing evaluative process.
I will only bring forth provisional selectees when we are ready to execute a grant agreement with them. And so we have 15 today in front of you that we are ready to execute grant agreements. They’ve met all of their obligations and checked all the boxes to date. We continue to evaluate several others. And should those pass muster, we’ll bring them in the coming months.
Representative Stetson Painter Thank you. And my second question, what has happened with the recent defaults on the RDOF Federal Awards for broadband?
Glen Howie That is a great question. That is a great question. So for any members that don’t know, there is a separate federal grant program that is not administered by our office. It’s administered directly by the FCC at the federal level. It was very prevalent in Arkansas. A handful of those providers in Arkansas that are subject to that separate federal grant program have defaulted on some of their locations and notified the federal government that they will not be able to build out to some of those locations.
And so, although kind of in reality and practically and by the rules, that’s not sort of our program to satisfy, I understand that politically it’s an issue, right? And we have a job, and even though it’s not our program and not our funding, we’re going to do everything in our power to work with those federal partners and see if we can’t find a solution for those folks.
Representative Stetson Painter My last question, Mr. Chair. I guess, is there a solution that’s going to be left with the leftover Bead money? If so, do you know what that might be?
Glen Howie Yeah. Everything that we have heard from our federal partners on this is that Arkansas is in a great position. Because we ran such an effective market-driven competitive process, we have about $650 million in the Bead program that is sort of excess funding, kind of leftover, if you will, after we’ve awarded these infrastructure grants.
We expect guidance from US Commerce about middle of next month, so middle of March. We expect US Commerce to say, okay, states that have run a great program and you have extra funding, here is sort of a menu of options that we will let you look at and design a program for the extra money.
Probably they’ll give us about 90 days to produce a plan for them on that. So again, in short, we expect guidance from US Commerce probably middle of March with a 90-day time frame for us to then get a plan back to them.
Representative Stetson Painter Okay. Great. Thank you. Thank you, Mr. Chair
Senator Jonathan Dismang Representative McGruder, you’re recognized for a question.
Representative Jessie McGruder Thank you. Thank you, Mr. Chair. Thank You, Mr. Howie, for all the work you’re doing. We truly appreciate it. I’m trying to get an update on a completion time for some of these projects in Crittenden and Cross County. I know we’re very patient, but I do have constituents contacting me about their broadband service. So just trying to see if we had an update when it will be close to completion.
Glen Howie Sure, there’s probably, off the top of my head, there’s several grant programs operating in and around Crittenden County on the east side of the state. Some of them likely are, as there could be others that are direct federal programs. I will get an update for you on that. Yes, sir.
Representative Jessie McGruder Thank you. Thank you, Mr. Chair.
Senator Jonathan Dismang All right, thank you. Senator Irvin, you’re recognized for a question.
Senator Missy Irvin Thank you. Thank you so much. Just a quick question. If you have one that has been audited and they’re not able to complete the project. Because of an audit, because they haven’t really met their obligations as you’ve laid out, do you have a backup plan for that so that the project can still go forward? Do you have a backup company, a backup plan just to make sure that those areas are deployed, the fiber? Or just talk to me how that would happen.
Glen Howie Yeah, good question. So in the Bead program, to be honest with you, NTIA is still figuring out a lot of this themselves. And so if we went through the process two years from now and someone was not able to complete their obligation, NTIA has yet to date given us guidance on what to do next with that.
It could be any combination of, okay, who was number two in the original bidding, talk to them about it, see if they can do it for the cost. It could be we’d have to do something with the assets, right, if they built out half the network. We would need to do some with that. So NTIA would have to give us guidance on what to do in that scenario.
Senator Missy Irvin OK, and at that time if we do have to transition to the second one, does that then, do you bring that back to us for an update or approval or anything like that?
Glen Howie Sure. Of course.
Senator Missy Irvin OK, thank you.
Senator Jonathan Dismang All right. Representative or Speaker Evans, you’re recognized for a question.
Representative Brian Evans Thank you, Mr. Chair. Glen, could you give us just kind of a high-level definition of what the term broadband serviceable locations means?
Glen Howie Yeah, so broadband serviceable location or BSL for short, it’s simply an occupied home or business with electricity that is actually inhabited or in use. So it doesn’t count land or empty facilities and so forth. Basically, in short, a home or a business that’s active with electricity.
Representative Brian Evans So then, with that definition, what this means is through this round one, we’re going to use $126.1 million to service 51,566 new accounts.
Glen Howie Yeah, 51,566 homes and businesses, correct.
Representative Brian Evans Okay, thank you.
Glen Howie All across the state. Yes, sir.
Senator Jonathan Dismang Representative Cavenaugh, you’re recognized for your question.
Representative Frances Cavenaugh Thank you. When you said that and he asked a question, that just something in my mind. So if I’m looking down at CNL Broadband Connect, they’re getting approximately $3 million for 85.
Glen Howie Yeah, so looking at that list, their requested grant amount is $965,000. Their match amount that they committed to put up as a part of the project is that 2 million. So the total cost of the product is right around 3, 2.93 million. The grant funding for that is 965 and themselves are matching $2 million.
Representative Frances Cavenaugh Yeah, but I guess I’m wondering why is it costing $35,000 to get broadband to 85 customers?
Glen Howie Yeah, so again, good question. You know, for us, we’re concerned about the grant cost per BSL, right? So for that particular project, it was a little over $11,000 per location on that one. For us, we don’t want to go in and like set a price cap or look at those things. We run a very open, competitive process. And CNL bid on those locations and they were the best application for that area. And so they were the winner.
Representative Frances Cavenaugh Yeah, but what makes that– I guess what I’m trying to say is, what makes that particular area so costly to get internet to?
Glen Howie Great question. Generally, there’s a number of variables to that. How dense are the locations? Are they closer together? Because if locations are closer together, it’s going to be less costly to get to them.
So if locations are spread out, that can increase cost. How far is that particular ISP from those locations? They have to build out further to get to them, that can increase costs. The type of terrain they’re in. So if we’re looking at granite or rock, it’s going to be more expensive to build there than it would be necessarily like in the Delta where it’s less friction when you’re building. So a couple of variables that can influence that.
Representative Frances Cavenaugh Well, and this is just thinking. So if it’s so costly to get it there, and there’s so few customers, have we in the process looked at financial viability? If we’re spending our money to get it there, have we looked at the financial viability of the providers to make sure they’re going to be able to continue to provide those services?
Glen Howie Sure, yeah, one of the things that we’ve evaluated across all of our selectees in this 15 are financials and viability. Yes, ma’am.
Representative Frances Cavenaugh Okay. We’ve drilled down into their finances to make sure?
Glen Howie Oh, yes. Yes, we have.
Representative Frances Cavenaugh Okay. All right. Thank you.
Senator Jonathan Dismang All right, thank you. We had a couple on. Everybody hopped off. Is that correct? No more questions? Okay. All right. Thank you very much. Alright, members, we’ve heard C1 and 2. We’ve went through the questions. What’s the recommendation of the committee? We’ve got a motion to approve item C1 and 2. Got a second. Any discussion on the motion? Seeing none, all those in favor signify by saying aye. All those opposed? Motion carries. Section D.
Various appropriations and fund transfers
Staff Thank you, Mr. Chair. We’re in section D. These are appropriation and or fund transfer requests. The first one is a request from the Department of Correction Division of Correction. Special language in their act allows a transfer among various capital improvements in construction projects after approval by the governor and ALC.
The department requests to transfer 458,000 from the female work release program to the Tucker unit water treatment plant. This is supported by general improvement funds that were released in fiscal year 2016.
Next item, D2, is a request from Department of Education, Division of Elementary and Secondary Education. Special language allows to transfer up to twice a year after approval by the state CFO and ALC. The department requests transferring 25 million from their school funding contingency and National Board of Professional Teacher Standards sections to the following: 15 million to declining enrollment, 10 million to merit teacher incentive, 200,000 to school recognition, and 16,000 to Easter Seals.
Next item, D3, is a letter from Department of Shared Administration and Services. Special Language in the Disbursing Officer Act that DFA allows the transfer after approval of the CFO and review by ALC. Department requests transferring $229,000 from the Project Development Fund to cover salary and match for two positions at the Project Management Office.
The letter explains the office is a cost recovery agency that’s limited to charging for services provided. However, the positions at the office provide services that produce statewide value and are therefore difficult to assign to a specific project. The Innovation and Project Development Fund provides support for the responsibility to statewide project governance, shared tools, enterprise reporting, and cross-department project support. Mr. Chair, those are all the transfer requests.
Senator Jonathan Dismang All right, thank you. Members, do we have questions on D1? All right, Representative, you are recognized.
Representative Denise Ennett Thank you, Mr. Chair. Is somebody here from the Department of Education?
Senator Jonathan Dismang Is your question D2 or D1?
Representative Denise Ennett Oh, sorry, it’s D2.
Senator Jonathan Dismang I’m going to, yeah– hold on one second. All right, members, do we have any questions on D1? All right seeing no questions, what’s the will of the committee? We’ve got a motion to approve D1. We’ve got a second. Any discussion on the motion? Seeing none, all those in favor signify by saying aye. All those opposed? Motion carries. All right, D2. Representative, you are recognized for a question. If you’ll hit your mic one more time.
Declining enrollment at public schools
Representative Denise Ennett Thank you. Thank you again, Mr. Chair. I have a question about the declining enrollment, if somebody can answer that.
Senator Jonathan Dismang Do we have anyone from the department? There we go. And if you could just recognize yourself for the committee and then, representative, you are recognized for your question.
Greg Rogers Greg Rogers, Department of Education.
Courtney Salas Ford Courtney Salas Ford, Department of Education.
Representative Denise Ennett Thank you. I had a question about the declining enrollment. Is that $15 million– how many districts are suffering declining enrollment?
Greg Rogers This year, there’s 152 districts that are on the preliminary list to receive declining enrollment funds.
Representative Denise Ennett So how do you divvy up the 15 million between those school districts? How do you do that?
Greg Rogers There’s a calculation in law under 6-20-23-05. We take the preceding two average ADM of the preceding two years less last year’s ADM and whatever that difference is multiplied by the foundation funding of this year.
Representative Denise Ennett Okay. And I have one more question. So is the 15 million, is that just a standard or does it go up any? Or is that a standard amount each?
Greg Rogers So we have an appropriation line item in public school fund for 23 million and we’re projecting that we need about another 10 million in there. We put a little bit more in there in case our preliminary is off. But last year, the appropriation was 23 million. We spent 24 million last year on declining enrollment. And we’re thinking somewhere between 28 and 30 million this year.
Representative Denise Ennett All right, thank you.
Senator Jonathan Dismang And just to make sure that I’m clear, we’re paying for kids that are not actually in the classroom just to make sure that the districts have an ability, a timeframe, runway, whatever you want to call it, to stabilize their funding situation?
Greg Rogers Correct.
Senator Jonathan Dismang Okay, thank you. All right, Representative Lane Jean.
Representative Lane Jean Greg, I’m over here. We were talking over here, what is the total number of school districts today?
Greg Rogers There are 260 traditional schools and open enrollment charter schools.
Representative Lane Jean And 150 of them are declining?
Greg Rogers 152 are receiving declining enrollment funds this year, yes.
Representative Lane Jean Okay, thank you.
Senator Jonathan Dismang Alright, thank you. Members, do we have any other questions on D2? Just a quick question, how long do the districts receive the declining enrollment funds?
Greg Rogers So it’s based off the calculation. It’s always rolling. So we’re looking at the preceding two years from the last year’s ADM to see if they’re having a decline. And so that calculation goes on that. So if a district is declining, they could receive the funds each year if they are having that decline that keeps going on.
Senator Jonathan Dismang So it’s two years?
Greg Rogers Yes.
Senator Jonathan Dismang Okay. Thank you. All right. Thank you. Senator, you’re recognized for a question.
Senator Joshua Bryant Thank you, Mr. Chair. What is the minimum number of enrollment that has to decline before it triggers the ability for them to ask for declining enrollment?
Greg Rogers It really depends on what’s happening in the preceding two years and the last year. If the average declining enrollment is going down those last two years and then it continues to go down that third year, then they get whatever the difference is, that ADM, they get that amount of declining enrollment.
Senator Joshua Bryant Would that trigger even at two students a year for the last three years?
Greg Rogers Yes, it could, if their average daily membership was going down that much, yes.
Senator Joshua Bryant Okay, do you know what the average declining enrollment is for the 152 schools? Some schools say 600-800.
Greg Rogers I don’t have that. I could get that but I don’t have that on with me today.
Senator Joshua Bryant Alright, thank you.
Senator Jonathan Dismang All right, members, we have any other questions on D2. All right. Seeing no other questions on D two, what’s the will of the committee? We’ve got a motion to approve. We’ve got a second. Any discussion on the motion? Seeing none, all those in favor signify by saying aye. All those opposed? Motion carries.
D3. D3, do we have any questions on D3? All right, seeing no questions, what’s the will of the committee? We’ve got a motion to approve D3. We’ve got a second. Any discussion on the motion? Seeing none, all those in favor signify by saying aye. All those opposed? Motion carries. Item E.
IT loan request
Staff Thank you, Mr. Chair. We’re in Section E. This is a budget stabilization trust fund loan request. It’s from the Department of Shared Administration Services, Office of State Technology. Arkansas code allows the Office of State Technology to borrow from the budget stabilization trust fund after approval of the governor, but only after the governor obtains advice of ALC.
The office requests 4.7 million to implement a new platform for information technology service management, portfolio management, and centralized change management, consolidating IT tools and assessing executive branch applications in an effort to consolidate licenses and modernize applications.
The letter says these activities would result in cost savings, improved security and efficiencies. Mr. Chair, the action for this item would be to advise the governor on whether to approve the loan.
Senator Jonathan Dismang All right. Thank you. Members, do we have any questions on E1? Senator Hickey, you’re recognized for a question on E1.
Senator Jimmy Hickey Okay. I guess my question is going to be, is the cost savings, do they have anything in writing that’s going to show that it’s going to fully cover the 4.7 million or are funds supposed to come from somewhere else to pay the loan back?
Senator Jonathan Dismang Do we have anyone from the agency that wants to tackle that? All right. And if you could just recognize yourself for the committee. And then Senator Hickey, it would probably be best to restate your question.
Senator Jimmy Hickey Thank you, Mr. Chair.
James Caldwell James Caldwell, CFO, Shared Administrative Services.
Jay Harton Jay Harton, Director of the Office of State Technology.
Senator Jimmy Hickey Okay. I’m up here. And I’ll restate the question as the chair asked me to. First of all, of course, I understand that we do this from time to time. But in the end, it’s a 4.7 million dollar loan that you’re getting from us. So how are you going to pay it back? It says cost savings. Is it going to be repaid fully with cost savings or is there going to be other funds? Or are you going to be trying to get a higher appropriation? Or how are you going to do that?
James Caldwell The cost savings we expect to come later. We don’t have an actual number projected. A lot of that’s probably going to come through the consolidation of different applications throughout the state. Currently, OST has a loan from ADFA for some equipment we had to buy a few years ago. That loan ends right before we’d start paying on this one.
So it runs through our rates just like everything else. So it shouldn’t have any impact on the rate because this loan’s actually lower than the previous loan. But it’ll be recovered through rates, just like everything else. OST is cost recovery, so everything we do is recovered through the rates we bill the departments.
Senator Jimmy Hickey I heard what you said about it being lower. However, from my standpoint, I’m going to use a term like evergreen. Is it a loan that’s what I’d call evergreen? Because if you have that now but you’re just rolling it over and we’re never fully paying the thing off, is that actually the case with this?
James Caldwell No, because these are for specific projects. So that previous loan was for a data center modernization project. This one is to improve– Jay can speak better to what this one’s for.
Jay Harton So this is for our– I spoke to it at the IT communications committee, but this is for our implementation of a product called ServiceNow. So it’s how we deliver our IT services to the other 15 departments, which of course then impacts the constituents because they will be more efficient on how they are able to do business.
And to James’ point on the application, we don’t know exactly how much we’re going to save. Back in November, we asked all the departments to report all their major applications. And currently, that list is sitting about 5,000 applications across the 15 departments. We got this from the spreadsheet and everything and the idea from North Carolina, who, at one point when they went through it, they had over 3,000 applications and now they’re down to just under 600 applications.
So we know we’re going to see the cost savings. We’re just not sure exactly. A good example is we know that there’s probably eight to 10 different grant management systems that everybody’s paying a different licensing. It’s not a common platform. So that’s one of the first ones that we’re going to try and tackle.
Senator Jimmy Hickey But what you’re telling me though is cost savings is not going to fully pay this. Because I heard you say that there’s going to have to be an increase in the rates. Is that correct?
Jay Harton Well, so what James was alluding to, previously, we had a data center monetization project that we had gotten a loan from ADFA on. That ends. So that project is complete. The payoff of that loan will end in June. And so we won’t be pulling any money off of this loan until July 1. So this payment back will be less than what we are currently paying for ADFA.
Senator Jimmy Hickey What are you using these funds for? This loan, this specific $4.7 million, what are you using those loan proceeds for?
Jay Harton So these proceeds are for the rest of the implementation of ServiceNow, which is the enterprise portfolio management system, the business continuity and disaster recovery module, and then also our governance risk and compliance from a cybersecurity perspective, which were all put in, are requirements of Act 480 and Act 489.
Senator Jimmy Hickey And that’s fair. Okay. So we’ve got what we’re going to do with the funding. But then the payback of that, where are the additional funds? Because you’re getting $4.7 million. Where are the additional funds going to come from to pay that back?
And I’ve already heard that it’s not in cost savings, because, although we put that in here, we don’t truly know what they are, which is a little odd to me. But that’s another thing. So where are the funds going to come for to pay this back? And then how long is it going to be before we have a zero balance on that back to the budget stabilization trust fund for that?
James Caldwell Under the code, five years is the maximum time we can pay it back. So it’ll be a five-year payback period based on the projected loan payment. We won’t have to increase the rates over where they are now because we’re going to offset that extra with the other loan we have.
That’s the only reason I mentioned the other loan is because we won’t increase the rates because of this one. Yes, it’s a cost but it’s replacing another cost basically. So there’s no increase to the rates just because of this loan.
Senator Jimmy Hickey And you’re paying the other one out of your appropriation?
James Caldwell Yes.
Senator Jimmy Hickey So you’re just going to be paying this back out of your appropriation?
James Caldwell Yes.
Senator Jonathan Dismang So the way that I understand it in talking to staff, they have a loan that is maturing. It’s going to be paid off. Its monthly payment is $100 a month, just making it up. And so now they’re about to take out another $4.7 million, five-year loan, whose payment is going to $90 a month.
Everything that they have is a pass-through from an agency. So right now, they’re divvying up the $100 month amongst the agencies, and that’s part of the bill that’s sent to the agencies. Moving forward, they’ll be divvying up a $90 bill amongst the agencies and that’s who will be paying for it. So essentially you had an old car, you’ve paid off your old car, and you’re buying another car.
Senator Jimmy Hickey As I call an evergreen loan for however you’re going to do it. Because at the end of this time, where are we going to be? I guess the one issue I have, I’m not saying I have an issue with your thing, but we’re sitting here trying to allude that there’s cost savings and things like that.
But maybe there is, maybe there’s not. Whenever you come in here before me and we don’t know what those cost savings are, but we are alluding to it in here, it makes it appear like we’re going to pay for this whole thing with the cost savings, and that’s not the case at all. All we’re doing is using state funds to pay a loan back that we’re giving you.
Thank you, Mr Chair. Like I say, I think we got where we need to be. I just want to make sure that we fully understand what’s going on.
Senator Jonathan Dismang All right, thank you. Members, do you have any other questions on E1? All right. Seeing no other questions, senator, you’re recognized for questions.
Senator Missy Irvin So just from staff, do you need a motion to not just approve it, but to advise?
Senator Jonathan Dismang It’s to advise.
Senator Missy Irvin Okay, so I’ll make a motion to advise.
Senator Jonathan Dismang All right, we have a motion to advise the governor to approve in accordance with the letter that’s been presented today. No, we’re going to back that off. I would like for you to make a motion for favorable advisement? Favorable advice? Favorable advice.
Senator Irvin has made a motion for favorable advice. Do we have a second? We have a second. Any discussion on the motion? Seeing none, all those in favor signify by saying aye. All those opposed? Motion carries. That was a new one. All right. We’re moving on to the review section. We’ll go through all of F. We’ll take them one at a time.
Staff Thank you, Mr. Chair. We’re in section F. These are cash fund appropriation requests. First one, F1, is a letter from the Department of Labor and Licensing, Division of Labor, Wage and Hour. This is $200,000 in appropriation. It’s to cover the increase in payments made to wage and hour claimants after violations have been found in the Fair Labor Standard Act and Arkansas wage and hours laws. It is supported by client deposits. Next item, F2, is the letter from Auditor of the State for $15 million in appropriation. This is to meet projections for the unclaimed property claims.
F3 is a letter from Parks, Heritage and Tourism Division of Heritage. It’s for 8,000 in spending authority. It’s to utilize a grant from the Walton Family Foundation for an after school and summer program at the Delta Cultural Center. Mr. Chair, those are all of the requests.
Senator Jonathan Dismang All right, thank you. Members, do we have any questions on F1? Any questions on F2? And F3? Is there any objection to reviewing items F1 through 3? There are no objections. The items have been reviewed. Section G.
Staff Mr. Chair, we’re in section G. This is a miscellaneous federal grant appropriation request. There’s only one. It’s from the Department of Education, Career, and Technical Education. It’s for 1.1 million in spending authority. They have a grant from the US Department of Education for the college and career coaches program to assist students for a post-secondary education or careers. These funds will be used to expand the program for rural districts.
Senator Jonathan Dismang All right, thank you. Members, do we have any questions on G1? Seeing no questions, is there any objection to reviewing item G1? All right. G1 is reviewed without objection. Section H.
Staff Thank you, Mr. Chair. We’re in Section H. This is pay plan appropriation and performance fund requests. 14 agencies request $3.8 million in pay plan appropriation for regular salaries matched.
Most cite the salary adjustments that came from implementation of the pay plan within class and compact. Labor and Licensing and the Real Estate Commission also cite the need for extra help positions. There are four agencies that show a total of $28 million in transfers from the performance fund. The transfers are also related to pay plan implementation.
Senator Jonathan Dismang All right, thank you. Members, do we have any questions on section H? All right. Seeing no question, is there any objection to reviewing section H? There is no objection. Section H has been reviewed. Section I.
Staff Thank you, Mr. Chair. We’re in section I. This is the proposed budget manual’s guideline. The Department of Finance and Administration submitted formatting changes for the budget manuals for the upcoming biennium. Most of the changes clarify titles and more clearly state fiscal years. If members have any more questions, someone from DFA will be able to go through that manual.
Senator Jonathan Dismang Thank you. Any questions on I1? All right, seeing no questions, are there any objections to reviewing I1? Seeing none, item I1 has been reviewed. Members, we’re at reports. Do we have any questions on the reports? Senator Hickey, you’re recognized for your question.
Senator Jimmy Hickey Yes, whenever you say reports, are we doing the I also? I want to do I. I want to talk about the Medicaid Trust Fund. I guess it’s I6.
Senator Jonathan Dismang L6. Okay. We did I already.
Senator Jimmy Hickey Excuse me. That’s L. That’s L. Well, I’d like DHS and then I’m going to ask DFA something too.
Senator Jonathan Dismang All right, if y’all could just recognize yourself for the committee. And then you’ll be recognized for your question, Senator Hickey.
Janet Mann Janet Mann, DHS Secretary.
Jim Hudson Jim Hudson, Secretary, DFA.
Medicaid Trust Fund spend down
Senator Jimmy Hickey Okay, thank you. My favorite report, as y’all know. Let you slide last month because I was tied up on a couple of other things. But okay, back on this Medicaid trust fund, we passed this legislation to try to at least keep a grasp of where we were.
I think we all knew we had a large balance in there, maybe that we were using a lot of that money but that we were going to pay it down to a certain number. And it looks like to me that of course that, according to the report, we’ve had this thing back from 2022 that we had a balance of 660 million in there. Is this for seven months ended, this report? It would be as of the end of January?
Janet Mann Yes, sir.
Senator Jimmy Hickey Okay, I used seven months but I wanted to make sure. I didn’t see that on there. So, then now, as of the seven months for this fiscal year, we’re down to 394 million. And of course I extrapolated that out and put that, it looks like to me that’s about round numbers, about 13.8 million dollars a month that we’re declining.
So it looks like to me that’s going to get us somewhere down to 325 million by the end of this fiscal year unless there’s some things that are cyclical in nature or timing or seasoning. So could you tell me, have you run any numbers and believe that’s going to be about where we’re at? Or is there something that we don’t know as far as timing coming in from the feds or other cyclical types?
Janet Mann I’ll begin and Secretary Hudson will chime in. So we do run projections. We look at stuff every week when we pay claims. And we are currently running with our AOP to not have any alarms on the budget. I do think– I don’t know– what was the number that you said again, just to make sure?
Senator Jimmy Hickey Well, right now, of course, you’re at 394 million as of the seven months ending in this fiscal. If I just divide that out, which I understand is not exact, it looks like to me that we’re going to get down to about 325 million at the end of this fiscal year, all things being even.
Janet Mann So I don’t know that all things can be even. I think it will be a little bit lower, but not very much. We do spend more in the fourth quarter.
Senator Jimmy Hickey Lower than the 325 or lower than the 394 that you’re showing right now?
Janet Mann Lower than the 394.
Senator Jimmy Hickey Anyway, I think my point– and as a lot of us know, I’m not the only one in here on this stuff. Again, I know that at the end of the fiscal year in 2021, we were at 504. 2022: 660. 2023: 688. And then we’re down to 579, 491, 394. And now we’re going to be lower than that. It’s obvious that we’re spending it down.
And again, I think we knew we were spending it down. But at what point are we going to say, and how much money are we going to say that we want to maintain in that trust fund?
And then my question to DFA is for this budget, how much are we going to increase that? So that’s kind of where I’m heading because we’ve been watching this and it looks like to me that this alligator here is about to show up a little bit.
Jim Hudson Yes, sir. I mean, I think we’re all in agreement that we’ve been spending it down. We knew we’re going to have to put some additional capital in the trust fund sooner or later. We have $100 million in the set aside right now that’s not been touched that will have to come in at some point.
We’ll have conversations, the governor obviously will with leadership as we’re working on the budget and see where kind of Medicaid factors into that in terms of any additional monies that we want to set aside for that. But the path of spending in terms of just the cash burn rate, it’s going to keep drawing that number down.
So we need to look at not only from a cash perspective, but from an expense perspective as well and what are all the things we can do potentially to mitigate the speed of the cash burn. But we can’t continue to spend it down and not respond in some way.
Senator Jimmy Hickey And I mean, I think the time to respond, though, was before, maybe before now. And of course, we’ve known this is happening. So back to my original question, though. And I heard what you said there about the money we have. So is our intention to just put this in another account and not actually put it in a budget and just give it to DHS as they need it with another set aside?
Jim Hudson I can’t speak to any intentions at this point. We’re still talking through the budget.
Senator Jimmy Hickey So what is our ideal as far as an ending balance on this thing from year to year? What are we looking to have? Because like I say, we’ve been at 660, 688, and there’s probably an argument that that’s too much. I will say that. But what have the discussions been on where we need to be? Is it 400 million, or is it going to be the 350 million? Or is it 200 million or what? I know that’s subjective, but surely we’ve had those conversations.
Jim Hudson We don’t have a recommended number at this point. Again, that will be part of the conversations about preparing the budget and what, if any, additional capital needs to come in on top of the 100 that is still there and has not been moved in the trust fund yet.
Senator Jimmy Hickey You’re just talking about in the set aside that we’ve done?
Jim Hudson Yes, sir. That’s correct. But is dedicated to Medicaid.
Senator Jimmy Hickey I understand, which gets, and I heard your conversation to Representative Cavenaugh last month about the balanced budget. I’m in agreement with her that it’s not– all things being equal, you put all your debits and all your credits in. So me and you don’t exactly agree on some of that.
Because I personally want to see it where it’s in the budget. And I understand we can’t be exact, especially with this thing. So I guess this is to start a conversation for the budget hearings. I will definitely be wondering if we’ve come up with a number of what we want to maintain in there and to try to make sure that how much money is not in the budget that we’re just putting in some set aside or that too. So that we are all, as that word we like to use, very transparent.
Jim Hudson We’ll be speaking to it in the budget process.
Senator Jimmy Hickey Thank you, Secretary Hudson. And thank you, Miss Mann.
Senator Jonathan Dismang All right, thank you. Representative Cavenaugh, you’re recognized.
Representative Frances Cavenaugh Thank you, Mr. Chair. My question is, as we’re looking at this trust fund, are you projecting any real changes to our Medicaid rate so that we know, are y’all projecting that when you’re looking at what we might have to put in there? Are we looking down the road to see what might actually happen to our rate or what we’re going to have to actually start matching? Are we looking at all that when we’re projecting what might be in this trust fund?
Janet Mann Yes, ma’am. If you’re referring to the FMAP that changes every October 1, we do have a tentative number for that and we do build that in. We have a range usually that comes from the federal government of what it could be and we do try to look at the high and the low of that range.
Representative Frances Cavenaugh And that’ll be used when y’all determine how much we might have to put back into the trust fund? I guess that will be one of the many factors, I’m assuming, that y’ all will be using when you’re looking at that.
Janet Mann It is used for our expenditures that then will become part of the cash flow discussion for the trust fund.
Representative Frances Cavenaugh And when we’re looking at our expenditures, do we have any sort– I know you don’t have a way to really kind of know this but you might have a feel for– are there any real expenses that you think that we’re having some health crisis with in the state that’s going to raise those expenses up? Are you seeing anything that’s alarming that’s going to make us have to pay more out than what we originally had thought?
Janet Mann As far as crisis, no, ma’am. I think as we work through our rules, that will also determine certain things.
Representative Frances Cavenaugh Okay. All right. Thank you.
Senator Jonathan Dismang Thank you. Senator Hammer.
Senator Kim Hammer Thank you, Mr. Chair. Over here to the right. The full ramifications of everything that we passed during the last legislative session or kind of tagging on to Representative Cavenaugh, things that may have come up unexpectedly that may attribute to the declining balance, have those all come into play and been put into place? Or is there anything looming out there that you would identify that’s going to be taking more money out of the balance?
Janet Mann As of today, we have not implemented all of the rules from the acts of last session. We are working with CMS and this body to get those implemented. Those could have some impact. To the best of our ability, the Medicaid program will try to function with the current balances as we implement those.
Senator Kim Hammer So do you have a price tag that goes with– about how many pieces of legislation that you have not processed the rules for yet are still lingering out there? And have you calculated what the price tag is that is associated with those?
Janet Mann I don’t have an exact price tag. We have over 10 outstanding rules that we are working through with CMS because they’ve asked some questions. And until we solve those questions and they approve, it would be hard for me to finalize a forecast of those expenses.
Senator Kim Hammer Chances of that happening before fiscal session would be what, nil to none or?
Janet Mann It’s a 50-50. I mean, we meet with CMS every other week via conference call. And in between we send information back and forth. So we are working on it daily.
Senator Kim Hammer Okay, Secretary Hudson, you look like you want to say something.
Jim Hudson Well, I just think since you bring up the, kind of the mandated benefits side of things, it is an important topic for us to be mindful of, that any time we pass something that says that Medicaid has got to pay for something, it’s a direct impact on the cash balance and the trust fund.
And so there are things that we’ll want to be mindful of as we go into session next year about increasing the spend rate coming out of Medicaid. When we solve this problem, we got to solve it both from cash coming in, but also managing the cash going out.
Senator Kim Hammer Just sooner than later when you know the price tag on those things. Thank you.
Senator Jonathan Dismang I’m going to Senator Irvin in just a second, but we also have the Big Beautiful Bill and that additional funding that’s coming into the state. I’m assuming there’s going to be a lot that’s going to happen in conjunction with those additional funding and actually our current Medicaid spend possibly, especially program implementation and that sort of thing. It may not be the day to have that conversation, but when we get into the budget meetings, I believe it will be.
Jim Hudson I think, generally, some of the concerns that potentially Representative Cavenaugh raised in terms of just health factors that are out there in the state, chronic diseases, there’s a lot we’re going to be able to do with that billion dollars over the next five years to hopefully drive down claims costs, not only for Medicaid, but also for private insurers as well.
Janet Mann And may I add that those funds and monies that will be distributed cannot be used for rate increases and they cannot supplant anything that’s currently in place. They will have to be used for outcomes and new things.
Senator Jonathan Dismang But I’m assuming it’s going to work a lot like it did when we implemented the private option later on, AR Home, whatever we want to call it. There were current expenses that were being paid at a lower match rate in Medicaid. And those through a process were adjusted to be part of the new program or we ended programs or whatever we did because they were covered otherwise. I’m assuming there’s some of those things that are going to happen, which hopefully will ultimately lessen, at least at the end of the five years, the burden on our Medicaid state dollar contribution.
Jim Hudson Senator, I think there’s going to be a whole bunch of initiatives that we’re going to be able to fund with the federal money to establish an ROI over the next five years. And once we determine there’s a positive return on that investment, then we can look at turning on the payment factors in Medicaid to be able to control those costs using Medicaid funds.
Senator Jonathan Dismang Thank you. Senator Irvin.
Senator Missy Irvin Thank you. I think it’s a good reminder, talking about just kind of the schedule and the flow, if you don’t mind, just refreshing us about the flow of those revenues and the value of the Medicaid trust fund, how it changes based on timing of the year and why it’s important that it’s secure. But there are times where there’s an ebb and flow. But do you mind?
I think it’s just a good time just to have that refresher from you about this as a utilization tool for that revenue as it relates to either the beginning of the fiscal year, the change in the FMAP, et cetera. That’s my first question. If you don’t mind, I think it is important just to state that when we come to the Medicaid Trust Fund so that we understand why it’s in place and the utilization of it.
Janet Mann Thank you for the question. So, the Medicaid Trust Fund is a compilation of many different funds. Some of them have very specific uses that are used for quarterly payments to providers. The providers put up that state match through those funds.
So there is some ebb and flow every quarter of those funds, and we try to match those funds and spend them within the week to two weeks that we do obtain them because we’re holding those monies for those providers. In addition, the carry forward account and the soft drink account can be used for any funding in the Medicaid program as needed.
And so we do use that on a quarterly basis, depending on large expenses that are either due or after we have used our SGR and other funds that’s in our paying accounts or things. If we need additional monies, that’s when we use the trust fund. So on a quarterly basis, it does ebb and flow quite a bit.
Senator Missy Irvin Thank you for that. And then my next question is, it is going back to what Representative Cavenaugh stated. But we did see, we do have to respond legislatively, which we have done legislatively, particularly when it comes to labor and delivery.
So, I mean, that’s something that I just want us to be very mindful as we’re having these discussions with Medicaid that it’s not a one size fits all approach. There are critical health concerns and issues in the state of Arkansas that we together have come together, executive branch and legislative branch, to address. And so but there are other areas where we have said, you know what, we’re good and that needs to remain flat rate, solid rate, whatever.
So I think it’s really important just to have that discussion and recognize. We did that particularly with labor and delivery because of what’s happening. And we know that those rates have to adjusted for labor and delivery so that we don’t lose any more delivering units across the state.
So I just wanted to add that because I think it’s an important discussion point. And I’d love to see changes that we’ve discussed to help make this trust fund more solid as far as hospital assessments and things like that. So I think it’s just a good point of discussion, but I appreciate the fact that we came together to say rates have to be increased for labor and delivery so that women can have healthier babies and healthy deliveries. So I just wanted to add that to the conversation. Thank you for letting me, Mr. Chair.
Senator Jonathan Dismang Absolutely. All right. Thank you, members. Do we have any other questions on this report or any of the other reports? All right. Seeing none, with that, I think we’ve concluded our business for the day. Thank you for your attention and time. We are adjourned.
