Joint Budget Committee - Pre-Fiscal Session Budget Hearings
Video
Transcript
7 documents
Machine transcript
May contain errors. Verify important quotations against the official video.
About transcript accuracy
- Source
- Whisper
- Model
- ggml-large-v3-turbo.bin RTX5060
- Processing date
- October 7, 2026
Unknown speaker
0:00
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
we would like to uh welcome everybody to the pre
budget hearings for the fiscal session we're hoping to wrap this thing up in two weeks uh co-chair you got anything you
want to tell members all right we are honored here to have the governor of arkansas governor asa hutchinson He's going to present his
balanced budget. Governor, welcome to the Joint Budget Committee, and you've got the floor.
Speaker 15
7:07
Thank you, Representative Jean and Mr. Coat, Chairman, Mr. Teague, Senator Teague. Thank you for the opportunity to be before you today, and I hope everybody is in a good mood after the election last night. Otherwise, we just simply get over it. But it is good to see you again as we start this budget cycle, and as has been our custom in the past, I will go over in a big-picture fashion the budget, and then I'll be followed by Secretary Larry Walther and Director of the Budget Jake Bleed, who will get into it in more details and respond to specific questions that you might have about the balanced budget presentation that we have.
As we begin the review of our state's budget in preparation for the physical session, we should be mindful of a couple of things. First of all, we live in uncertain times, and we govern in uncertain times, from the coronavirus and its economic repercussions to the challenge of natural disasters such as historic floods, global trade wars, both of which we experienced last year. Our budget should reflect this reality and plan for a future that is somewhat unpredictable
and in which we have to compete for jobs, for capital, and for talent. I know that this is somewhat of a gloomy note to begin the presentation, but there is also good news in our current position. We have not only a balanced budget as required by our Constitution to present to you, but We have maintained a consistent surplus where our revenues exceed our spending, and we're building a savings account that is the first in history for our state, and the balance
in savings is growing each month. This is called our Long-Term Reserve Fund, which was created in 2016 thanks to leadership in the General Assembly who advocated and helped initiate this savings account. And I did provide two charts to you, and one of the charts that I have shows the growth in the long-term reserve fund. It's the one with the blue graphs. And you can see that it has increased almost 50 percent in four years, from $103 million
to $152 million in FY19, it will grow again in 20. And now it is over $150 million, as you can see. But it should be noted that this reserve fund is still inadequate by today's standards and with the risks that are associated with state government. And my goal and our goal is to increase this fund significantly within the next three years. The bottom tier of states, we are in the bottom tier of states for sufficient reserves.
And so we currently have an unallocated surplus of about $170 million that we will talk more about as we go into the fiscal session. But this will be necessary for some specific needs in our state that we'll be talking to you about. But it also is my hope that a significant portion of that unallocated surplus can go in to strengthen our long-term reserve fund so that we will have reserves that will last us longer in the state
and we will be better in terms of our bond ratings, but also being recognized as a prudent state in terms of our savings. In terms of our economy, we continue to have low unemployment and more people working now than at any time in our state's history. Wage rates are up, taxes are down, and we are at the lowest level of SNAP benefits compared to any time in the last 15 years. In terms of Medicaid, there are almost 50,000 fewer recipients
on Medicaid than there were three years ago. Since 2015, we have enacted $250 million in annual income tax cuts. Over 10 years, this will be $2.5 billion in income tax relief for the taxpayers of Arkansas. Because these have been phased in over time and carefully, we have been able to increase funding simultaneously in education and public safety.
Now that brings me to the FY21 balanced budget that is before you. Let me emphasize a couple of key points. First of all, there's no increase in funding requested to implement transformation As we promised, transformation is being done with no new spending. But as a result of your work in transformation, the executive branch of government has been organized into 15 cabinet-level agencies.
This has resulted in savings, efficiencies, and improved management. For example, the performance funding line item that's before you for employee performance rewards has been reduced from $15 million to $5 million. This is a $10 million savings, which is the result of our transformation efforts. And so that is a concrete $10 million in savings that can be demonstrated in the budget
and reflects a promise fulfilled. Secondly, the balanced budget that I have presented increases state spending by 1.5%. This is the lowest rate of growth in general revenue spending since the Great Recession. And I have the second chart before you. And if you could take a glance at that second chart.
you can see the comparison in terms of the growth in general revenue spending. As you can see, the rate of growth in state spending has steadily declined during the last three years. from 3.1% in 2018 to 2.4% in 2019 to 2.2% in 2020, and now 1.5% in the proposed budget for 2021.
Also, instead of spending every dollar that comes in from the taxpayer, my budget instead leaves a $54 million surplus. Of this, the budget provides that $40 million of the $54 million surplus would remain in the restricted reserve fund. These funds are surplus dollars that will be set aside to be used for future tax cuts or other budget needs that we see come across our desk.
They can only be released with the specific approval of the General Assembly. So this is a partnership operation. The balance of the surplus funds, as required by law, will be placed in the Highway Trust Fund as part of our mutual agreement on the use of our surplus. When it comes to education, K-12 education funding will increase to meet the standards, the adequacy standards set by the General Assembly.
But the requirements from general revenue are actually reduced because of the growing revenue in the Education Excellent Trust Fund. Because that's growing, it allows more of those funds to be used to meet the adequacy requirements, and it's less of a challenge for general revenue. This is a result of a growing economy that helps us meet the needs of investing in our students without as large a contribution from general revenue. When it comes to the Succeed scholarships that you have budgeted $3 million for, this will be paid from one-time funding and then added to the base in FY22, but the Succeed scholarships is provided for.
As to higher education, thank you for creating the productivity funding model that has incentivized higher education to focus on graduation rates and progression. This has proven successful and deserves your continued support, and it is good news as the progress higher education is making in terms of graduating on time, reducing remedial education and making it more cost-effective for the students. Let me
talk about public safety for a moment. When I became governor, we increased the county jail reimbursement from $28 to $30 per day. That was four years ago. I am recommending in my budget that this be increased again. It should be increased to $32 per day for the counties housing state inmates. This will help our counties, and it also reflects the historic partnership the state has had with our local jurisdictions.
And you might say, well, some counties say, well, it costs even more than that for them to house state prisoners, and is that enough? Well, the answer is we have a partnership relationship with the states that reflected, with the counties, that are reflected in many different ways, from our pain, the local prosecuting attorneys and the deputies, administrative staff of some of the courts, to the juvenile functions, and there's a shared responsibility with these prisoners that are sentenced and as they go into state custody.
So it's a partnership relationship, and I believe the gradual increase, increasing that to $32 per day, will be well received by the counties. This will help our counties and reflects that historic partnership. The Crisis Stabilization Unit is a great interest to many of you, and the funding for the Crisis Stabilizations Units is incorporated into the budget as recurring items within the DHS Behavioral Health Budget.
It's at $2.5 million per year that is consistent funding for the three Crisis Stabilization Units that we have currently in operation. In addition, school safety training is now a recurring part of the budget, and this is part of the CJI funding that is necessary for them to engage in the school safety training. And there is also $1 million in proposed funding to allow for new state police trooper school.
This was authorized, but we had to put it into the budget, and so that is included in the state police budget. Lastly, in terms of public safety, we have all listened to the concerns of our counties in terms of jail overcrowding because of a backlog of state inmates. And I hear it not just from the counties, but I also hear it from Secretary Kelly as our Secretary of Corrections. To relieve this pressure, I am recommending that we add $2.6 million
dollars to the community correction budget to allow for an additional 175 new beds in Texarkana and West Memphis facilities. This will also allow for continued funding of 62 beds that have already been put in operation, but there's not the ongoing budget to take care of those needs. And so these new beds going online in the community corrections area will allow us to handle the technical violations or the other minor violations of a parole violator versus simply putting them back into the Department of Corrections system.
And this is consistent with some of the changes that you have made legislatively. It will also relieve some of the pressure from the county jails, and the backup in the community corrections has been part of the reason for that backup. And so this relieves that pressure. It should help across the board. And so I hope that that will be met receptively by the Joint Budget Committee. When it comes to Medicaid funding, the budget reflects a 4.98% increase in funding for Medicaid, which equals $65 million.
Now, this is consistent with the biennium budget that was approved last year. So there's not any change in that, but I did want to talk about this for a second, that, you know, ordinarily Medicaid budgets grow at 5% a year. We have been consistently, because of our transformation efforts, been able to hold that to a lower number, but it is 4.98% as we look at this next year. As you remember, though, the General Assembly in the last session
directed the Department of Human Services to review the Provider Reimbursement Agreement. This was because of the increase in minimum wage rates mandated by the voters of Arkansas and the fact that the provider rates had not been raised for some time. So there's a lot of pressure to review those rates. That was mandated in law, and DHS is gradually going through and reviewing those provider reimbursement rates. Some have already started that process of increasing it.
As a result of this directive, I expect the traditional Medicaid fee-for-service part of the budget, the fee-for-service part of the budget, to increase this year and next. We are watching it closely, but don't be surprised as next year comes around and the Medicaid budget increases significantly, and we need to be prepared for that as we develop the budget for this year and our savings plan as well. In regard to the Rainy Day Fund, I think there was a misconception because we have a surplus
that somehow the governor is going to say, I need to have a huge increase in Rainy Day Funds. Although it is critically important to the operations of state government, whether it comes from levies to other needs in the state, this budget does not provide any increase in the budget for Rainy Day Funding. Now, that's to be distinguished from a long-term reserve fund that some people call Rainy Day, but the long-term reserve fund is set aside as our savings. The rainy day fund is utilized in a different fashion.
In April, I look forward to working with you as I give my state of the state address and as we work between now and then for the physical session. We need to work on how much of the current unallocated surplus should be devoted to long-term savings, how much should be devoted to rural broadband, how much should be devoted to workforce training. These will be some ongoing discussions that's not provided for in this budget but can be handled through the unallocated surplus that we will have opportunity to look at in the physical session.
In conclusion, this is a budget that is in line with the biennium recommendations that came from the General Assembly and it does reflect the savings from transformation that we set as a goal. The budget also accommodates the specific needs of jail overcrowding, public safety, and education. Very importantly, the budget provides a surplus with a substantial amount in restricted reserve to allow us to be as flexible as we can as we look at an uncertain future, both in terms of natural disasters but also in terms of unanticipated things that we might see in our own state.
With that, thank you for your attention, and I look forward to turning the microphone now over to Secretary Walther and Director Jake
Speaker 20
24:01
Bleed. Chairman, thank you very much. Thank you, Governor. Thank you.
We'll give Mr. Walters and Mr. Bleed time to get up to the table. If you have questions, we'll
push your yellow button. And, members, I want to remind you to hold on to this piece of document. This will be, you can compare it to the final week of the fiscal session to RSA to know what kind of changes have been made.
well I'll just tell you I thought this thing would be lit up there's not a single question so I guess everybody's got their question answered I'm glad there we
Speaker 30
25:17
go I don't know I knew I'd jar them Mr. Chairman I think we're waiting in the rotten tomatoes to get passed out Do
y'all have a statement you want to make or just go straight into questions?
Chair
Unverified
25:27
I'd like to make one brief statement. For those of you who don't know, I'm Larry Walther. I'm the secretary of the Department of Finance Administration and the chief fiscal officer of the state. I've been blessed in this job to have two outstanding individuals who are on both sides of me. John Shelnut, Dr. John Shelnut, who's the head of our economic research area, and Jake Bleed. Both of these gentlemen have a critical part, separate but critical part,
as we develop our budget with regard to the forecast of revenues and then working with the agencies, working with the governor's office, putting together the budget that we've brought before you today. So I'm glad to have them here. They do an outstanding job. I know y'all work with them a lot with Jake a lot with me and and John too and we're just glad to be here and we'd like to answer any questions you have
okay representative Meeks you're recognized thank you
Representative Stephen Meeks
Unverified
26:29
Mr. Chairman I'm way over here on your right
so uh the the uh uh a my first statement is I was very encouraged by what I heard from the governor this morning and uh and this I don't know if this will be to y'all or two the the chairman, but I'd love to get a copy of the synopsis of the state that the governor presented this morning so we can have that and the changes in the budget if that would be possible. My question is, on the unallocated reserve, there have been discussions, and the governor just mentioned it, about making use of that in rural broadband, and that's an area that
I definitely have a passion for and a need that we have in this state. do we have any idea what that reserve amount is at this point or
Representative Jack Ladyman
Unverified
27:19
what it might be going forward? So Jake Bleed, DFA
Speaker 41
27:23
Office of Budget. The restricted reserve fund currently has a balance of about $42 million. The long-term reserve which the governor mentions about 152 and of course we have some unallocated surplus. The current restricted reserve fund one thing to keep in mind is that under our
highway funding plan we had committed 35 million dollars in funding that was to come from some source the law identifies a restricted reserve fund so to some extent the existing funds are somewhat committed but the governor has made it clear that he is he wants to support rural broadband so I'm sure we'll find a solution for that right and while he'd
Representative Stephen Meeks
Unverified
27:56
mentioned it would come from the unallocated but now so that's what my question was do we know what's
Speaker 39
28:02
in the unallocated at this point the current balance of the general revenue allotment reserve is about 172 million okay all right um the the other question if i can mr chairman
Representative Stephen Meeks
Unverified
28:10
um one of the challenges we faced last term was the teacher raises we put one time 60 million dollars in towards trying to cover that does the governor's budget address a long-term solution to that yet
Speaker 41
28:28
budget we put 60 million dollars uh directed towards the four-year phase-in, that was really to help those schools that were struggling to make those minimum teacher salaries, and that will be accounted for. All right, thank you. Thank you,
Mr. Chairman. Thank you, Representative Meeks. Senator Elliott,
Senator Joyce Elliott
Unverified
28:50
you're recognized. Thank you, Mr. Chair. For the reduction of general revenue funds to meet adequacy, um that is as the governor said based on the fact that we have a growing economy um do you know what that means then in terms of uh the percentage of um the the funding the
percentage we have reduced gr over the last year or so last two sessions the reduction in gr
if there has been a reduction in last session to now if you could just we've increased general revenue for
the public schools it's just how much we've increased the original biennial recommendation had an increase of about 45 million coming from general revenue in the second year we've reduced that down to the 9.7 here largely because as the governor mentioned educational adequacy fund has been strong enough we're fully meeting the recommendations to meet educational adequacy
Speaker 58
29:50
It's just the funding is coming both from the RSA, the Revenue Stabilization Act,
Senator Joyce Elliott
Unverified
29:56
as well as educational adequacy. I'm not questioning funding, and I'm just trying to be sure I understand the delineation of the sources of funds. And so what I want to get to is something that is a little bit more important, I think, overall about the sources. So if we were to bring forth a more robust adequacy recommendation that would be moving us to something from adequacy, say, to, I don't know, good, we would likely have the funds to pay for that.
if we continued our trend with GR funding and also had access to the funding from the trust
Speaker 60
30:38
fund? Well, obviously, whenever the advocacy committees meet and they make that
Senator Joyce Elliott
Unverified
30:44
recommendation, that's on us to make sure we meet that obligation. And so far, yeah, my expectation is we would have to do our best to come close to that. It would really depend ultimately, though, on what that recommendation is.
Then that's on us. But your answer is a good answer. I just have one other question when it comes to higher ed we sat through a very
long hearing lately having to do with what's happened with Henderson State University and some of that most certainly had to do with the way things are managed but it's clear to me based on some of the testimony about even the types of students that are harder to educate and might cost more to educate and then we we hear this morning that this fund the formula that we have the performance formula we have is working and when you look at the budget and
what's happening not just with Henderson because it's certainly true in certain universities that it seems very apparent no matter how this is working we are not funding higher ed in a way that we don't have to keep raising tuition and make it even harder for families. So can you give me some idea about how it informs the budget that this is working to the extent that we don't need any further
funding or more funding in higher ed to go beyond what we say is this performance formula that I'm
Speaker 69
32:20
just not convinced about. Senator Elliott I believe this afternoon we're going to be
Chair
Unverified
32:27
Director Markham will be here and we'll be discussing specifically the higher education formula and budget it might be better if we were to delay to defer that and for that discussion with the experts
at higher education involved in that discussion?
Senator Joyce Elliott
Unverified
32:45
I anticipated that answer, but there's a reason I'm asking it here. Because everybody in the executive branch works for somebody called the governor, and we understand how that works. So you are a part of putting together the budget, and I will ask that question of them. What is not working for me is when I see these, we say on the one hand, this performance formula is working and over the years we have dramatically cut funding to higher ed but we keep saying
one thing that seems not to be borne out on there at the end and that should inform this budget that's before us in some way that you should be able to say to us there is enough funding in here to do what higher ed needs to do and not keep coming up short or having to raise tuition just to get by? Because that's all they're doing right now, even if they're getting
by. Well, if I can, Senator, our funding for higher education through revenue stabilization
has actually increased since the governor took office. And the productivity funding, if you recall, was supplemented by about $10 million annually. So our funding has actually increased. Now, to the extent that that's sufficient is a question I think we can probably get into this afternoon but as far as the amount of money that we've provided it's been a pretty steady about 750 or 800 million
dollars annually i'm i'm not questioning that that you that we have increased it i am questioning is it sufficient just so that we're clear because you know i can
get a raise of ten dollars and it's increased but is that really what i need so i'll take it up with higher ed this afternoon but I don't I want to be really clear that people in higher ed can say no more than what they are allowed to say from the governor's office and that's fair that's why I'm asking you guys because you're the ones who put the numbers on the paper all right that's it thank you I I see the pain I will
let it go thank you mr. chair thanks senator Elliott
Senator Malik you're recognized. Thank you
Speaker 82
35:05
Mr. Chairman. A couple questions on the budget and then one on the forecast. I know division of career technical education went away as part of transformation but did where was that money, the $4.8 million that goes away, is it added somewhere else in the budget, or
is it just absorbed within the Education Department and other places where that division may have been split
Senator Joyce Elliott
Unverified
35:33
out? Sure. So the schedule that you have before you is kind of an unusual schedule. We're presenting to you the budget as transformed, but of course still sticking with the schedule that was adopted as part of the biennial recommendations. One of the things we added, though, was that column in the middle for transformation changes. If you see kind of on the first page that division of career and technical education, the $4.8 million reduction out of that line.
If you flip to page two, under the Transformation Act, that division was split in a couple different places. And so one was placed in the Miscellaneous Agencies Fund, in the Skills Development Fund, which was part of miscellaneous agencies, and then the other piece at the bottom there, Division of Workforce Services Adult Education, that's where that money was transferred. Okay. If you go to the bottom of that transformation changes column, that column only measures
the movement of funding that follows through the positions, so everything is accounted for there. Okay. My other question, and I'll
Speaker 82
36:39
wait until this afternoon on this too, but it also related to higher education, some of the questions that Senator Elliott mentioned. There's just, you know, at least a couple of universities, which happen to be in my district, that are cut, and then a number of the two-year institutions and our technical schools, you know, there's quite a bit of red there, and I didn't know whether that
was strictly based on the performance funding formula or what, but we will get into that this afternoon. Now, if I might follow up just one on the general forecast, Dr. Shelnut, from the time that I've been here, we're probably in the most uncertain of times, and I know we went through the recession, 9-10 in that era, but with the uncertainty with the coronavirus and those type things, could you just make some comments with respect to how that might impact us?
And I know it's early and a lot of it's unknown, but just could you make some comments about where we are in the economy with the, I think, the 10 years at an all-time low, below 1%, stock market's certainly uncertain, up and down. But could you just make some comments with regard to our
Chair
Unverified
37:58
current situation in the economy? Well, currently, we've been in this unusual pattern of stability of very good growth, very low inflation.
and very low unemployment and it's gone on for an extended period of time so we're living in a less volatile economy than decades past you know if you want to speculate on the coronavirus and what it does it it could manifest as a type of shock to the economy but i think it would be less of a shock than past oil shocks for example that had immediate impact on businesses
and consumers so this one will play out over time and we'll track it we'll watch to see what it does to the supply chain to consumer behavior but at this point we have no data to indicate a problem of course economic data lags somewhat to varying extents. But we have no data to point to any problem at this point. And we have a lot of national forecast groups that are also on hold, except for the Federal Reserve
where we saw some proactive action yesterday. And we see the typical kind of circuit breaker activity of markets, equity markets, bond markets, and commodity spot markets adjusting to the situation and absorbing some of that volatility for us all right thank you thank you Senator Malik
sir to bond you're recognized Wow thank you
Senator Will Bond
Unverified
39:43
to follow up on a couple of things and one is representative
Representative Justin Boyd
Unverified
39:50
fight who's here I know has worked incredibly hard on senior centers and funding and I think in the last budget cycle there was about 2.5 million some of the members know this area better me that hasn't been funded the governor made a 1 million dollar transfer but I think there was 2.5 million more dollars in appropriation that haven't been funded is there any plan to make that up in this fiscal session it is not there's no additional
Representative Joe Jett
Unverified
40:14
funding provided here of course the governor did release that 1 million dollars from the rainy day fund there's
Senator Joyce Elliott
Unverified
40:21
also that half million that was swept from DHS at the end of the
Representative Justin Boyd
Unverified
40:27
fiscal year. Seems like with a hundred and seventy two million dollar unallocated surplus that would be a good place to make up something for our seniors and help keep them in their homes as long as possible to live out their lives with dignity and freedom blah blah blah. All right very important stuff that I know a lot of let's agree on. Two things. One, with regards to teacher salaries, big fan of setting aside
the $60 million. Has the governor set a goal, or is he going to set a goal, that we lead the region, the south region, in teacher salaries? Do we know where we're headed? I know we increased the bottom. The goal is to get the bottom to $36,000, but it seems like to me that as a state, we ought to set a goal of where we want to be in teacher salaries. Is there
Senator Joyce Elliott
Unverified
41:14
any plan to do that? My understanding is the stated goal is to get those teacher salaries in the top half of that SREB region, the Southern Regional Educational Board, in terms of teacher
salaries. All right, why not number one?
Speaker 104
41:30
I think that for the time being, getting in the top half
Representative Justin Boyd
Unverified
41:35
will be good progress. All right, a final follow-up. As you may be following, in our higher ed situation. The biggest driver in economic development, in my opinion, is the education level of our people. We continually fall around 47th to 49th in the level of education of our people. Our college going rate has decreased for four years in a row, although the data
is a little questionable. It's been described as abysmal. Are we setting a goal and funding it to get our education level, particularly our two-year, four-year college degree level and job certificate level, is there a goal and a funding goal to increase that? For instance, Tennessee has the drive to 55. I think we ought to have a statewide goal as to where we're headed. Are we doing that in this budget? Well, the governor
Representative Joe Jett
Unverified
42:25
made a point of pointing out the productivity funding formula, which
is, of course, developed in large part with legislative
Senator Joyce Elliott
Unverified
42:32
leadership. And one of the things that it really does is fund performance and fund those institutions and direct the flow of dollars towards those institutions that hit that goal. So, yeah, I'd say that the
Speaker 62
42:41
productivity funding formula and the changes you see in the budget really do reflect those priorities. All right. I would
Speaker 103
42:48
like to see us set up a statewide goal that we're all aware of and attach a dollar figure to
Representative Justin Boyd
Unverified
42:54
where we're headed on getting the education level of our people up. Thank you. I appreciate everybody.
Thank you, Senator. I think in seat 90, it's not Senator Flippo, Senator Garner. Yes, sir. Thank you,
Senator Trent Garner
Unverified
43:08
Mr. Chairman. You're recognized. Thank you. So one of the big things we had during the transformation discussion is what kind of baseline money we would save from that. I see your transformation changes on here, and after it's explained and looked at, it's really just moving money from one department to another right now. I know we were talking before about potentially getting some kind of numbers or figures during the process that shows what we're actually saving through transformation.
because as of today, I've never seen the actual numbers that show that $15 million to $20 million we were promised. And from this, the line item at the end of it is zero. So I imagine maybe that comes in later on when you're going through each individual budget, but I think that needs to
Senator Joyce Elliott
Unverified
43:47
be pressed as we go through these budget hearings. Sure, and I agree, Senator, and that's one of the things we're working on is how do we show transformation savings. In this budget, you know, when we sat down and did the performance pay plan, which was adopted by the General Assembly a couple years ago, we've created a line for performance funds for employee raises for salary adjustments
and that was originally budgeted at 15 million dollars a year we then went back and removed about five million dollars from the second year of the biennium to reflect transformation changes on the general revenue side there's there's savings elsewhere in special revenue and trust funds that of course don't appear on this when we put this budget together because salary savings have been strong enough because the hiring freeze has been effective, because transformation changes have allowed us to reduce that headcount, we're lowering that money down to $5 million
in this budget, which would be about a $10 million reduction from where we had originally proposed when we had originally started out with this budget. Now going forward, we do face a challenge in how we show savings because of course when agencies operate, they're operating on a mix of funds, and they're going to be saving general revenue, but they're also going to be saving special revenue and trust funds and federal dollars, which don't appear on this schedule. That's something we're working on, and I really look forward to being able to lay all that out for you. I think it needs to
Senator Trent Garner
Unverified
45:03
be happening, because I know we've been promised that, and I haven't seen it.
I'll take your word for it now. Thank you,
Senator Trent Garner
Unverified
45:14
Mr. Chairman. Thank you, Senator Garner. Senator Tismang, you're recognized. Thank you, Mr. Chairman, and I appreciate you touching on the performance fund. That's
Senator Jonathan Dismang
Unverified
45:21
one I did have a question about. It was always my understanding that that fund was eventually going to be dispersed back through, you know, the various, you know, accounts or distributions. But it doesn't look like that's the case. Is there currently a fund balance in the performance fund? And if so, what is that amount?
The current balance is $46 million. $46 million in the performance fund? And how much is that as obligated to go back out?
Senator Joyce Elliott
Unverified
45:44
If we hit our worst case scenario at the end of the year, I believe it's about $14 million. Now, next year we do have a little bit of a hiccup in that there's 27 pay periods in FY22, so that'll be a bigger hit on that fund. But if you remember, when we put together the RSA at the end of the 19th session, we had enough of a balance there that we were able to fund some obligations for state police
and some other folks out of that. we keep expecting that balance to go down as we pay those obligations but the reality is that the hiring freeze and some of the transformation savings have been effective enough for the agencies to make use of the money they've got we we have not had to hit that fund when
Senator Trent Garner
Unverified
46:24
I and I guess my question though is is you know at some point in 19 there was a discussion
Senator Jonathan Dismang
Unverified
46:29
that you know that fund is going to go away uh you know largely because it's going to be uh part of the ongoing funding that's going to be in the miscellaneous or the you know the
various categories and the best I can tell we're not at a point that that fund is going away we're still you know contributing to it obviously it still has a balance and I don't see the increases in the various line items for the the pay increases that have occurred out of the performance fund does that make sense yeah we move
Senator Joyce Elliott
Unverified
46:57
that money on a biannual basis so when we come back in October you'll see those line items increases for distributions that we make through the pay plan but you know when we set this thing up like i said we had a fairly conservative
budget amount 15 million dollars a year that we flowed into that fund over time but of course the hiring freeze transformation changes those budget estimates were probably a little higher than we had originally thought and the fact that there's a fund balance there that
Senator Jonathan Dismang
Unverified
47:23
yeah obviously i mean i would argue that that's a pretty big you know component in in why you don't put additional money in there if the funds that are being put to performance fund are eventually actually not being used for pay raises but being used for you know various projects that need to be funded as
Senator Trent Garner
Unverified
47:41
you detailed just a minute ago right yes okay and then my other question is on the rain what is
Senator Jonathan Dismang
Unverified
47:52
the current rainy day balance i want to say it's about 16 million yeah and and how much of those funds have been uh i guess obligated
Senator Joyce Elliott
Unverified
48:00
or thought to be obligated uh through commitment oh i know that we've got one fairly smallish request that we'll be presenting through a DEF appropriation. But, of course, the governor has a long list of requests. I'm not aware that he's obligating any of them until at the point when he makes the decision to release those funds
or seek a request to release them.
Senator Jonathan Dismang
Unverified
48:17
Okay. And my last question is, and I realize that this was legislatively mandated, and it's on the highway transfer fund. We're showing about $13 million would be transferred. of course that that could go up depending on what actually happens in the course of the year and we saw that happen this past year my understanding probably most of the other members whenever that was you know created the the purpose of that was for repairs and maintenance needs uh and then also to help fund the federal match the match yeah and at this point there was enough that went into last
year that there's now a special fund that's been set aside for economic development at the highway department and my understanding talking to them was in coordination with discussions with the governor's office. I mean as that that's my understanding. What what do you see happening with that if there is additional money? I mean are we looking to grow that special projects fund or are we going to get back to the basics of funding the repairs and maintenance needs as it was originally
Senator Joyce Elliott
Unverified
49:22
intended. So we are obviously when we put that money in that highway transfer fund and then we bring the request over for the General Assembly to approve moving that funds over to RDOT at that point that's really RDOT's call on how those funds are used. The 15 million dollar for match that usually goes against what has been a 50 million dollar commitment on a part of the governor to support highways. In addition to that we've got that 35 million dollar minimum commitment on the new highway funding plan so we'll be transferring kind of two blocks of funding to the the department
here annually going forward how those funds are used i'm
Speaker 41
50:00
not aware of any limitation on them okay yeah and again
Senator Jonathan Dismang
Unverified
50:03
i would just say then and then maybe just for the members my understanding in the beginning we were looking at repairs and maintenance needs and those not being met and then also meeting the federal match which is being met um and there may be some discussion on how how those funds are transferred over and how they can be utilized if there are no limitations on the use by the highway department at this time. All right, thank you.
Thank you, Senator. Representative Ladyman, you're recognized. Thank
Representative Jack Ladyman
Unverified
50:32
you, Mr. Chair. I have a question on rural development, basically, and I may be getting too detailed here, but I'm looking at under other funds. i think it was brought up earlier that there was a million dollars from the rainy day fund that was used given up for senior centers and some other things at local in local areas but my question is there was a fund of about a million dollars that came from rainy day funds
that local cities and counties could use for projects there was no match and as you know about 75 percent of our cities are small towns which have very small funding and a lot of times they can't meet a match so this fund required no match there was a limit of i think fifty thousand dollars so when i talked to my mayors in small towns in my district that was really good for them that that million dollars matter of fact it was used up in half of the interim so there's no
more funds there and that was one-time funding so I guess my question I don't see it in here but was that 1 million going to be reoccurring funding and was there a possibility of increasing that to help our local cities and counties that are have small populations so
Senator Joyce Elliott
Unverified
51:55
the funding is not included in the RSA as
Speaker 41
51:58
an ongoing basis when we set that program up with that initial release of million dollars I don't think we were entirely sure how popular would be how long that million dollars would last obviously it's done a lot of good we're very happy with how it's been
used in the response to it so my understanding is the governor is definitely looking at providing additional funding for it through the rainy day fund or through other one-time funds and that might be something that when we get to the biennial budget here coming up in October we can look at
Representative Jack Ladyman
Unverified
52:27
funding on an ongoing basis well other things like the senior centers that was brought up earlier by senator bond a lot of times that's funded through the local cities and counties as well and then also the waste districts we've had numerous problems with these waste districts throughout the state some of them are losing money i don't know where that's in the budget
but that's another thing that we need to address is there any funding there to help that or has that been increased or changed
Speaker 41
52:56
there there's been no increase in funding for it through the rsa now Some of that funding might be special revenue that comes through energy and environment, what used to be ADEQ. That wouldn't show up on this schedule, but that is something we're aware of and we're monitoring,
Representative Jack Ladyman
Unverified
53:10
definitely. I think most of that is through environmental, and that would be in a breakdown later in the budget.
Speaker 41
53:16
Is that correct? Well, when we present the Appropriation Act for the Department of Energy and Environment, ADEQ, we'll be able to go over that with you. All right. Thank you. Thank
you, Representative. Representative Cavanaugh, you're recognized. Thank
Representative Frances Cavenaugh
Unverified
53:37
you, Mr. Chair. I'll read to write. I just have one question. We have an item called
miscellaneous agencies, and if someone looks at financial statements all day long,
whenever I see miscellaneous, the hair on the back stands up because that's usually a way to hide something. So what is really in miscellaneous agencies?
Speaker 147
54:00
We have a lot of smaller agencies and boards
Senator Joyce Elliott
Unverified
54:03
and commissions that get a little bit of general revenue. And I think primarily just so that we could fit it all in
Speaker 41
54:11
a format that could be understood, those were placed, all those little tiny agencies were placed into a miscellaneous agencies fund.
It was created under the law and it exists as a line in the RSA. We can get you a line or a report that shows exactly how much is in there. Now, over the years, some of those agencies have grown, and particularly with transformation now. For example, emergency management, I believe, is in the miscellaneous agencies line. Well, now they're running AWIN. So there are some small, there are a lot of very small agencies, but there are also some big ones in there, too, and
Speaker 62
54:41
we can get you that information. If you could get that information.
Representative Kavanaugh, it's coming your way right now.
Representative Frances Cavenaugh
Unverified
54:48
Thank you, because it's $68 million, so it's a little small, smaller than small. Thank
you. thank you representative jet you're recognized for a question thank
Representative Joe Jett
Unverified
55:00
you mr chair um jake can you talk about the 1.8 million dollars we give or we appropriated to the agriculture division arkansas university is it in the budget i'm looking over here to fy 21 to fy 20 the 1.869 is that what that is yes sir that
so the 1.2 million dollars it was originally given to them
Speaker 41
55:20
was loaded into the base that was in category b this year the commitment though was three million so i think so correct me if i'm wrong here that does increase it goes it gets us up to that three million dollar annual funding commitment going forward and that's going to
Representative Joe Jett
Unverified
55:34
be put into the base from here on out is that correct yes sir for the 1.8 million so it's going to be a total of three million from here on out yes sir
for the biennium all right thank you very much thank you mr
Speaker 161
55:50
thank you representative senator johnson you're recognized thank you mr chair uh mr secretary
Senator Mark Johnson
Unverified
55:53
and and mr bleed and dr shelnut thank you for being here i've i've got a question on page four of the general revenue forecast uh for fy20 we're showing the uh decrease uh as percent of uh i guess compared to 19 in gaming as down 55.2 percent and is that indicative of the change in the rate in amendment 100 as compared to that under the electronic
games of skill or is there some other indicator that
Chair
Unverified
56:35
that caused that that That Amendment 100 not only altered the rate, but it altered the flow, the allocation of funding away from general revenue. And so most of that is coming from that diversion in the amendment away from general revenue. Well, now,
Senator Mark Johnson
Unverified
56:55
the diversion you're referring to, I presume, is that it went to the localities?
Correct. Because, of course, the governor requested and we approved that the gaming funding be set aside for highways. But that does reflect the rate as of today, as stated in Amendment 100. Yeah, the 30
Speaker 69
57:21
that looks like it dropped is actually going to the cities and counties where the casinos are located. as we move forward, revenues would be expected to increase.
And anything over $31.2 million will go to the highways, yeah. Okay, so I guess while
Senator Mark Johnson
Unverified
57:43
we may indeed be gambling our way to prosperity, that prosperity looks like it's going to be in Crittenden, Jefferson, Garland, and, sorry, Senator Davis, maybe Polk County. That's correct. Okay, thank you very much. Thank you, Senator. Senator Rape,
what you're recognized? Thank you, Mr. Chairman.
Senator Jason Rapert
Unverified
58:07
Mr. Walther, thank you for
being here with your team. I want to echo what Representative Kavanaugh brought up. I specifically was interested in that $68 million. I believe it's in the miscellaneous agency's line. Yeah, $68 million. And I do want to ask this question. I have heard just, you know, you hear things about as we prepare. So in transformation, has the executive made a decision that you're really going to be articulating the budgets under the new 15 different agencies rather than letting us see, for instance, the securities department, the bank department, the insurance department?
Is that why we're seeing this miscellaneous agency line this way? No, so
Senator Joyce Elliott
Unverified
58:55
the miscellaneous agencies line has been a part of the RSA for as long as I can remember. Now we will be presenting the budgets in the appropriation acts in individual acts. In some cases there will be some combinations, some of the smaller boards and commissions. This is something that we've been working with leadership on to make sure that we're all on the same page on exactly how this is going to be presented. But we're not going to roll any numbers up into individual columns.
You'll get exactly the same level of detail that
Senator Jason Rapert
Unverified
59:25
you've always gotten. Okay, well, I'm confused. I thought you just said a while ago to Representative Kavanaugh that the reason that this line had grown was exactly the reason that
Speaker 177
59:34
I just stated, that some of these agencies are now over in
Senator Joyce Elliott
Unverified
59:39
a miscellaneous agency line. Well, there was one agency, I think, Career and Technical Ed, that transferred down into an agency that had already been in that miscellaneous agency's line. the movement of that money makes that agency look larger in the miscellaneous agency's fund,
but the number of lines in there, as my understanding, it has not changed as a result of Act 910. It's just really trying to track where the funding and the appropriation will travel as those
Speaker 69
1:00:06
pieces get moved around under Act 910. Senator, and we can give you, and I think it's
Chair
Unverified
1:00:13
been passed out, a detailed description of what's in the miscellaneous agency, agencies, and we will be providing you the budget and the appropriations for each agency
that existed last year. You'll be able to see, I think all of them, inside of like commerce, insurance will be individually described so that you'll be able to see them like you saw them last year, but they will be in a larger appropriation which is for the Department of Commerce. So what you're saying is the
Senator Jason Rapert
Unverified
1:00:44
decision has been made that's a slightly different way of presenting those budgets. Yes, sir. Like Mr.
Speaker 182
1:00:50
Bleach said, we have been working with leadership and with BLR and within the governor's office
Chair
Unverified
1:00:56
to determine how discreet we'll be doing that, and that's what we've agreed to do. Well, Mr. Chairman, I definitely believe that all members of budget ought to have
Senator Jason Rapert
Unverified
1:01:06
that detail, if you could get that passed out to us. The last thing is a softball for you, and I'll quit. just note the military department there's a huge reduction there the Department of the military just what is that sure
Senator Joyce Elliott
Unverified
1:01:23
if you look at health services under youth services there's a similar increase that's the movement of the C
step program okay it's kind of a boot
Speaker 62
1:01:31
camp for juvenile offenders that under transformation got moved to DHS we're not cutting funding for military
thank you senator out on that division of career head on your first page of your budget at $4.8 million reduction. A lot of that is going into that miscellaneous agency. So it's just shifting from
one column to the other of that 3.8. That's where that money is coming from.
Senator Joyce Elliott
Unverified
1:01:55
And if I can, sir, another big piece that you're seeing there, we moved the AWIN program out of
state police into emergency management. Emergency management is one of those items that's
Speaker 62
1:02:04
in there. So that's another big part of that increase. All right.
Thank you. Thank you. senator chestfield you're recognized
Senator Linda Chesterfield
Unverified
1:02:16
thank you mr. chair just a quick question are any of the underfunded um appropriations going to be fully funded this time we have a
number of appropriations i'm not sure what you mean mine is the hbcu appropriation
it's been underfunded by about 1.5 million so i'm just trying to figure out if that's anywhere in in the
Senator Joyce Elliott
Unverified
1:02:37
agenda the funding for hbcus is not changing under this budget to the extent it
thank you senator representative rye you're recognized hold on you
Speaker 194
1:02:56
got a green button yet what you doing
Representative Johnny Rye
Unverified
1:03:04
it's just blank oh there you go okay thank you thank you mr chairman first question
uh fellas um on the money on page five that's that's uh excuse me it's page four that's mentioned for our highway system uh which is totaling uh around around 53 million dollars okay this is something i've been wanting to ask for
a long time what if we did more than that can we get a larger amount from federal money for the matching on that you know that's that's a good
Speaker 203
1:03:46
question i'm not familiar enough with rdot and the federal funding programs but we can certainly have folks reach out to rda and get in
Representative Johnny Rye
Unverified
1:03:54
touch with you and be able to answer that for you Okay, sir. And one more, please follow up. On our retirement centers, guys, this whole year, you know, and even part of last year, we've been really concerned about that. And Representative Dee, she's brought this up, I know, at least five times.
That $1 million that we're talking about for our retirement centers? Senior citizens. Senior citizens, yes, sir. Could we not work on trying to make that $3 million instead of just $1 million? Sure. This is something that the governor
Speaker 41
1:04:31
is proposing in his balanced budget, and as he mentioned in his comments this is something we're going to be working on in the fiscal session
Speaker 206
1:04:38
well we sure would appreciate that okay
Representative Joe Jett
Unverified
1:04:43
thank you representative rye representative jet we got a question yes sir thank you mr chairman jake under the human service fund on page one
under the county operations we're showing executive rec taking out 1.6 million we're not going to start closing county offices are we what's that 1.6 million for so
Speaker 41
1:05:03
the Department of Human Services has authority to reallocate resources within their budget they run those requests before legislative council and so all that reduction there is to reflect the reallocations that the agency
Speaker 62
1:05:13
has made I'm there are no closures plan that I'm aware of thank you thank you mr. chair thank you representative representative Kavanaugh if
Representative Frances Cavenaugh
Unverified
1:05:27
you're recognized thank you mr. chief thanks for providing me the miscellaneous because it does have a question on under the
miscellaneous we have the state board of election commissions they were currently at 602 000 but now they're going to be up to 4.7 million what's that increase so the board of election commissioners their budget fluctuates with election cycles
Speaker 41
1:05:49
you know if they've got a big election like the one we're in the middle of now their costs are going to be much higher next year when they don't have an election their costs are going to come back down
again so if you follow the miscellaneous agencies line on the rsa you'll see that increase and decrease for the election commissioners follow up is there any
Representative Frances Cavenaugh
Unverified
1:06:08
in there for voting machines there's nothing in
there for voting machines or anything that was one of my questions i'm not familiar enough with the
Speaker 41
1:06:17
budget we can certainly dig into it of course we did provide additional funding voting machines during the session. Okay, thank you.
Representative Dodson, you're recognized for a question. Thank
Representative Jim Dotson
Unverified
1:06:32
you, Mr. Chair. Sorry, I had to step out. So if this question
you've already been asked, I apologize. But on the last page there, page four, under the executive rec, the increase is 218 million. And that's over base level. The base level, is that category A of RSA or is that, can you tell me what base level one? The base level would be FY19, the
Speaker 41
1:06:59
FY19 funding. Now there's some adjustments that go into there and that's really going to be the starting
Senator Joyce Elliott
Unverified
1:07:09
point that we put together the biennial budget. So FY19's budget was the budget that we came into the session last year looking at and that's what we used to develop the budget for FY20
Representative Jim Dotson
Unverified
1:07:22
for this year and then of course which is what's before you so so realistically base level is 19 we increase that 130 million roughly and the 88 million is what's over FY 20
he's correct sure sounded extremely confident about that answer and then Then finally, just as I'm adding up this entire column so I don't have to add up everything, the transformation changes, you're showing there's zero changes in savings from transformation.
Senator Joyce Elliott
Unverified
1:08:00
The transformation changes column, and maybe we should have retitled that to be transformation transfers, that was really
Speaker 41
1:08:07
just to show the budget effect of the movement of those divisions,
those programs, those offices around within the RSA schedule. Okay. All right. Thank you. Thank you, Representative.
Seat 42, is that Representative Vaught? Yes, sir. You're recognized. Thank
Representative DeAnn Vaught
Unverified
1:08:25
you, Mr. Chair. I know that we've talked a lot about the salary increase for teachers, the $60 million, and essentially I do think that we have to come up with that money somewhere. Somehow it can't be a one-time kind of thing because our schools can't survive. But the more immediate pressing concern is the minimum wage increase,
and I don't see anywhere where we've kind of taken a look at that and made adjustments for that and how hard it's truly going to hit our schools. Can you tell me where that will come from or how we will figure that out? Thank
Speaker 41
1:08:57
you, Mr. Chair. So there was no increase recommended at coming out of the adequacy recommendations, but you're right, that is something we're monitoring. It's something we're looking at not just at K-12 education but at all our state agencies, and it's one of the things that I know that we'll be working with ADE on to make sure that we can we can meet those obligations okay thank you mr
Representative Jack Ladyman
Unverified
1:09:17
chair thank you representative ladyman you're recognized thank you mr chair uh i had a question on on page three there uh institutions two-year institutions at the bottom black river college of the old washington it looks like those are all being cut their budgets going down if we really and i know this is something we want to emphasize is to increase
votech training we have a lot of uh skilled trades out there that cannot hire people because they're not available it's pretty hard to recruit industry when you don't have welders and electricians and those kind of things so we know that needs to be increased and one of the ways to do that would be to bring votech to these smaller communities uh so that they can get their training locally where they live so it seems to me we ought to be increasing or at least not decreasing the budget for these two-year programs where they can expand and in some rural areas where these small towns are
are decreasing or shrinking many of them have school buildings that are set and vacant that could be upgraded and utilized for these technical trainings and then those people could go fill the factory jobs in the bigger cities close to there so I mean is there any thought about more funding for these
two-year programs this so those changes reflect the productivity funding formula that was applied for higher education that's
Speaker 41
1:10:48
it that's a complicated formula it's one that we're looking at pretty regularly
and I know that given the amount of funding that's available to different agencies there's definitely a lot of interest in making sure that our skills development funding needs are fully met but there's no additional funds in here right now not outside of what was recommended as part of the productivity funding now that might be something we can get into in a little more detail this afternoon as well okay thank you all right that's
all the questions all right representative Jett you got one
Representative Joe Jett
Unverified
1:11:19
more you're recognized yes sir thank you let me follow up on that real quick Jake so when they did the model for this
funding was the schools I'm assuming these school presidents they were in on that yes sir and they agreed to
Senator Joyce Elliott
Unverified
1:11:30
this and and the changes that you see before you have already been made available to them through
Speaker 41
1:11:36
the higher education courting board so they should be aware of the the funding formula how it works and the effects of it well let me push
Representative Joe Jett
Unverified
1:11:43
back on a little bit being aware and signing off on is kind of two different things so a lot of these guys they kind of they they know this and they understand what's going on here well good
Speaker 41
1:11:54
with this whether they're good with it I'm not sure about that they should
be aware of the legislation and of course the
process okay all right thank you, buddy. Thank you, Mr. Chair. All right. Seeing no other questions. Gentlemen,
we appreciate it. Thank you, sir. Thank you. Thank you. All right, committee, we're going to take up item C. If you get exhibit C, this is Act 678 of 2019, which is the government financial disclosure and accountability
Act. This is appropriating unappropriated funds. We're not going to take any action on this today. This will be on Tuesday, March 10th calendar, but we wanted you all to have it, and Mr. Anderson is going to explain the items on it. Mr.
Representative Jim Dotson
Unverified
1:12:50
Anderson. Thank you, Mr. Chairman. So in order to identify what appropriations might be needed by the constitutional officers for unappropriated cash funds. We worked with DFA to identify some of those unappropriated cash funds. We
sent that list to all the constitutional officers and asked them to respond in this format that you see here. This is the response we received from them. It's being passed out now to give people an opportunity to look at this for a week and next Tuesday, Mr. Chairman, morning this will be on the agenda for action. Just real quickly, I'll do the first one to show you You see the offices of Secretary of State. They have a gift shop cash fund that is unappropriated.
And if you go to the last two columns, they are going to request an appropriation of $90,000 for that gift shop. And the action item identifies where if the committee chooses to adopt this, BALR staff will draft the appropriation for that. And it lists all of those entities that responded, constitutional officers, they're all listed at the very top of your page one. You'll see it in A-1, the governor, secretary of state, attorney general, and so forth. Mr. Chairman, that's...
Go ahead. All right. Any questions? Any comments? All
right. That's for Tuesday the 10th. If we'll go now to Exhibit D in your packet. Everybody got a copy of Exhibit D? Action will be required on this. Mr. Anderson. Thank you Mr. Chairman. Item
Speaker 248
1:14:34
D lists several items that have been
Representative Jim Dotson
Unverified
1:14:40
identified for potential committee action both in working with DFA and your staff. I will take one at a time Mr. Chairman. Okay so you'll see at the far left flag list number one this is for the Department of Human Services if the committee chooses action to be taken here the Department of Human Services has an appropriation act that is currently titled Medicaid expansion the short version is this has created a lot of confusion because that is not actually
part of the Arkansas works program or private option program it is was a program that was established in 2000 that is funded with tobacco settlement proceeds this request is to allow your staff to change that appropriation bill from medicaid expansion to medicaid tobacco settlement programs and all this does is change
name only any questions i have a
motion and a second any discussion all in favor say aye
Speaker 254
1:15:43
all opposed mr chairman item flag list number two
Speaker 255
1:15:50
hold on mr jet you didn't have yourself lit up.
Representative Joe Jett
Unverified
1:15:57
Well, you need to pay attention. My apologies. I could have stayed home and got treated like that. This tobacco settlement money, will this change, you know, two sessions ago, I think Senator Hendren and I ran the bill to put tobacco settlement money in the long-term relief fund. Will that change that any at all? Will not. All right. Thank you.
Speaker 248
1:16:17
Appreciate it. Thank you. thank you mr. chairman so we're on flag list number two this
Representative Jim Dotson
Unverified
1:16:27
is for the Department of Commerce Office of Skills Development the Office of Skills Development was transferred to the Department of Commerce it is currently a special revenue fund this request is to change that to a miscellaneous agencies fund there will be no change in funding there will be no change in the actual language it is allowing this skills development fund to receive money
directly from RSA due to the Transfer of Transformation Act. Any questions? Do we have a motion? I
have a motion and a second. Any discussion? All in favor say aye. Any opposed? Mr. Anderson.
Speaker 248
1:17:07
Thank you, Mr. Chairman. Flag list number three.
Representative Jim Dotson
Unverified
1:17:10
This is for DFA Office of Lottery. There is language and code that requires review for procurement contracts by the Office of Lottery.
it only mentions the legislative council so if we're in session there's no mechanism for this to take place this will amend the code to add or the joint budget
committee all this does is add joint budget if we're in session any questions do we have a motion we have a motion
and a second any discussion all in favor say aye any opposed mr. Henderson
Representative Jim Dotson
Unverified
1:17:40
mr. chairman we're on page two of the flag list it's flag list item number four this is department of commerce division of state services for the blind state services for the blind was transferred from dhs to commerce
however the fund that pays for them is still in dhs in code this moves that out of there does not change the fund funding sources anything like that it just puts it in the proper
place in code mr chairman any
Senator Joyce Elliott
Unverified
1:18:10
questions senator elliott you're recognized thank you mr chair um do we know how many other agencies or divisions that have their funding, say, in DHS, but they are actually situated someplace else? Any others besides
this one? Or did we take care of all of that
Representative Jim Dotson
Unverified
1:18:29
with the transfer? I think this is one that we've identified that was missed. That's why it's on here. If
Senator Joyce Elliott
Unverified
1:18:37
there are any more, we hadn't found them yet. All of the others, though, were addressed within the transformation process that we had. Yes, ma'am. As far as we know. I hope
so. Yes, ma'am. All right. Thank you. Thank you. Any other questions? Have a motion? Have a motion and a second. Any discussion? All in favor say aye. Aye.
Speaker 261
1:18:57
All opposed? Mr. Anderson. Flag list number five.
Representative Jim Dotson
Unverified
1:19:00
This is for Department of Public Safety, and this is where AWIN was moved from the state police to Adam, and it was discussed in the balanced budget previously where Adam was funded through the state police fund since it has been moved to Adam it will be funded from the miscellaneous agencies fund if you adopt this it will allow us to draft the bill instead of saying state police fund it'll be miscellaneous agencies fund it will be no change in the language or the funding just the funds fund
source. Representative Dodson, you had a question? Yes, thank you, Mr. Chair. So, if I'm hearing you correctly,
there will no longer be a, quote, state police fund? No, no, sir. That still exists, but AWIN was funded through the
Speaker 250
1:19:52
state police. It's now funded through ADAM. So, we can't fund AWIN through the state police fund because ADAM administers it, so we're moving it to the proper fund so the
Representative Jim Dotson
Unverified
1:20:02
revenue that's going into that fund still general revenue saying general revenue
will that actually decrease the general revenue that's going into the state police fund and move it over into the miscellaneous fund yes by the
Speaker 250
1:20:14
by the exact amount that the awin program was transferred yes sir thank you okay
Senator Joyce Elliott
Unverified
1:20:25
senator feelyt you have a question yes i'm just wondering what's the reason it can't go to the adam budget instead of fund
Representative Jim Dotson
Unverified
1:20:34
instead of miscellaneous fund i i understand that i didn't explain that very well okay the state police operates under the state police fund so now adam
will be administering a win and it can't use the state police fund it has to use a different fund two different agencies can't use the same fund and that's why we need to move that to to miscellaneous agencies that's if that makes sense it
Senator Joyce Elliott
Unverified
1:20:56
does as on that first premise of the two agencies can't use the state fund but that's okay I get it thank you
thank you senator representative Tosh hold on light up again representative Tosh
Representative Dwight Tosh
Unverified
1:21:18
you're recognized thank you mr. chair I just want to make sure I understand i'm just curious why we're transferring that to a miscellaneous fund and not directly to
Representative Jim Dotson
Unverified
1:21:34
adam um mr chairman the miscellaneous agency fund is a general revenue fund that can specifically be used by adam it was one that was readily available it the appropriation bill will be drafted for them out of general revenue uh it's a convenient fund to use so are you saying
Representative Dwight Tosh
Unverified
1:21:52
And then it'll be moved from the miscellaneous fund into the Adam fund.
Representative Jim Dotson
Unverified
1:21:56
Is that correct? Yeah, they'll spend it
out of there. Yes, sir. That's just okay. Thank you. Any other questions? We have a motion. Got a motion and a second. Any discussion? All in favor say
Representative Jim Dotson
Unverified
1:22:13
aye. Any opposed? Mr. Anderson? Okay, Mr. Chairman, we have three more. We're still on page two, flag list number six. these are the reappropriations
and as you know reappropriations provide authority for departments and institutions to spend unexpended balances these are on pages 4 through 18 they're all listed there for you if you adopt this it will give your staff permission to draft these bills which will then be brought before the committee for their consideration and remind you reappropriations are projects that
are not completed and allows them to fund them through
the next fiscal year but they've already been approved any questions on that do we have a
motion have a motion and a second any discussion all in favor say aye
Representative Jim Dotson
Unverified
1:23:04
chairman if i can take the committee we're on flag list number seven to page 19 because it gives a little better detail there's been some discussion about these on page 19 in your flag this is flag list number seven the reason this proposal is here is a there
is a requested mechanism for savings and to eliminate duplication of administrative services in different divisions by having one centralized division general revenue savings could also be realized by allowing funds other than general revenue to pay for those administrative positions so what this request is for the committee to consider a special language that if you go to you'll see on flag list page 19 you'll see there will be a regular salary
shared services section established in the cabinet level department bills that will list all the administrative positions and then in section 2 you'll see there will be an appropriation of paying account allowing those administrative positions to be paid for more than one source and sources other than general revenues so in section 3 the special language that does all this you'll see on page 19 a 1a it starts off where it creates the paying accounts and
then in B it directs the transfer of funds and appropriations and transfer positions to the shared services section. And then in A2, the transfer authority is limited to only those services that are provided for multiple departments or divisions for such services as administration, human resources, and procurement. On page 20, number three, you'll see the transfer authority may be used only within the department. It's not from different
departments on b1 a report must be included in the budget manuals for budget hearings listing all of the transfers and then b2 a and b details what that report submitted to budget hearings shall include so that sufficient detail will be available for the committee to make decisions and then in item c it's the intent that this be allowed only up till fiscal year 2021 In other words, giving them 2022, giving them fiscal year 2021 time to implement these administrative sections that will list all of them in one section as opposed to having administrative positions in various divisions.
And that at that time, the committee be informed, the budget committee be informed that that transfer authority is recommended to be discontinued.
We've got some questions. Senator Rapert. Thank you
Senator Jason Rapert
Unverified
1:26:07
Mr. Chairman and I don't know if we need someone else to come up here and answer this or
not but you know I'm just gonna state you know I've been watching this and getting some feedback and I'll use as an
example the insurance department 300 million dollars a year or so it's coming in that usually went to general revenue and my concern is that these actions are beginning to take into, I guess, beginning to put into code or statute here opportunities for suddenly that money that used to go to general revenue that was raised by that independent agency is suddenly going to be carved up and used inside the Commerce Department before it ever really even hits general revenue again.
So I don't know if this is what this is intended to do, but I know that there is a desire from some angles to try to do that and i think that it needs to be very very clear that's it that's a step away from what normally has happened you know the insurance department survives on about 18 million a year and the rest of that goes to general revenue and so mr bleed now that you're here is this the black and white and the the blueprint to do what i've just described no sir
Okay. Well, where is that? Is that something that you're actually approaching and you want to do, is to be able to utilize all of that extra revenue inside of this new Commerce Department without that ever really hitting general revenue to be decided by the legislature like we've done before? No, sir. Okay.
Speaker 147
1:27:45
Well, proceed. So the intent of this
Senator Joyce Elliott
Unverified
1:27:48
legislation, if the first dozen or so pages of the Transformation Act really emphasizes making better use of the dollars we direct for kind of administrative
back office services, human resources, budget, fiscal, accounting, IT, that sort of thing. If you look at an organization, and insurance is a good example, over there in commerce, commerce is a combination of seven or eight agencies. If we didn't have this language, then the Department of Commerce would in effect have seven or eight human resources departments, seven or eight accounting departments, seven or eight IT departments. This language would allow the Department of Commerce to combine those services so that
instead of each one of them having to operate an independent service, they can do so collectively and as a result, we won't need as many people. That will create savings not just for the insurance department but for all of the different pieces within the Department of Commerce. The challenge there, as you're aware, insurance operates on special revenue, and most of those pieces within the Department of Commerce operate on special revenue. Special revenue is limited in how it can be used. So if we want to operate this correctly, what we have to do is set up a paying fund with the right appropriation
Speaker 147
1:28:59
so that we can detail down to the penny in the event that an auditor from Division of Legislative Audit or the federal government comes along and wants to see
Senator Jason Rapert
Unverified
1:29:10
how those funds were spent well mr. chairman I'll just say this and this is the best opportunity for me to get to say it never before and that transformation legislation was there an intention in fact to the contrary there was a specific effort to protect the integrity of the bank department commissioner the securities commissioner and the insurance commissioner and I just want
you to know that several of us are going to object strongly to any efforts to try to eclipse them and and and i'm concerned about it and so i'm that's why i'm a little bit trigger happy on when i see this kind of language because i don't want us to go down the road and i'll just tell you bureaucratically there needs to be a discussion in the commerce department about the fact that those commissioners have statutory authority and they need to be given the proper respect that they do their position in state government because they serve they're not
relegated to just some team leader no they're the insurance commissioner the securities commissioner and the bank commissioner and I'm getting very concerned about what I'm hearing coming out of some of this transformation this may need to be taken up with the new commerce secretary but this is why I'm going to be watching very closely to any moves that are being made that further undermines what is really the true authority of those people that have now been placed in commerce. That's all I've got
for today. Thank you, Senator. Senator Malick, you're recognized.
Speaker 82
1:30:41
Thank you, Mr. Chairman. My questions are really related to those of Senator Rappert. The concerns I had throughout transformation was really with respect to the cash agencies. Senator Rappert mentioned insurance, banking, oil and gas would be another one that's in the Department of Energy. when will we see exactly how much those cash agencies are going to contribute toward these shared services and you know a concern I had is whether for the pure cash agencies whether it
was really going to cost them more under transformation than it did before but what I'm interested in is the specific amount those cash agencies are going to contribute toward those shared services where will we see that so when we
Speaker 147
1:31:24
get out of the fiscal session the first thing we're going to do, we're going to roll right into it, is we're going to take the appropriations that are generated by the General Assembly and kind of marry them up with the funding streams to create agency operation plans. Within those agency operation plans, the agencies are going to identify for us exactly the positions that are going to run through
this shared services language, as well as the appropriation and the funding that will be needed to move through it. So as of July 1, we'll have all that information. We'll have it all laid out and loaded, we'd be more than happy to sit down and talk to you about it. As far as how much they pay, and this is kind of really the important part of what we're trying to do here, legally and constitutionally, we cannot make, we cannot take special revenue and use it for a purpose other than for which it was laid out in the law. So if we use too much, we're breaking the law. And so the intent of this section is really to make sure that we avoid that. And from an accounting
standpoint, we've worked really hard to make sure that we can set up the kind of processes and procedures to make sure that no one pays more
Speaker 82
1:32:27
than they should well and I certainly agree and applaud efforts on efficiencies the example that you mentioned with HR directors and all that but you said when we get out of fiscal session but during fiscal session will we know how much the bank department or how much the insurance department or how much the commerce or securities
Department will contribute toward the Secretary of Commerce's salary, administrative support staff, how much they'll be charged for their rent, for their office space. Will we know those exact numbers? The Appropriation Acts that will be presented
Speaker 147
1:33:03
for you will have the positions that will be running through these shared services and under the special language that's before you those positions have to be in a position where they can provide services for multiple divisions right so we're really talking about administrative staff those positions then
will carry appropriation and funding with them but if there's any interest you have in learning more about exactly how much a specific agency would be contributing through that that administrative portion yes we'd be more than happy to sit down and get that's
Chair
Unverified
1:33:32
what i'm interested in and i'll get with
you thank you thank you senator senator hickey
Senator Jimmy Hickey, Jr
Unverified
1:33:40
you're recognized thank you mr chair thank Thank you, Mr. Bleed. I heard you say the word legally and constitutionally and that
y'all would be violating it on another issue. But that's exactly what this legislature would be doing
if we passed this, and I hope the members are listening. I'm speaking loud on 7. I'm going to be screaming on number 8. As far as number 7 goes, there is a host of attorney general's opinions and even court cases out there that this body cannot delegate their authority as it comes to appropriations. I'll go on and speak to number eight that's coming up. It also says that we must be specific and we also must be distinct in what those appropriations are. Not only, again, are there AG opinions, there are court cases that set precedent on that that go back as far as 1936.
One court case that I read, because I've been researching this, actually had to do with the game and fish, and it actually even made reference that since that appropriation that was made to Game and Fish back whenever the governor had control of it is that since we did not list what it was supposed to be used for that the governor could do that and that would be a violation. So I understand what you all are trying to do, but I also say this,
is that is what the purpose of developing budgets are about you should have are and i'm not saying you mr bleed but your cabinet directors or your cabinet secretaries they should have already put these budgets together and brought them before us so that we would have that we would be appropriating that money the way that this body is supposed to do so have you all looked at that i guess i'm supposed to ask you
a question and i'm up here making statements but i'll ask you
Have you all looked at the constitutionality of this? Well, yeah, and so
Speaker 147
1:35:34
the language that's before you has actually been in place at the Department of Agriculture for a couple sessions now And the language of using paying funds like that has been in place when we put all this together One of the things we tried to do is not reinvent the wheel or introduce anything to y'all that you hadn't seen before So this is something that we've been doing for a little while. It's something that Paul Lothian the accounting shop that he runs has been working on it is something we've been looking at okay
Senator Jimmy Hickey, Jr
Unverified
1:36:00
Well, again, I hope the memberships understands and will help vote against not only seven. Again,
seven's not as bad because we have some amounts in there. Eight is fixing to be just past egregious in my point, even though I know that you've got in there that it has to be approved by the
legislative council. But, again, I don't see where this body can do this.
Thank you. Ms. Garrity, if you'll identify yourself and speak to Senator Hickey's question on legality.
Speaker 302
1:36:31
Thank you, Marty Garrity with the Bureau of Legislative Research. There is quite a bit of case law out there, but as Mr. Bleed stated, this is language that has been in appropriation bills. Generally, until challenged, it's found to be constitutional. There are no constitutional challenges on this point yet. There is language, as Senator Hickey mentioned, in item number eight that's related to if
it is found unconstitutional, then the whole section is found unconstitutional, and they can't piecemeal out only the unconstitutional parts of it. That's a safeguard for the legislative body in its appropriation powers. Senator Hickey, you got a
Senator Jimmy Hickey, Jr
Unverified
1:37:21
follow-up? Well, I hope I'm smart enough not to debate Ms. Garrity on legal issues, but basically if I understood what Ms. Garrity said, she said it has not been challenged, but on its
face and in the most basic form, this is a function of the legislature, and if we've been doing other stuff incorrectly in the past, that doesn't mean that that makes it right from this point
forward, so I'll just end with that. Thank you Mr.
Chair. Thank you. We've got a bunch
Senator Joyce Elliott
Unverified
1:37:56
of other questions. Senator Elliott you're recognized. Thank you Mr. Chair. Mr. Bleed I just trying to think about this just as it is operationalized and trying to make sure for example cash funds are not intermingled you know
with other general revenue funds or whatever. So if it's a matter of we're you know pick I guess a cabinet, and we have three or four directors, for example, and some of them are cash funds. We've got this one big HR department, so it would be that HR's department to make sure we don't get these funds intermingled.
so okay we're getting some backup here i'll wait then and okay i'm i'm just uh trying to understand how this would be operationalized and not whether we've challenged it or not and not violate the law this is
before paul comes up here okay this is a process that's very common for federal grant programs where uh we're cost allocating is the accounting term, and that's really coming up with an objective criteria that says, okay,
if we've got a shared human resources department, they're going to develop a uniform means of making sure that if, you know, they can show, for example, that a particular office has occupied 10% of their time or required 10% of their invoices or however they want to measure it, then that office is obligated for 10% of the cost of the total unit. Did I say that right? Yes, sir. Yeah, and
I understood that. Yeah, because I've been in situations like that where you have to do it that way, but what it has generally resulted in is what's causing my question.
It has resulted in just a miasma of all kind of things that takes everybody's time and energy and so forth. So what I'm getting to is, I get the example you just gave us. That's a good one to illustrate it. But the question I want to understand is, is that going to cause us to have, then, an even larger Human Resources Department to operationalize all of what we have to do to
make this work? As opposed to, for example, leaving it like it is. I'm not advocating one way or the other, I'm just trying to make sure I understand that We're not
Representative Frances Cavenaugh
Unverified
1:40:37
going to just create a bigger monster. Well, that's certainly not the intent. As Jake said earlier, you currently have administrative staff in every agency that's been combined, and the intent is to reduce that number and have that central services set up
so that they can support each one of those agencies at the same level in the same manner as they currently are, but just have more efficient use of the staff to do that you've obviously got to fund that in some manner and to effectively fund that the use of paying funds allows you to do a cost allocation on the front end rather than doing it on the back end of the process and so each agency or each secretary department would need to sit down and look at their business processes and what they
support and determine those allocation factors that are most prudent to be used and to the level of that allocation that you make one of the things i do not advocate is doing cost allocation just for the exercise of doing the accounting there becomes a point in time when there's no value to that but there will be a value to doing this to a certain level to see that the funding to support those shared services is done and done correctly because the federal government will look at it
legislative audit will look at it and this is a way to make sure that we don't supplement the general revenue actions of agencies by using federal funds inappropriately or using the special revenue inappropriately because we can put these plans in place they're audible you can see the movement of the money, but you have to set the appropriations up at the level of the individual agencies and then fund that forward based on those allocation factors and with a true
up if there's any adjustments necessary by year end.
Senator Joyce Elliott
Unverified
1:42:35
I'm going to ask you too. I'm sorry, Mr.
Speaker 147
1:42:37
Lee, go ahead. If I can also jump in, I think this is kind of responsive to your question. You know, we
Senator Joyce Elliott
Unverified
1:42:44
have a lot of little boards and commissions out there, little small agencies that are not very well funded at all. Traditionally, those agencies don't have high-level accounting managers. They don't have high-level HR managers. So while I do not, if this somehow results in us growing positions, we're doing it wrong, it will result in some of those smaller boards and commissions
having access to really much better back office staff to help them fix problems. So our hope is that going forward, leg audit or peer committee, you're going to see fewer problems because we've got that secretary level staff addressing problems. From my standpoint, from our standpoint, it's nice because when we have problems at those little agencies, we can now call on that secretary level of staff to help
Senator Joyce Elliott
Unverified
1:43:30
it, and it might just be me
because probably a lot of us have had three or four hours of sleep, so I will stipulate that. That last part that you, Mr. Bleed, said really is responsive to what I'm asking because it feels like I was getting a response to a question
I did not ask. Because I understand totally what you're saying about the way it's organized according to the
federal government. But I'm asking did you plot this out,
which is more to what you just responded to me. We've got a lot of little agencies and we've got some big agencies all rolled in. Have we plotted it out, say once we create one big whatever, in this case, you know, human services departments. Have we actually plotted it out to understand, not that we are just not going to intermingle funds, I get that, you don't plan to do that, but have we plotted it out to know that we have the people to do this,
let's say there are eight small little boards or whatever, But there are some really big agencies that have been folded in. Does it stand to reason that some of those agencies might be so big and so complicated, it's best not to fold them in? Is there a possibility for some hybrid situations within these departments? So there's certainly a lot
Representative Jack Ladyman
Unverified
1:45:03
of possibilities, and we provide our secretaries with the flexibility that they need.
Senator Joyce Elliott
Unverified
1:45:08
We hope we provide them with that flexibility. that the the reason that we focused on these shared services is because our belief that and although I'm sure there's differences from agency to agency on a higher level human resources and applying the personnel law should be uniform across all 15 divisions similarly with accounting similarly with all those services when you get down into the programmatic level yeah that's when you're going to have those differences but this appropriation that we're talking about now should not cover any programmatic level employees it should
really be on those administrative backup
Speaker 328
1:45:46
staff okay Larry Walter else you gonna bring up here
Chair
Unverified
1:45:51
go ahead well I think as I have heard your question I'd like to give you some experience that I've actually had over the five years I've been at DFA if y'all recall you brought into DFA the lottery. The lottery was a fairly large organization pushing a hundred
people. I don't remember the numbers right now. And while we integrated them within DFA, well we didn't need a personnel department. We didn't need procurement and some of those common functions. So what we did is we moved that over into the DFA organization. We already did shared service at DFA. we learned that a long time ago well before I got here I don't have any don't give me any credit for that so we then so we actually reduced the number of
people at the lottery did not give up any efficiency services or anything the next thing that was brought into DFA was the building authority and laid law in that organization we did the exact same thing with them and so and when you integrate them, then you have attrition that will allow, as they come, we, no one is terminated, but what we do is, over time, those people find other jobs, we move them around, find, do that, so we have efficiencies that develop, and we,
whenever the smoke clears, so to speak, you have fewer people doing those things, and you're a more efficient organization, and I see that. That's the way we're going to be doing it as this transformation continues with this authority this makes it gives us the ability to account for it to allocate cost as needed to needed mr. Lothian is you know the chief comptroller he's very particular about accounting and making sure that we are doing things that are
lawful and I do not think that we're going to be doing anything it would be outside of the law and we'll be doing it accurately and it will allow the efficiencies that you all are asking for the administration in transformation to occur and allow us to have savings. This is a way of allowing us to do our job as we implement this transformation. if i may if i may i
Speaker 330
1:48:17
think i have an example of what you were asking about
Representative Frances Cavenaugh
Unverified
1:48:21
uh labor and licensing is obviously taking over many of these small boards and commissions into that operation what they're not apparent at this
Speaker 316
1:48:30
point in time they're not going to take workman's comp in and make that part of that central administration it's being held separate at least at this time okay which is what you were really saying they're big enough standalone large enough that right now they're going to do the smaller piece with the boards and commissions into the labor department okay and that and the reason
Representative Frances Cavenaugh
Unverified
1:48:51
is just the size of trying to do both of those i just last say
Senator Joyce Elliott
Unverified
1:48:58
i think i'll just let somebody else
have this um in the event that what you we give you the authority to do this and then you decide within in these departments you need to make some decisions like, well, that was a good idea, but when it was operationalized, that really didn't work so well, so we really need to figure out a way to maybe hybridize or whatever we want to do with this, do something different from what is obviously on the paper here. There will need to
be more than one human resources department. Who makes that decision? Does that come back to us in some kind of way? Are we just saying we're going to, under special language, give you this authority, then it's going to become a part of legislation? And we're going to be just deciding, the only thing we're going to be deciding is this one big budget as opposed to the budget and how things are going to be done differently
that we were not told about during
the transformation discussion. So this is not,
we're not rolling up any budgets or consolidating any numbers, any lines in particular. What will happen is, of course, we budget annually. And if a secretary, and it would be the secretary's call, if a secretary says, you know what, the shared service isn't working, I want to break this out into a separate appropriation or I want to move positions down from the shared service work created to the appropriations within my cabinet,
that'd be something we'd present to you all as an amendment to
the Appropriation Act. but it's not in here automatically. You'd have to come back to us with that amendment
to do that. Well, if this language is adopted today, it would be laid out for you all and presented to you in the fiscal session.
Okay. Thank you, Mr. Chair. I'll sleep on this and maybe get clearer, but I
appreciate y'all's answers. Thank you very much. Thank you, Senator. Representative Wooten, you're recognized.
Representative Jim Wooten
Unverified
1:51:03
Thank you, Mr. Chair. I want to be sure I understand because I was a part of the last reorganization and headed up the Department of Commerce. And one of our biggest challenges was the independence of the bank department, the insurance department, the securities, and others as it related to their statutory authority. The budget control was a totally different situation. I have two questions.
The first one is, are you going to be able to, under this transformation, to identify all funding independently of the total commerce budget? I mean, you'll know where the revenue is coming from, who it is, who it's charged to, and the $300 million from the insurance department can be identified. Correct. Correct. Act 910,
Speaker 62
1:52:01
the transformation won't change how we track those funds,
and it won't change how the appropriations or
Representative Jim Wooten
Unverified
1:52:08
any reports are presented to you all. So the accounting operations can be identified independently relative to the funding that's there? Yes. Okay. Now, in reading the acts or the information that we have here, Is my understanding correct that we'll be really voting or approving budgets kind of in the dark relative to the transformation?
Because you said, you made a statement earlier that some of this will be worked out after the fiscal session. So the amount? So the budget, so are we going to be able to look at and identify the personnel changes that are being made?
Senator Joyce Elliott
Unverified
1:53:04
So right now, these personnel costs are not presented to you. They're loaded, they're kind of hidden into
Speaker 41
1:53:11
larger lines in the Appropriation Acts within the department.
So you might have a large line that says this is to operate this agency. But within that you're going to have all kinds of different costs including human resources and some of the administrative stuff What we're proposing we do is pull that out and put that into this shared services appropriation language Which would be presented to you all in that separate appropriation and then when we come back in Budget hearings coming up here in October We're going to be making a report already on the positions that we move through there at that time We can absolutely give you information on the amount of the cost that we project out through there
Representative Jim Wooten
Unverified
1:53:48
Okay, so we can assume and make the assumption that the bank department, the insurance department, securities department, identity will remain as is, and their statutory authority cannot be or will not be interfered by the Secretary of Commerce. We'll
Senator Joyce Elliott
Unverified
1:54:14
be enacting Act 910, and now I understand this is an issue
Speaker 41
1:54:18
that we debated all over the place during the 19th session, but our intent here is really to really focus on identifying and creating efficiencies through that administrative backbone to agencies. This should have no impact on the operational programmatic work of the
Representative Jim Wooten
Unverified
1:54:38
individual agencies, including the ones you're talking about. They should be statutorily free, as they are now, to enforce their rules and regulations without an involvement or input or coercion from the Secretary of Commerce.
Speaker 110
1:54:53
We're absolutely going to follow the law as it's written, sir. Okay. Thank you, Mr.
Chairman. Thank you, Representative. Senator Bond, you're recognized.
Representative Justin Boyd
Unverified
1:55:04
All right, and I guess we're talking about seven and eight. I have a couple particular questions, then I'm kind of overriding. There's just seven. We're
Senator Will Bond
Unverified
1:55:14
not to eight yet? We ain't got to the biggie yet. Well, then, first off, I'll just say
Representative Justin Boyd
Unverified
1:55:19
I've long held the position that super majorities for either party are bad for budget oversight.
And there's just probably a handful of people in this room, and I don't consider myself one of them, that really knows what's going on in the budget. And so the more transfer authority we give, sometimes the less oversight. You're consolidating power in the executive branch. So what does this mean at the bottom on page 20? The Bureau of Legislative Research, I'll bring the recommendation in subdivision C1 of this section to the attention of the chairs.
I guess that's our people's language. I've never seen. on
Speaker 194
1:56:01
if you'll let mr. Anderson can answer it for you there it was
Representative Jim Dotson
Unverified
1:56:07
the will that this just be for one year to allow them to set up that and then there was concern that there wouldn't be a mechanism to let the next general assembly know that that they want this to set up be set up for one year so the bureau staff was charged in notifying the budget subcommittee and special language that they've been asked to take this out. That's all that is, is to let the legislators
know that this was only intended for one year by that General Assembly. It doesn't bind them to that decision, but it does charge us with making sure everybody knows about it. I guess
Senator Will Bond
Unverified
1:56:44
that just caught my eye because I don't think I've ever seen maybe it has been a bring to the attention of in in a piece of legislation it seems to me that also that if if that is going to be the language shouldn't it be brought to the
Representative Justin Boyd
Unverified
1:57:01
attention of the entire legislature maybe as opposed to just those listed I don't know I'm concerned about the the oversight particularly on eight of course as
Senator Hickey mentioned not so much on session
Representative Jim Dotson
Unverified
1:57:11
I guess Senator Baum Mr. Chairman if I may I guess the thought was that it would be brought to the attention of the people that were making the decisions on the language, which would have been the special language subcommittee and ALCJBC subcommittee during budget hearings. But this language was put in there as a draft to address that concern. All right.
Senator Will Bond
Unverified
1:57:39
That's all the questions I have on seven. I have some
on eight. Thank you. Thank you. Members, we're going to go to about 1130, and then
we're going to break for lunch. At 1 o'clock, we've got higher ed. Chairs realize there needs to be some more work on this, so we're not going to vote on this today, but I do think we need to have some questions and discussion and some more work done on it. But just to let you know, we're going to go to 1130. While we've got DF&A and the governor's people here, we're going to take questions.
Representative Jim Dotson
Unverified
1:58:12
Representative Dodson, you're recognized. Thank you, Mr. Chair. So I'm not sure if this is for staff or for budget, the governor's office, but this basically allows us or allows the agencies, the departments, to transfer appropriation authority within their subdivisions. is that what I'm understanding and it says on the top of page 20 here without
limitation administration human resources so technically does this open it up to be more expansive than just those shared service administration pieces without that with that language in there without limitation well I can tell you the discussion and the intent is that
this would just be for administrative services serve those intent I'm just talking about what the way it's
Speaker 359
1:59:14
drafted so if I can Kevin the the intent here is just as
Speaker 41
1:59:22
administrative services and I think the language says who any position you move up there has to be in a position where they can provide their service whatever it is they do to multiple divisions within that agency right so if it's an HR person they need to be able to provide HR services to everybody if you of a state trooper out there, that state trooper is really only going to be able to be a state trooper for one agency, and that's the Arkansas State Police, so that we wouldn't move that sort of position up there. And I can tell you, we're going to be very clear with the agencies when we set these things up that they need to be following the guidance that's established here. The reason
there is a little bit of flexibility is just because not all the cabinets are sure on what their shared services need to be. For example, someone has set up legal pools. We've got a lot attorneys in state government some want to set up a shared service where they have a legal office that handles all the legal chores within that department but not all so there is a little flexibility there but it will all be for that kind of administrative back-office stuff no programmatic employees who will be doing the frontline work of the agency would be included okay so I understand and
Representative Jim Dotson
Unverified
2:00:26
appreciate the effort here to try to have these shared services together what I'm primarily concerned about, and I don't see anything, any language in here that this requires prior approval of ALC or JVC if we're in session within here, so this would be completely on the agency's discretion. We would be giving complete authority for you to transfer and move positions
around, appropriations around, all within, with inside of a department. Is that what I'm understanding?
Speaker 41
2:00:59
it would be limited to the cost that we could show I mean we wouldn't be running whole giant programs through there it'd be limited to how much it costs to run human resources etc etc because keep in mind every one of these has to be able to survive an audit not just from divisional legislative audit but also from a federal audit or from a lawsuit so we need to be able to show every penny if we start moving huge amounts of money through those funds that's going to create a huge headache and a liability for us on there if we can't cost allocate it down to the programs it serves okay but you could do it this
Representative Jim Dotson
Unverified
2:01:33
gives you the flexibility to do it yes sir okay that's and and that's without getting into I know we're not talking about number eight yet but this basically if I'm understanding just as a it says without DHS being a part of it but the reallocation of resources that we do currently within DHS's budget four times per year allows them to move appropriations from one to another this
Representative Jack Ladyman
Unverified
2:02:08
would act similarly to that is that that's that that's this is more just to create the shared services so it would be moving a position
Speaker 41
2:02:17
from an administrative position within a division up into that that that main administrative Appropriation Act and then transferring the funding and appropriation that follows those positions it would have to have the exact position an equivalent appropriation transfer for that it's
Representative Jim Dotson
Unverified
2:02:29
tied to that position yes sir okay I'm not entirely sure how comfortable I am with that
without prior authorization but I understand it
better now thank you representative kavanaugh you're recognized
thank you mr. chair with shared services
Representative Frances Cavenaugh
Unverified
2:02:49
there's always a fee associated have we even talked about if there's going to be a fee charged and what that might be
actually that we're that's what we're really
Speaker 316
2:03:07
talking about is how to pay for those services through the allocation process of factors such as the number of employees that
hr services by a division or department you would take their total cost and divide that into the number of people they service and that becomes the charge that they are asked to pay into the paying fund to support that unit there won't be like a set fee of five dollars per employee or something like that it'll have to be a covering of the cost incurred and then at that allocated down to that
Representative Frances Cavenaugh
Unverified
2:03:41
department or that division so that that comes back to a sum zero
follow-up mr chair in our business we do centralized services which is a lot is very similar to shared services but i charge for the administration of that and that's the question i'm asking the person that's overseeing this is they're going to be an additional charge when we have shared services now, DF&A takes 3% of this and someone else takes 2% of this. Is there going to be a percentage that's going to be taken for that? Yeah, go ahead.
Speaker 121
2:04:16
No. I think what you're talking about is constitutional officers or state
Speaker 41
2:04:20
central services funds, which is similar. The issue we've got here in state government and in Arkansas is that, of course, special revenue, cash funds, trust funds, Those are all funds that are limited by law and how they can be used So if we did a flat fee like that, we would be opening ourselves up to basically overcharging or in some cases undercharging different fund sources, so What all the secretaries and the shared services the CFOs are going to have to do is set up the objective
Criteria that Paul was talking about so if an auditor comes in and says well Why did you charge the amount you charge to this particular agency? We can go back and say well that's because they occupied this amount of our time or this they required this amount of the work of the total unit and that's how we allocated those costs. Thank you.
Speaker 115
2:05:11
Thank you Representative. Representative House you're recognized. Thank
Representative Douglas House
Unverified
2:05:20
you Mr. Chairman. I don't know Mr. Lothian or Mr. Blede which one of you ought to answer this
but I've noticed a couple of terms being thrown around in the room and want to see how much you have addressed that. The Constitution talks about special revenue. If you collect revenue for one purpose, you have to use it for that purpose. And then we have constitutional language that says an appropriation is for public money. It's appropriated for a particular purpose, and it can only be used for that purpose. I've noticed a tendency, too, among folks to classify revenue as general revenue when
they want to spend somebody else's money, but it's special revenue when somebody wants to spend mine. And it can only be used for my purposes. Now my question of you is, because you mentioned it, how much discussion, you can use special revenue for a ancillary function you can take gas money gas tax money and buy computer services for the highway department so how much discussion and and time are y'all spending about the use of
revenues if it's one thing to transfer an appropriation it's another thing to use an appropriation for an ancillary purpose and and i want you to try to address that because we're to be talking about it in special language thank
Representative Frances Cavenaugh
Unverified
2:06:54
you thank you mr chairman okay i'm gonna take i'm gonna take a shot at this understanding i'm not as articulate
Speaker 316
2:07:02
as mr bleed is but the whole concept here is that we will utilize the either the federal revenues the special revenues or the
other revenues that which is not general revenue to pay for only the support they need from that central service unit to perform the function that that money is collected for and that is the reason that you go through the allocation process rather than charging a set fee that is not necessarily then re-evaluated and and gotten down to the exact cost for that support you you can't subsidize one special revenue with another special revenue and we can't let federal
revenue subsidize the cost for a general revenue function or special revenue revenue function but one would break the special revenue piece breaks state law the federal piece would break the federal law and so you've got to sit down and in each situations evaluate what the benefits are that program which pieces of those puzzles they're using and allocate that cost back to only that from which they draw a benefit and then you have to be able to show that and substantiate that
through an audit trail and quite frankly i think what you're going to find is as we move these positions into the shared services and you set that up on the transparency website such that those people are out or delineated in that website you will have more visibility of what the cost of providing those services are than you've had in the past and you'll have one place to go look for that
Speaker 121
2:08:48
and and if i can jump in on that um on my eloquent colleague
Speaker 41
2:08:52
here the whole purpose of this
is to really not just cost allocate to the special revenue and the cash funds and accounting for accounting sake but it's also to make sure that we're allocating costs to the services that should be paying them because if we don't do that then the only funding source that we have that has the flexibility to cross those lines is general revenue and so at the end of the day the intent of this this process and what's before you is to save money and to save money by reducing the number of positions that are out there and reduce the burden that's on general
revenue in particular. Thank you. Thank you, Mr. Chair. You through, Rep. of House. All right. I'm going to get to seat 60 of Senator Hill. Who was that? Senator Rice.
Senator Terry Rice
Unverified
2:09:45
Okay. You're recognized. Thank you, Mr. Chair. And as an alternative, it was going to be
quiet. I'll be brief, but I do appreciate you announcing there will be more discussion. And let me just offer this to the the body it's been brought up here and and in good
Concerns I heard mr. Bleed mentioned to I believe a couple of people that be glad to get with them and and Expound some more appreciate that mr. Bleed this committee This whole committee needs that same opportunity What we are about to do mr. Bleed you please correct me I'm not saying I'm against all this, but correct me if my understanding of this and concern for this is not just what this committee will agree to do, and it's been brought up, I believe,
Representative Dawson, it will affect what ALC has oversight and transparency of in some ways. Is that not correct? so the language that we're talking about here will be
Senator Joyce Elliott
Unverified
2:10:50
included in appropriation acts assuming that it is adopted here as a recommendation and then it will be discussed in more detail coming up here in the fiscal session what we come out of the fiscal session then will then be of course the starting line for any action that we take to alc so you
are correct in that and if i can i'm more than happy to meet with anybody and if the committee would like for me to present on any particular details such as for example
Speaker 41
2:11:18
what senator malik had requested I'm more than
Senator Terry Rice
Unverified
2:11:20
happy to do that and I do appreciate that and just being fair because you gotta you've got to do things to know sometime if you're going to work that's what I'm always concerned about is is what the legislature is put here for and you know if we're not going to do our job we just need might as well stay home some days I feel like that but we do have a job and
and some of it's oversight and some of it's very limited in what we can do other than ask questions and that's one thing I want this committee to understand is is what this actually does and if we're giving up maybe some unintended things even though you know road they talk about road paved with good intentions I'm not against good intentions and making good things work please understand but I would like the body I feel like to understand more and Mr. Chair goes back to what you said be some more discussion thank you
Representative Johnny Rye
Unverified
2:12:13
Thank you, Senator. Representative Rye, you're recognized. Thank you, Mr. Chairman. Total agreement with Senator Terry and Senator Bond on what they said. It would be a great thing
to get things right. And just like the things that have been brought up this morning, which my part was very little thing, We were talking about the road part and also the money that Representative D. was speaking about all during the off session, you know.
It's a lot easier to get things right on the front end than to come back and have to amend these bills once the session starts. So I know on our end, I really would appreciate it to get things right, and especially a lot of transparency that you're speaking about, because there will be folks that are here in this room today that will not, you know, they'll know, but the folks that are not here, which are a whole lot of folks,
may not know what's going on. And it would really be a great thing to get everything, the
combination-wise, so we could see that, sir. Yes, sir. And like I said, if any
Speaker 121
2:13:32
of the members who are here or those who are not want to meet and talk about it, more than happy to
sit down. Representative Rye, are you finished? Senator Hendren,
Senator Jim Hendren
Unverified
2:13:46
you're recognized. Thank you, Mr. Chairman. Mr. Bleed, I just want to ask a practical question about this, because, again, as we went through the transformation process, which, as we know, was long and well debated,
and with the hope of some efficiency and some more savings in the way we run state government, was the goal. So I guess I want to ask, from a practical example, with this language or without this language, if I've got three departments, three agencies now consolidated under one department each three of those has an HR person so we have three but we also know that one person through consolidation could do the entire job and I one of the things we did was we're not doing this through layoffs we're
doing this through attrition so if one of those HR persons leave and now I have two and I decide to fill that with those two people and eventually fill it with one and allocate the expenses based on the percentage of work that that person is doing for each of those agencies. Is that what we're trying to allow happen here?
Speaker 177
2:14:49
Yes, sir. Can you do that without this language? The challenge would be and and the answer is
Senator Joyce Elliott
Unverified
2:14:56
there's nothing we can we can move people into an office and we
can have them work together and we can tell somebody for example at DFA we if If
Speaker 62
2:15:06
we take the HR people from child support enforcement and we put them in DFA's HR shop and we say today you're going to do the HR for the revenue division and not child support enforcement, there's no
Senator Joyce Elliott
Unverified
2:15:18
reason why they can't do that. The problem is if that federal auditor comes down and says, now, hey, wait a minute, I paid for that person to support child support, but you're using them to support another mission, then we've got a big problem.
Senator Jim Hendren
Unverified
2:15:31
So it is to enable you to make those changes that would enable us to see the savings that we all want to see in transformation? Yes, sir. Now, I'm all for oversight, and we certainly, the legislature needs to know when those type of things are occurring. But we can, on one hand, demand that you present savings and show the efficiencies, but then, on the other hand, not give you the ability to make those changes. Yes, sir. Thank you.
Senator Jason Rapert
Unverified
2:16:01
Thank you, Mr. Chairman. Well, let me just say in response to
the to the DF&A, if I were one of the executives in the departments, why in the world would I have any faith that this is not more than what you say when literally, though it be small, they're even rejected on having a parking spot for a commissioner and told by the Secretary, not the Secretary of Commerce, but the Commerce
Secretary's secretary, that they're nothing more than a team leader. I'm just telling you that the reality of what's being stated is not just efficiencies. It's emasculation of the position and the authority of those people. There needs to be a meeting, frankly, of the governor with those folks and make sure there's some clarity on who is who and what authority they have. But I'll tell you what's going to happen. If you don't get that message
sent clear, you're going to start losing key people that's going to be leaving all of those positions. And I tell you, I'm in a position right now where I'd be happy to file the bill in the special language to completely remove all three of those departments and put them back in the proper position they should be so that we're not having to argue some of these points. Do you understand why we're concerned, sir? Yes, sir. Senator Bond, you're recognized. Well,
Senator Will Bond
Unverified
2:17:44
and I guess we're still talking about seven and follow
up to Senator Hendren's comments there. It just seems to me from a legislative perspective,
Representative Justin Boyd
Unverified
2:17:51
At some point, we should know how many people we need to do human resources, and the legislature should be brought that information, and we should vote on how many positions, and it seems to me we're delaying. It's like you want authority to delay that, to put off those tough decisions, and that may be on eight and not seven, but why don't we know now? I mean, how much longer do we need?
Representative Joe Jett
Unverified
2:18:17
The appropriation acts the way that we drafted
Senator Joyce Elliott
Unverified
2:18:20
will have a single position a single salary section up there and all the positions from All the different divisions within the cabinet that are going to be used through those shared services are going to be pulled up and presented to you in a single Appropriation section, so you'll be able to see all those positions Now the special language here will give us some flexibility to move positions from down below up into that shared set that salary section here during the year as we get those shared services set up but my expectation is when we
present bills to you coming up next month you'll have every position that will run through this program. So we're going to see it. Yes sir. But you still need this language. We need this language to allocate those costs out across the different programs so we don't run
Speaker 397
2:19:07
into some of the accounting issues that we might otherwise. I'll
save my other question. Thank you. Thank you. Thank you, Senator,
Senator Joyce Elliott
Unverified
2:19:17
Senator Elliott, you're recognized. Thank you, Mr. Chair, I just, initially when
I was asking my questions and trying to get
some clarity, and I was getting a response to the intent of what you were going to do, which was not my question, and I don't mean that in any kind of pejorative way, communications can be difficult. What I want to clarify is there's not any misunderstanding on my part about what you are trying to do and that you're trying to reach efficiency and so forth. But it's how or why or whether we should do this. And I want that, that's, is that clear
now from the, I want to be sure you understood what I was asking you. Because a lot of things, can run down 50 things in history that were very efficient, but whether or not they should have happened is a different story, and that's what I'm getting at. I need to understand, is this really a proper thing for us as legislators to delegate to somebody else, and that's where my question is, and I would like you to think about, I
know it's difficult to do because I'm trying to think about it from the executive's perspective, because I think that's only fair. And I would ask you, as you were putting to get this together, if you are thinking about that as well so that we are coming up with something that could be collaborative as opposed to something that's just convenient. Because convenience
Speaker 399
2:20:49
is many times do not good policy make. That's my whole point. I want to be sure that's clear. Okay, yes ma'am.
Representative Wooten, did you have another
Representative Jim Wooten
Unverified
2:21:03
question? Yes, I do, Mr. Chairman. You're recognized. Will these changes come before the Legislative Council
Personnel Compensation Committee? On number
Senator Joyce Elliott
Unverified
2:21:15
seven, which is before you, no, they
Representative Jim Wooten
Unverified
2:21:19
will not. So you're just bypassing the Personnel Compensation Committee without coming to us to share what you're anticipating doing just for our review?
Senator Joyce Elliott
Unverified
2:21:32
The positions will be presented to the Joint Budget Committee during the fiscal session as part of Appropriations Acts. And so once those are enacted, assuming this is adopted, then that would move forward. Any changes to that would
Representative Jim Wooten
Unverified
2:21:47
be brought to ALC. Yes, sir. Okay, let's say you've got five human resources people now in those agencies. and you can find how are you going to determine if you can do it with two or three just through the
Representative Frances Cavenaugh
Unverified
2:22:03
volume of work yes yeah i think what's going to happen here is is like mr walther said with dfa
Speaker 316
2:22:09
you know this this didn't happen like in 30 minutes okay as we brought in the building authority and the lottery we combined those people that were doing purchasing and hr from the lottery into dfa and we worked with those people because we did not lay anybody off immediately but as attrition occurred we re-evaluated the workload to determine okay we brought in this amount from one we already had this amount now we have a combined amount can
one person do this two people do you know do we do we make a determination to eliminate a position now or is there enough workload still to be there you're going to have to have some working work of this as we go and management decisions made by the people that are there hands-on about the elimination of the positions and the timing of that through the attrition process that the governor has said he wants to have happen we're not going to do a layoff just
because we had to have more work than three can do that will occur through the attrition and then the re-evaluation of the work that's still there to be performed and this isn't going to take 30
Representative Jim Wooten
Unverified
2:23:27
minutes to do okay so this five to two
yes okay possibly i'm saying okay back to your point about the federal audit or state audit, how are you going to work that?
Because you're going to have the human resource people or the accounting people that are handling funds for four or five agencies and they're under a federal grant. I mean, I guess the people that are going to handle the accounting, are you going to leave them in the agencies? But if you're going to combine them in the accounting group Are you not co-mingling the functions of general revenues, of
Speaker 316
2:24:18
Again, the work that they perform, there has to be an acknowledgment of this person works on four different things. They will have to keep up with their time, or they will have to have allocators that are fair and equitable, and that cost for every two weeks will be allocated to those four cost centers. Every two weeks? We pay every two weeks.
Speaker 410
2:24:40
Every pay period. Okay, every pay period. All right. Now,
Representative Jim Wooten
Unverified
2:24:44
did I understand you to say that you're going to determine the fee that will be charged to an agency
will be determined by the number of employees in that agency and the dollar amount? Well,
Representative Frances Cavenaugh
Unverified
2:24:57
what I said, what I tried to convey
Speaker 316
2:25:01
is that's an example of that. But there will have to be allocation factors determined
Speaker 336
2:25:07
on each and every resource that they share. whether
Speaker 316
2:25:11
it's warrants written whether it's employees that you supervise whether it's employees that you handle through the hr process whatever those allocation factors are will have
to be used across the board for that service okay and then the funding sources for the employees that are serviced would then be allocated through the transfer of the dollar amount necessary to cover that payroll that next two weeks and that's when we talk about the transfer of funds and appropriation we're talking about costing it at the level program level back up to the shared service level to pay that check as it goes out
Representative Frances Cavenaugh
Unverified
2:25:49
the door okay so in reality we're creating another
Representative Jim Wooten
Unverified
2:25:57
level of accounting function within these agencies there will be more
Speaker 405
2:26:01
accounting than is done currently but the net savings
Speaker 316
2:26:05
will be there because you'll have less people doing the work less cost to put across to all the department and there will still be a net savings i don't know that you'll necessarily hire any more accountants but where you had
Representative Frances Cavenaugh
Unverified
2:26:18
10 you may may have six now and that that sixth instead of the fifth will be the one doing that
thank you committee we're going to we're going to break at 11 30 we got well we did have two more questions now
Representative Jim Dotson
Unverified
2:26:43
we got one more representative dodson thank you mr chair um so in this entire deal this is only for the remainder or for one fiscal year because when we get into fall budget hearings i'm assuming that any of these positions that are transferred over to this regular salary shared services, you're going to come with recommendations for actual appropriation level
for those amounts, and those would be permanent positions that have
been moved over or transferred into that other category? No,
Senator Joyce Elliott
Unverified
2:27:12
the intent would be to move forward with this fund language. One of the questions that came up earlier was, you know, this is something that's been in place at the Department of Agriculture, and so moving forward, this would be a process. The positions would, the special language that's being proposed here, those positions would be moved up into it, and that special language allowing us to transfer positions would go away.
But the paying fund language would be a permanent part of
Representative Jim Dotson
Unverified
2:27:40
the bill, yes, sir. The paying fund language, but the transit, I'm kind of viewing this
as a transitional thing, because you don't know what you need in there right now when you get over there at the end of this year. Hopefully we will know how many we've transferred over what sort of sort of shared services It's not something we're going to be continuously doing three and four years from now Hopefully going through a transition period. I
Think that's an accurate statement. So so to a certain extent this is kind of going to go away as far as
Speaker 420
2:28:19
a an ongoing transitional period the the transfer language along the position of positions would yes, sir,
Representative Jim Dotson
Unverified
2:28:26
okay and And in that vein, would you be amendable to making this an approval item for ALC or joint budget when we're in session? We'd have to look at
Representative Joe Jett
Unverified
2:28:37
the language or look at a specific proposal.
Representative Jim Dotson
Unverified
2:28:41
I think I would be more in favor of it if we at least had approval whenever you're going to be making major transitional. The
Speaker 105
2:28:52
challenge is this is a week-to-week, a paycheck-to-paycheck process. Like Paul said, every two weeks we're going to be cost-allocating that out. So at what point would the approval be needed before the agencies could move forward with this process? I guess we meet
Representative Jim Dotson
Unverified
2:29:07
monthly, so you just have to plan it out a month ahead of time, I guess.
Anyway, thank you, Mr. Chair. Thank you, Rep. Dotson.
Senator Jimmy Hickey, Jr
Unverified
2:29:19
Senator Hickey, you've got the final word. Thank you. Just one thing on that for members to know. The
way that that's set up is the appropriations that we do must be by law, and although I welcome ALC and ALC have an oversight, and you all hear me say at all times I want us to look at it, what you have to remember is that those appropriations that are specific and distinct must be made by law.
ALC does not make the law. The legislature does. So that's why we have to have this approval coming
through the session. Thank you. All right. That's all the questions. Mr. Anderson, if you would just go ahead and read Flag List 8 just to get it out there. We're not making any action on
Speaker 248
2:30:08
this item today either. Okay. Thank you, Mr. Chairman. So my understanding is Flag List No. 7
Representative Jim Dotson
Unverified
2:30:13
and No. 8 have been deferred, But for the committee's information, flag list number eight is on page 21.
This is different in that it's transfer authority. It's more blanket authority as opposed to just for administrative services as was in seven. So number eight is a request to amend the DFA dispersing officer bill with special language for the cabinet-level departments except for DHS, which already has reallocation of resource language. This allows the Secretary of the Cabinet Label Department to request from the Chief Fiscal Officer and the Secretary of the Department of Transformation and Shared Services positions, funds, and appropriations within the Cabinet Label Transfers.
C1, 2, and 3 require detail on page 21. And then on page 22, you'll see it requires approval of the Chief Fiscal Officer of the State and the Secretary of the Department of Transformation and Shared Services and of the Legislative Council or Joint Budget. and it is limited to four transfers during a fiscal year. Mr. Chairman, that's what's in there.
Senator Jason Rapert
Unverified
2:31:16
Senator Rapert, real quick. Mr. Chairman, 30 seconds, and that is to say
that when we take this back up, I'd like to suggest that we add the term barn door to this particular provision.
Thank you, sir. Thank you, sir. All right. We are recessed until 1 o'clock. Higher Ed will be here at 1 o'clock Thank you all for your work
Unknown speaker
2:32:02
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Thank you.
Members, y'all take your seats. We're going to have Ms. Marie Markham with the Department of Higher Ed. Is she with us today? You'll come on up to the main table.
You'll identify yourselves, and you're free to
Speaker 429
4:04:08
start. Thank you, Mr. Chair. Maria Markham, Director of the
Speaker 429
4:04:19
Fuller, Deputy Director at the Division of Higher Ed. We are just here to present
Speaker 431
4:04:24
the amendments as stated in your letter. We have three amendments. The first is simply amending our recommendation for a reduction. We're restoring the funding from a reduction
that was based on expiration of one-time funding for Division of Agriculture. So we are restoring that as it's been added back. Those funds have been added back to RSA, so they're no longer
Speaker 432
4:04:44
a one-time fund. So that's the first amendment. Members, do we have any questions? She's on the right. All right. Do we have a motion?
Senator Irvin, you're recognized. This is on the
Senator Missy Irvin
Unverified
4:05:10
First Amendment, E2B. Is that correct? Is that what we're looking at? Yes, ma'am. Yes. Okay, I have a question
for higher ed at some point. It's not necessarily towards this amendment, so just put me back in the line. Okay, all right. Any other
questions? I have a motion on the amendment, and a second. Any discussion?
Representative Jeff Wardlaw
Unverified
4:05:38
I'll wait a minute. Representative Wardlaw. Thank you, Mr. Chairman. If I look at this, I was on the other stand this morning we were looking at 1.8 million
Speaker 163
4:05:55
increases, and this looks like a half a million dollars in increase. So where am
Nick Fuller
Unverified
4:06:01
I missing this up? The original appropriation from 2020, the appropriation level had the total $3 million in funding already increased to the allotment but the recommendation from the coordinating board didn't include the 1.8 in one-time funds
so our recommendation actually would have reduced this by 1.8 million dollars that's what's in the budget manuals that are presented so this letter is just requesting to amend to put that 1.8 million back not in line with the Coordinating Board recommendation. So we're getting a continuation of the $3
Representative Jeff Wardlaw
Unverified
4:06:31
million? Yes, sir. Yeah. We want to make sure that
Nick Fuller
Unverified
4:06:34
the Division of Ag has the full allotment of appropriation for the funding. Okay. Thank you, Mr. Chair. All right.
We already have a motion or a second. Any other discussion or comments? All in favor say aye.
Speaker 431
4:06:56
Aye. Any opposed? Continue. Our second amendment is a name change for College of the Ouachita's. This will change their name and code to Arkansas State University Three Rivers. So there are several sections of code where that needs to be updated. Name change only. Any questions? We have a motion
on the amendment. We have a motion and a second. Any discussion?
All in favor say aye. Aye. Any
Speaker 431
4:07:22
opposed? Continue on. Okay, our final amendment is to some special language for Henderson State University. We're presenting this request on behalf of the institution. It converts the advance of $6 million that they received into a loan. And again, we're requesting that on behalf of the institution. Okay. Mr. Anderson. Mr.
Representative Jim Dotson
Unverified
4:07:44
Chairman, it's been brought to our attention that Henderson State would like this language
to be effective upon passage and approval so that it can be used this year. And if the committee is willing to do
that, it would take an amended motion. Okay. Got
Senator Jimmy Hickey, Jr
Unverified
4:08:04
some questions first. Senator Hickey? Yes, just more about the format. It says the president, what do we have, just an
interim president? Or is that language going to be affected by that because of what's transpiring
Speaker 431
4:08:16
right now? They have an acting president at this point. I think that their selection process is ongoing.
I believe that title will be chancellor, but they are serving under the president of the ASU system. Okay, so I
Senator Jimmy Hickey, Jr
Unverified
4:08:29
guess what I'm saying is the way this is written and with the way the current structure is, especially with what Representative Jean just said, you're going to be able to make that transfer with the acting president? Yes, sir. Okay. All right. Thank you. Mr. Welch, you might
want to come up here at the table. Just save
time if we've got some additional questions up here.
Representative Jim Dotson
Unverified
4:09:00
Representative Dotson, you're recognized. Thank you, Mr. Chair. Is this an additional $6 million loan or is this the existing one
Speaker 464
4:09:11
that's already been done? Where are you, Representative Dotson? There you are. Okay. No, sir. It is not an additional $6 million. So when
Representative Douglas House
Unverified
4:09:17
Henderson was given the $6 million this summer as part of their advance, the way that that typically works is that it is then withheld from the appropriation throughout that fiscal year so that it's completely repaid by the end of that fiscal year.
Because of the financial situation that we found when we arrived there, we realized that was virtually impossible to be able to do that. So what this does is the loan repays the $6 million and then extends out that payment period to repay that loan. But it's not an additional six at all. It just covers the requirement in code that the $6 million be covered in this fiscal year and then changes it into
Representative Jim Dotson
Unverified
4:09:54
a loan from an advance. So you'll maintain the same basic spending authority for this next year and slowly start to pay it out of this?
Representative Stephen Meeks
Unverified
4:10:01
Absolutely, yes. Thank you. Representative Meeks, you're recognized. Thank you. And I'm right next door. And I'm actually going to follow up on the question he just asked us to make sure I understand fully what's going on here. So it sounds like Henderson State currently owes the $6 million. Correct. And this is just going to do some accounting tricks to allow us to extend that payment out to help with the fiscal stability of the school.
Is that a – Absolutely correct. So we're not taking out a new loan. No, sir. We're just trying to extend the terms of an existing loan essentially. Absolutely. That's absolutely correct. Okay. I just want to make sure I understood what
we were doing. You got it. Thank you, Mr. Chairman. Representative Kavanaugh, hit your button again.
Representative Frances Cavenaugh
Unverified
4:10:55
Yellow button. You're recognized. Thank you, Mr. Chair. All the way over here. I'm struggling today. Do we know what the repayment plan is for this? Because it just says from time to time.
Representative Douglas House
Unverified
4:11:04
Right. So, Representative Kavanaugh, one of the things that we discussed with DF&A, obviously is some of the challenges that we're currently working through in terms of cash flow and in terms of um you know the problems effectively the six million was gone the first week after the advance was given because of invoices that had been held in a prior fiscal year and so what we're trying to do right now is not only balance the annual budget which we expect to do but then also begin to have some money in reserve because there's essentially they have six
days cash on hand, down from 120 at the end of FY14. So we're trying to build some of that back. So there's not a plan. What we plan to do is put money aside on a regular basis into a restricted account and pay as we can. I would hope that it doesn't take that full amount of time to repay that, but just because the severity of the situation and needing to have a little bit of flexibility there is the way that was structured. I think that's based on some language that was used in a similar situation with another agency in the past but there's no defined repayment
schedule it just gives you the window in which to
Representative Frances Cavenaugh
Unverified
4:12:13
repay it follow up Mr. Chair since there is no repayment schedule on it how do we know if you're defaulted well we
Speaker 479
4:12:22
would have until that date to to repay the money and so it wouldn't be until that date that we would be in
Representative Douglas House
Unverified
4:12:28
default but I don't expect that we're going to wait until that date to make a full payment we'll be paying as bit as we can as we move along
Representative Frances Cavenaugh
Unverified
4:12:37
and what is that date um it's in the 2028 okay 2028 okay thank you
Senator Jimmy Hickey, Jr
Unverified
4:12:40
senator hickey you're recognized thank you and mine's exactly along she
was she was touching on exactly where i was about to go i'm fine with what we're doing however i would like the language to be changed so that it's not all the way out to 2028 before we look at it and I don't know if we can just need to do it yearly whenever we're down here but that this comes up yearly so that we can get a get the report at that time to see
if any payments have been made I just I guess the old
retired banker in me is worries about that from time to time so I just think that'd be a little more prudent if we can change that language to to that we would have no problem
all right just I'll leave your mic open. Any other
questions? You in seat 20? Okay, 42. Thank
Representative DeAnn Vaught
Unverified
4:13:39
you, Mr. Chair. And I don't know who I would direct this to, Mr. Chair,
but is there, have we done something to ensure that higher ed, that this doesn't happen again
at another college? Is there some kind
of precautions that we've put into place that would alleviate such things as this happening? Well,
Representative Douglas House
Unverified
4:13:58
I mean, I don't know. This was a mismanagement issue, if we're just going to be very frank, and just overspending and not handling revenues. We certainly have protective measures within our own system to ensure that these types of things don't happen from regular reporting and that sort of thing. But in terms of a global-type situation, I mean, there has been some discussion, I believe,
about understanding of what everybody has in terms of liquidity or days, cash on hand and things of that nature, but beyond that, I don't know if there's
Representative DeAnn Vaught
Unverified
4:14:30
been anything specific. Just to follow up on that, Representative Vaught, we're going to be looking
Speaker 431
4:14:35
at this at JPR next week. The agency is going to be providing what we knew and when we knew it. I think that there are probably going to come from that some recommendations. Most of the things that we're going to find, the systems who have internal audit functions would have found those things much earlier some of the institutions if
they're standalone or sometimes if they're just very small they don't have strong internal audit functions so as we kind of do a post-mortem of what happened at Henderson I think we'll be able to make some good recommendations for those institutions that don't have some of the controls thank
you mr. Thank you. Representative Wooten, you're in seat 20. Thank you, Mr. Chairman. I wish my banker would
Representative Jim Wooten
Unverified
4:15:20
put it in there from time to time. That would be much improved. My question
is, and you addressed it, Ms. Markham, but I don't understand how we could let a state institution get in this financial condition when we have a Department of Higher Ed and we're and and and then we do audits I just don't understand that and I haven't been head of DFA I sure don't understand it how we could how this could occur but what is it were there not procedures or processes did
Did they not do a monthly financial statement to present to their board? Is their board derelict here or the president, which I think has changed? Representative Wooten, I'll address that if I
Speaker 494
4:16:19
might. To answer your latter question, no. There wasn't, in my opinion, appropriate
Representative Douglas House
Unverified
4:16:24
or regular reports to the board that would have provided them with the type of information that would have allowed them to make decisions. In some of the reports that were made, there was misleading information, and this was discussed at length on Friday at legislative audit and has been referred to JPR for discussions about why that happened and the individuals that were involved with that.
Speaker 467
4:16:47
So I think you had a little bit of both pieces. I would also
Representative Douglas House
Unverified
4:16:54
comment that one of the things legislative audit pointed out on Friday was that the biggest drop or significant decline in their financial health occurred in fiscal's years 18 and 19, and those legislative audits were just now being reviewed because they run behind. So there were a couple of issues there, but I think the biggest issue was simply that over time there wasn't the appropriate amount of reporting or accurate information being provided to give that understanding of where they were,
and therefore they continued that, and then they got into an even worse situation
Representative Jim Wooten
Unverified
4:17:28
in the last two fiscal years. Have you determined if there's been any misfeasance, malfeasance, or will any of this be referred to a prosecuting attorney down there? Legislative
Speaker 494
4:17:39
audits comments on Friday when that very question was asked that was at
Representative Douglas House
Unverified
4:17:44
this point there hasn't been any findings of anything that would be considered fraudulent, certainly some mismanagement issues. However, I think this body or the Legislative Audit Committee
felt that it was appropriate to continue looking at the matter. That's why it was referred to JPR to make a complete determination that it was simply mismanagement and that there wasn't some sort of fraudulent activity occurring. I can tell you from our standpoint, since we've come on with Henderson in August and started assisting them from the ASU system, We have dug very deeply into all of these situations, have developed lots of new policies, lots of new board reporting. We're going to be putting them into all of the different processes and protocols and requirements that we have in our system,
which should eliminate any possibility of that happening again. And also the individuals who testified on Friday as subpoenaed by legislative audit are no longer with the institutions. So I have
Speaker 467
4:18:38
a greater comfort level now that we're certainly moving in the right directions and addressing the problems that were existing that got us to this place in
Speaker 495
4:18:49
the first case. Thank you, Mr. Chairman. Thank you,
President McWill. Thank you. All right. Thank you, Representative Wooden. Senator Stubberfield, you're recognized.
Senator Gary Stubblefield
Unverified
4:18:59
I know where he is. Is it green? Don't touch it. I want to call on you. Thank you, Mr. Chairman. Mr. Wells, let me make sure I understand this. You're asking us to pass special language that's to be incorporated in Arkansas law that will allow Henderson State not to pay one dime on a $6 million loan until June the 30th of 2028.
Speaker 467
4:19:33
That's essentially what you're asking us. That's the way that it's written, Senator, yes. And that's based on, I think, precedence from how it
Representative Robin Lundstrum
Unverified
4:19:42
was written in the past. But certainly Senator Hickey's suggestion, we understand that and are more than willing to do
Senator Gary Stubblefield
Unverified
4:19:48
whatever this body feels is appropriate. You know, this is my own personal opinion, colleagues, and you can take it as you will. Well, this is the kind of decisions, I think, that got Henderson State in the situation
they're in now, making these kinds of decisions. So I will go on
record as being against this. Thank you, Mr. Chairman. Seat 13, Representative Rye, you're
Representative Johnny Rye
Unverified
4:20:23
recognized. Thank you sir. Thank you Mr. Chairman. Question for you sir, Henderson State will be dissolved under ASU, is that the way it's
Speaker 488
4:20:35
going to be? They will remain an institution with their independent appropriation. They will just be a
Speaker 464
4:20:41
full member of the ASU system and the current board of trustees of henderson state university will be dissolved and they will come under the board the existing board of the
Representative Johnny Rye
Unverified
4:20:50
asu system okay follow up mr chairman please uh if that be the situation will that be repaid by it would still be
Speaker 464
4:20:58
repaid by henderson yes sir because they have that separate appropriation and separate budget all the institutions none of the institutions share budget funds or anything
Representative Johnny Rye
Unverified
4:21:06
of that nature but they have the money to pay back that amount of money that we reported last Friday that was
Representative Douglas House
Unverified
4:21:15
about $5 million? We will over time. Yes, sir. So Henderson finished the last fiscal year with a $4.9 million deficit. We made about $3.5 million worth of cuts already in this fiscal year and have also put into place other actions that have caused additional savings. We feel very comfortable, barring any kind of major catastrophe, that we're going to finish
this fiscal year without a deficit and we're preparing for future fiscal years to be able to begin to rebuild some of that financing so yes sir I feel comfortable that over time we'll be able to do that unfortunately they there were no reserves that were remaining when we got there they were running annual budget deficits and it's just a lot to turn around in a quick period what I had said in my initial testimony to legislative audit was I wish this were a quick fix but it's not. It's going to take several years for us
to be able to fully turn this around, but based on the decisions that have already been made and some of the planning that we're making for
Speaker 464
4:22:17
the next fiscal year in terms of their budget, I feel far more comfortable you'll be looking at a very
different situation and a very different Henderson moving forward. Thank you, sir, and thank you,
Senator Linda Chesterfield
Unverified
4:22:29
Mr. Chairman. Thank you. Senator Chesterfield, you're recognized. Thank you, Mr. Chair, and thank you Dr. Welch for being here and Dr. Markham and a friend at the end. This is a tough situation, but the entities that I hold in highest regard are the kids.
If we don't do something, then it is not the past officers of the institution, not the past board of directors of the institution that will suffer, it is the kids. I am going to support this in spite of the fact that we've had the mismanagement. I don't know if there was inappropriate behavior. I know there was a lack of knowledge of finance or a will to do what was best or a will to
do what was right. I don't know if it was for best. But I am concerned that we not hurt the kids in our attempt to hurt those individuals who made these horrible decisions that have led to this institution's dire circumstance at this time I am pleased that we are going forward having been a part of this conversation for the last year so with budget cuts taking appropriate action to move the institution back to solvency which is what is important and allowing
this institution that serves so much of the area from which I come those kids who are first-generation college students I don't want them hurt and so I would ask that we vote for
Speaker 494
4:24:03
this would you agree yes ma'am students are certainly our top priority and we're doing everything we can to make sure
Representative Robin Lundstrum
Unverified
4:24:09
that we maintain the same high quality educational experience for them while we try to fix
the other issues absolutely representative lundstrom you're recognized thank
Representative Robin Lundstrum
Unverified
4:24:21
you um thank you dr welsh for being here
i'm a little bit confused i get the part where there's
a six million dollar loan that's the school's in need of but i'm a little confused on the time to time i've never heard of a loan that Just when you're ready, you get to pay it. Right. I would rather see it be a payment a month, like a normal loan would be. So this is a little disconcerting for me. And did the university have any insurance for malfeasance or bonding or anything like that?
I don't believe so, no. Okay. I am not for this at all. I think it sends a really bad precedence. What we reward, we get more of. What happens if the next university comes in or the next college? This is for my colleagues. Do we just pass out checks for $6 million to the next school and the next school and the next school? I realize Henderson is a great school. I have a family member that went, was a former Ms. Henderson. But time to time is a little scary to me.
We need something a little more stable and paid off a little quicker. The taxpayers shouldn't be on the line for time to time. Okay. So I'd like to
Representative Douglas House
Unverified
4:25:36
hear a different proposal. Representative Lovestone, I would respond to that in a couple ways. Number one, I would say, you know, I fully agree with you. I wish that the institution had not even had to have taken the advance in the first place. And I was hopeful when we agreed to come in and assist back in the fall that we would be able to repay that. It wasn't until we got there and realized that the challenges facing the institution were so deep and so pervasive across the institution
that it was far worse than I think anyone even understood when that was originally done. As far as the way that the language is worded, again, I think that comes from precedence and the way that it's been done for other state agencies. I think it's also from a discussion that we had with the FNA and also with the governor's office and an understanding about FY18 and 19 were such severe financial years that FY20 and 21 even are going to be even difficult to just keep staying.
I mean, you're looking at a multi-year process of being able to get back to financial health, and so it was allowing for some flexibility to do that without having that added burden. I mean, we're certainly open to any type of way that it can be restructured that allows the institution to do it. We're just trying to find ways to make sure that we can, as Senator Chesterfield said, return the institution to solvency and ensure that they're able to move forward in a manner that doesn't diminish the educational experience for the students.
Representative Robin Lundstrum
Unverified
4:27:06
I understand. Follow up, Mr. Chairman? Go ahead. June 30th, 2028, though, is a long way off. Sure, it is. And it's a little scary to me to get to the end of that and have, from time to time, have to look back at the taxpayers and say, well, we said it was okay. Sure. I would love to see some structure. Sure. I
Speaker 482
4:27:26
don't know if DF&A could speak to that. I don't know if there's any. Paul, I hate to put you on the spot. I don't know if you could.
Speaker 494
4:27:33
They have more understanding of how this works than I do.
Representative Robin Lundstrum
Unverified
4:27:36
Thank you. I just think the taxpayers deserve to see a plan other than time
to time. Mr. Lothian, if you would identify yourself and
Speaker 316
4:28:05
address the question. Paul Lothian, State Comptroller, DFA.
Representative Frances Cavenaugh
Unverified
4:28:09
The whole concept behind this is just what Dr. Welch said. They are going to have an uneven cash flow and a very tight cash flow for a period of time while they redo maintenance that hasn't been done, build the student population back up, and the whole idea was to try to give them some leeway to operate with this advance until such time as their cash flow allowed them to do that.
And there are some alternatives to that, but I think you have to think through that and give them some leeway to get their cash balances back up and their operating day-to-day balances where they can make some repayment. In my life, what I've seen is maybe you defer this for two years and then you say we'll pay it back over the next four to five years. You make a smaller payment on the front end and escalate those payments, but the attempt of the language was to allow them to have time to turn this around
and make this a payout of the profits of the college and not put it on the taxpayers' back immediately by saying that you have to have some other funding source that the taxpayer bears the burden of. So you can change this and alter this in some fashion but my perspective is we have to give them time to work this out. I understand that. I just would
Representative Robin Lundstrum
Unverified
4:29:42
like to see something a little firmer than from time to time in 2028 that the taxpayers can hang their hat on. And the university isn't put in a
desperate situation, but we need some structure. Thank you, Mr. Chairman. Yes. Thank
you. Representative Kavanaugh, you're recognized. Thank you, Mr. Chair. We were
Representative Frances Cavenaugh
Unverified
4:30:04
talking about the structure of the loan, and any loan that I've ever had has interest in it. Is there an interest charged on this loan, or is it interest-free? No, ma'am. There's
no interest charged on this. The fund that we're using this
from is used to do the cash financing for all the state agencies on a monthly basis. We collect revenue we disperse revenue but we disperse that revenue at the end of each month whether it's special revenue general revenue or other revenues and we have this fund balance and it's used for the cash flow needs of all state agencies in the in the higher ed institutions and there is no interest collected on that we simply use it as a financing technique generally speaking on a
monthly basis to allow them to pay their payroll and their bills through the month and so these loans that we've made like this in the past have never had any interest charged to them and I'm not sure legally that we could. Okay because
this is not a short this is not a short term loan this is not a monthly loan you've got this going out for eight years no interest no payment cycle I'll just emphasize what my colleagues have there needs to be a better plan than time to time, and I hope we can pay.
You through, Representative? All right. Senator Hendren, you're recognized. Thank you, Mr. Chairman.
Senator Jim Hendren
Unverified
4:31:33
So what happens, I kind of like to always ask
when we start talking about killing something, what happens if this language isn't passed? Do they just default on the $6 million at the end of the fiscal year, or where would we be? There would be
Speaker 316
4:31:47
two options. We could allow them an opportunity to find some other method to pay the $6 million
Representative Frances Cavenaugh
Unverified
4:31:53
back at the end of the year,
or I can immediately start taking that back out of the general revenue distribution they receive, and they would have to deal with the consequences of that because I would take
Senator Jim Hendren
Unverified
4:32:05
$6 million over the next four months. So what is their total that they would be getting over the next fiscal year? Over the remainder of this fiscal year, about $7 million? No, for the following fiscal year, because they're good until the end of this fiscal year, correct? Well, this $6 million must be repaid by a close of business on June 30th. Right, which is when the next fiscal year starts?
Yes, July 1 is the next fiscal year. So what is their general
revenue term back approximately for the next fiscal year if you had to take it out of that, if they defaulted? $21 million. $21 million. So you could just take it all out of that $21 million term back, but the ones who really pay the price of that are the ones
Speaker 531
4:32:51
who took it over, right? Well, you mean if
Representative Frances Cavenaugh
Unverified
4:32:53
we made the loan now for next year, then I could get the $6 million back the next fiscal year in total?
Right, right. You could. I'm not sure how they would operate.
Senator Jim Hendren
Unverified
4:33:05
Yeah, okay. So it sounds like what I'm hearing is I think that most people understand we've got to do something other than just pull it out of hide in one swoop but maybe something a little bit better than what we have as far as language goes with some clarity. So I don't know whether that can be cleaned up and satisfy folks, because I agree, you know, maybe some sort of thing, at least look at it for the first year or two
and then come back with a restructure plan that they have to present
or something. Thanks. Paul or Dr. Welch.
What would be the problem if we cut this in half to 2024? You can always review it at a further date if you hadn't. And I think
what they're scared of is the length of distance.
If we just put a date like 2024, which we understand the next couple of years is out of the question, and then see how the finances are at Henderson State, would you all oppose something like that? No, sir. Dr. Welch, I'm asking you.
Representative Douglas House
Unverified
4:34:23
Oh, I'm sorry, Representative Gene. You know, certainly. I mean, one of the things that we discussed early on
Speaker 467
4:34:28
was actually, as all of this, there were many different options that were put out there,
Representative Douglas House
Unverified
4:34:33
and one of those was saying was actually 2025, do two years of no payments and then it's paid back over the next three years after that. So you'd be roughly $2 million a year. But certainly, I mean, I understand. And as Senator Hendren said, and I appreciate that, I mean, we're just trying to fix this. We're trying to clean this up and turn this around. And we're just asking for some flexibility in terms of trying to get it turned around. But yes, sir, we can certainly open. All right, we've got more questions. Representative Beck, you're recognized. Thank you, Mr. Chair.
Representative Rick Beck
Unverified
4:35:04
I actually like your proposal, but I'm over this way. Another option that I was going to say is if you want more latitude here, we probably should put some type of a stop gate or check gate maybe where it says that if the university starts to operate at a surplus at some level, you know, if the surplus gets above what, I'm just going to throw a number, $1 million or something like that, that half of the surplus above that would then go to repay this loan
as opposed to just being able to, you know, quite honestly, if you want to give me $6 million for this amount of time, I don't think I'm going to pay you back interest-free until the end of the road there. So maybe something like that. That would also help, I think, with administrative, because there's always going to be people requesting money within the university itself. So this would give you some way to say, hey, if we have this much of a surplus, 50% of anything above that has to go back to repay this note,
and that would get the note repaid a little
Representative Douglas House
Unverified
4:36:11
bit earlier. Representative Beck, I certainly understand. The only caution I would have on that is you may recall that back in the summer when all of this first broke, Moody's Investor Services downgraded Henderson's bond rating twice. The only thing, quite frankly, that has stemmed them from downgrading more, potentially even below investment grade is the fact that they were looking to join our system and some of the steps that we had but one of the biggest challenging factors is that they have no reserves and so the only challenge of that would be if you did structure it that way we'd never be
able to you could be facing some potential action from a moody's that could further downgrade it i mean i understand and and we're open to any kind of structure on this that would be the
Speaker 467
4:36:49
only immediate concern that i would have if we just set some sort of you know if you have a million and you've got to give half of it, is that could adversely impact us on another front that we're trying to address. Go ahead. You should be. Push the yellow button again.
Push it again. All right. Leave it alone now. Wait a minute. You just push your yellow button and quit pushing.
Representative Rick Beck
Unverified
4:37:27
There you go. Sorry about that. My intent was, and maybe I didn't make myself clear, is that the university would set a level, and they would say that once we got to a million dollars of surplus, at that point on, anything over and above that, 50% or whatever, 25% would go towards retirement.
Certainly we could do some of those things internally, absolutely. Because, again, I understand you
Representative Douglas House
Unverified
4:37:52
do not want to hurt your ratings. No, and one of the things that I've said is that I want us to be as much as possible setting money aside the entire time during the year so that, you know, we could pay a little bit. I want to pay it back as quickly as possible. I mean, that is my goal because I don't want to have to have it out there and have to have that liability still sitting there. But obviously it's just we've got a long way to go to get everything completely back to where it needs to be.
Speaker 548
4:38:16
But I understand that certainly that could be addressed.
Senator Breanne Davis
Unverified
4:38:26
Thank you. Senator Davis, are you recognized? Thank you. I was curious, Mr. Welch, the timeline you laid out is a little different than I've understood with your lobbyists just saying you guys have known from the beginning that there was no way you'd be able to, that they would be able to pay that loan back in time. I'm just kind of curious, what is stopping ASU from helping pay that loan back? I mean, part of being a system and coming under the umbrella of the ASU system, I understand
that you sometimes shuffle resources around and help other institutions when they need it. And I'm kind of curious, well, we've seen other schools kind of do it for when their schools are failing financial-wise that they're able to help with that. So I'm just sort of curious why ASU can't help repay that loan back in a faster manner. Sure, well, there's a couple of
Speaker 494
4:39:11
things, Senator. Number one, they won't be a member of our system until after January of 2021. So they're not currently a
Representative Douglas House
Unverified
4:39:18
member of our system and not recognized in that manner. Secondly, all of our institutions are independently appropriated independent budgets we have never moved funds from one campus to
another campus within our system and the system does not maintain any reserve amount of anything significant because our budgets are so small so they're all individual institutions that operate in that manner. Can you
Senator Breanne Davis
Unverified
4:39:36
help me understand the benefit then for Henderson coming under the umbrella of a system? Absolutely I
Representative Douglas House
Unverified
4:39:41
think the benefit has already been evident by the fact that their investor services immediately said because you're joining the system because of the way that the campuses and the ASU system have historically operated, the fact that they're all not only financially solvent, but meet every one of the guidelines that Moody's sets forward in a negative
higher education outlook nationally, that we have internal audit that was mentioned earlier, that we have the types of reporting mechanisms that are in place because we have the type of, we're passing a, our board hopefully will pass on Friday, an institutional reserves policy to ensure that our campuses don't get in this place. So it's additional oversight. It's the strength of what we've been able to do with collaborative purchasing, what we've been able to do with collaborative contracting. It's the strength of what we've been able to do with that additional oversight and management at the system level that have allowed our institutions to far outpace and
exceed what most higher education institutions in the country have done in terms of financial health and condition. And if you look at our 10-year rate there, I mean, that's pretty obvious. And as I say, for Moody's to come in and say, one of the three things Moody's listed as a reason that they were not going to further downgrade this institution was the fact that they were joining our system. And because that gave them, as external third-party financial analysts, much greater confidence in the long-term future of the institution as if
Senator Breanne Davis
Unverified
4:41:01
they were independent. So do you anticipate their bond rating going back up?
You said it dropped. Like once they become part of the system, then their financial ratings and bond ratings
Representative Douglas House
Unverified
4:41:10
should go back up? Well, a couple of things will happen, Senator. First of all, we actually have a consolidated system rating, but for a period of time, they would maintain a separate rating for existing bonds and then ultimately move under ours. Now, there's not going to be any magic potion that as a member just automatically shoots up because we've got to get some of those financial indicators back in place, an appropriate amount of reserves, days cash on hand, operating
margins and ratios and things of that nature which will take additional time. However, just because of the mechanisms we have in place and the way we operate ours, it's going to stem any downgrades until such time that we can get those ratios back up to an acceptable level where you could be looking at
Speaker 467
4:41:50
a bond rating increase. Thank you. Senator Hickey,
have you got another question or is this yours for a motion all right uh let me see senator blake johnson you're recognized
Chair
Unverified
4:42:09
thank you sir for this right here oh yeah you are taking the heat on this thing you know this is just a suggestion uh that maybe this body could entertain in 2022 payback one percent 2024 pay back one and quarter 2026 uh pay back 1.75 and 2028 pay back two and that's the minimums and and if any time during that you can pay back more than that uh that would be acceptable but
those are the minimums and that would be 2022 would be your first payment which would be one
Speaker 561
4:42:46
percent fiscal year 2022 would be one million well no one percent
Chair
Unverified
4:42:50
what's i'm talking about one percent of your of your six six six million dollar. I was just trying to. Sure. I mean however you guys want to set that
Speaker 563
4:42:58
up. Not one percent but you know just the
Speaker 564
4:43:05
one million I think yeah. The six million I guess.
Representative Douglas House
Unverified
4:43:09
I think the discussions we have with DFNA is just really
the next two years of the two that they're most critical because we've got to get all of these changes and one of the you know one of the challenges you have with an institution is there's only a certain amount of cuts you can make within a fiscal year so we've made those for this year now we're looking at the cuts we can make for future years but it takes a couple years to get all that put back in place so we're looking for that really that maximum flexibility in the first couple of years and then certainly we can structure that I mean differently understood no absolutely we're open to however you want to structure it'd be a million me in that
Chair
Unverified
4:43:44
in 2022 and and and like like senator hickey said you know review it annually i'll just give you absolutely i think
that's appropriate all right senator mark johnson
Senator Mark Johnson
Unverified
4:44:00
thank you mr chairman uh dr welch uh representative lundstrom's question uh brought to mind some issues that we discussed on friday at that audit And for the benefit of the members who were not here, could you reiterate that issue of the insurance coverage and the recommendation of somebody's lawyer?
I don't know if it's the ASU or the Henderson Lawyer or whatever. Just so everyone is up to date on that issue and the possibility of coverage that was in place at a
Representative Douglas House
Unverified
4:44:33
given time could be possible recovery there. Absolutely, Senator. So there was a question about whether the Board of Trustees did have insurance. Senator Lundstrom, back to your question. They have historically had that. It has been the recommendation of our legal counsel that they discontinue that because what that does is jeopardize your sovereign immunity up to the level in which you are insured.
And so, but for anything that would have already happened, that policy was already in place. But then obviously moving forward, we have never had it for our system because of sovereign immunity and because of that threat of jeopardizing that if you have that type of insurance as a state entity. But they would have had coverage during the time that these actions happened if someone were to bring anything forward that would have been there. But it would only pay up to that amount, and then you would go to the Claims Commission if there was anything above that.
Speaker 571
4:45:30
Thank you, Mr. Johnson. Senator Johnson,
you through? I'm through. Thank you, sir. All right. Representative
Representative Douglas House
Unverified
4:45:39
House, you're recognized. Thank you, Mr. Chairman. Doctor, thank you very much. Thank you. And Mr. Lothian, I appreciate everything that you said and I understand. I've seen this picture before, and it's not unusual for a government agency to overspend, whether it's a college or whether it's an executive agency
or even sometimes happens on the legislative and judicial side. And what I've generally seen happen, we have an obligation to fund you. And what Senator Chesterfield said really strikes home, it's the kids. The institution is there for those kids, and they're the first thing. And we have an obligation to support the institution. And we also had an obligation to exercise oversight. And if we failed in that regard because of our procedures and policies and whatever, that's on us too.
What I've normally seen happen is a government body, whether it's an agency transferring money into another agency or a legislative body, Congress transferring money, the promise to pay back usually gets met by well we'll cut our budget a little bit this time this year and that goes towards paying what debt we owe the taxpayers and that's how it gets paid back and over time that's what probably will happen uh i like uh what i heard someone saying i couldn't
quite see from where I'm sitting who it was some other terms. Taxpayers are making the institution a tax an interest-free loan because we owe an obligation to support it. I doubt that over the time period that it'll probably be repaid and I understand that this is taxpayer money it's supposed to support a taxpayer's purpose and that sort of thing but I appreciate the the good faith instead of putting out some sort of elaborate procedure I would trust Dr. Markham or Mr. Lothian
either one anyone else just make it a two-year demand note and at the end of two years we'll kind of look at it and see what happens I don't believe you'll I don't believe the institution will put back a reserve to repay this they do like most everybody else they spend all their money up paint themselves into a corner and then want dad and mom to bail them out the money will never be there I don't think it will be I think they'll make sure that that happens so I would ask you this question can you just say two-year demand note gives them the institution the leeway it needs and two
years from now we'll look at it again and if everything is going right and we see some good faith on the part of the institution dr. Markham says they're doing the best they can. I'm cool with that, but understanding that it'll probably never be paid back. What
do you think? Well, I'd like to speak first, Representative House. I can 100% assure you it'll be paid back, and I think you can look at the track record of the campuses that we have in the ASU system. Each of our campuses meets or exceeds our institutional reserve policy, and they have days cash on hand that far exceed what is required by our independent third party.
If you look at the track record over the last decade of our campuses in terms of the way that they've managed their money, put back appropriate reserves, not overspent, made mid-year budget cuts as necessary, just as you would do with your home budget, I think you would feel 100% comfortable that's going to happen. I can't, unfortunately, go back and undo the things that were done at Henderson State because we weren't there as a part of that. But I can tell you that they will operate just as the campuses and ASU system do. this is a liability that will be repaid and it's not something the state needs to be concerned
about from that respect at all. Now certainly I understand the concerns about the way that it's structured. I understand that and your fiduciary responsibility to the taxpayers but you have my word it will be repaid. It's just a matter of we also understand the pervasiveness of some of the challenges that we encountered when we took on this challenge was something that it just can't be done in six months or one year. It's going to take multiple years, but I can promise you that five years from now, we're not going to be having this type of conversation about Henderson State
University, and we're not going to be having this type of conversation about budget challenges facing that institution. Go ahead. You're talking. In a case like this, where a county, a
Speaker 575
4:50:22
city, or whatever, takes an advance on the funds, they actually pay back to you. There we go.
Representative Douglas House
Unverified
4:50:31
Thank you. In a case where a city, a county, or an agency has to take an advance on the funds, do they physically pay back the money, or do they just have the money withheld out of their next allotment? We withhold
Speaker 316
4:50:44
that over. we withhold that over whatever time period is
Representative Frances Cavenaugh
Unverified
4:50:47
necessary to have that paid back by the end of the fiscal year. A reduction in their budget. In their distribution at the
Representative Douglas House
Unverified
4:50:55
end of each month, yes. Thank you. Thank
Speaker 579
4:50:58
you, Mr. Chairman. Mr. Chairman, if I
Speaker 494
4:51:00
might add one more thing for Representative House,
maybe to give him an added comfort level. Henderson's bond insurers, they flew three
Representative Douglas House
Unverified
4:51:07
people from New York City down here to meet with myself and my CFO to talk about their great concern that Henderson wasn't going to be able to make their debt service. payments. We met with those individuals for about two and a half hours. This was in the fall shortly after all this happened. As a result of that the bond insurer proposed language that changed Henderson's contract that said that they would have an acceleration clause. In other words if a payment was missed they had to immediately pay any full amount. I think they had about 44 million dollars
that was insured by this particular entity. They put in language to that acceleration clause which is a massive step obviously that said if Henderson State University joins the ASU system, this language becomes null and void. And I think that was a direct recognition of our track record, our commitment, our integrity, and our willingness to repay those liabilities. So that's another third party entity that I think believes very strongly in what we've been doing and our ability to do it in the future. So hopefully that will give you some added comfort as well. Go ahead. That money, is any
of it owed to the state or is it owed to
Speaker 512
4:52:11
private investors. No, sir, it's bonds. It's bonds
Representative Douglas House
Unverified
4:52:13
that were sold for projects. Right. I'm looking for an example of where a state agency physically paid back money that was appropriated and paid to them on the basis of a loan. Oh, yeah. We did this, we
Representative Frances Cavenaugh
Unverified
4:52:26
did a similar situation with UCA about five or six years ago when they were in trouble. And we withheld
Representative Douglas House
Unverified
4:52:33
from their appropriation, right? We withheld it from their
Speaker 330
4:52:36
monthly distribution. Thank you. Thank you, Mr. Chairman. Thank you.
Members, let me remind you that we've got a lot of other stuff, and I don't want to turn around here at 4 o'clock and see 10 people here. So ask all the questions you want, but we need to stay in our seats. And one thing to remember, come January of 21, Henderson State is going to be under the Arkansas State System. That gives me a lot more comfort on what we're doing here, So I just I want to just bring that in there. We got a lot more questions Representative Lauer you in seat 16 and you're recognized
Representative Mark Lowery
Unverified
4:53:16
Thank you, mr. Chair One of the One of the things that really hadn't been discussed and I know a lot of the issues we've talked about and probably some even that I will bring up are Issues that are best discussed in the JPR hearings that we are we're going to be holding holding. But when we talk about that there is a precedent for state agencies being able to borrow against their revenues, one of the things that we miss is this is not an apples
to apples comparison. Representative House made the comment that with proper oversight maybe we wouldn't have gotten to this point. Well, the problem is that higher ed has this amendment 33 veil that keeps us from being able to do the oversight necessary and so my concern and why I want to bring this up now rather than later in the JPR meeting is that I think as a condition of any kind of extension
whether it's two years or whether it's to 2028 is that there should be some measure of good faith shown to the legislature of what is taking place and one of the references that was made was that you know this could be paid paid back I don't remember who said it but it could be paid back from the profits of the institution well the truth is the only profits that would come would be from revenues from students and I think we need some oversight to make sure that
that this debt is not being repaid on the backs of these very students that we're trying to protect. Do you envision that there's any kind of an agreement that could be made that this Amendment 33 veil that basically protects the vested interest of higher ed institutions from the executive branch or the legislative branch having undue oversight, that there could be some type of an agreement that would waive that right
so that we have additional abilities to provide oversight onto what is being done at Henderson State. Representative Lowry, I think I would say
Representative Robin Lundstrum
Unverified
4:55:39
you control our appropriations, so you
Representative Douglas House
Unverified
4:55:42
can certainly have that oversight. You can request any information, any reports. We've provided any financial reports that have been there. We're happy to report anything that needs to be. I mean, it's all an open book as far as I'm concerned, and we're happy to provide you with every quarterly budget report that we give to the Board of Trustees.
So I don't believe that Amendment 33 prevents you from accessing information or having oversight at all, and we're happy to provide you with whatever you need, certainly considering that you provide the appropriations, and we
Representative Mark Lowery
Unverified
4:56:14
need to be responsive to that. Well, and I'm possibly using the wrong terminology to say oversight. I'm talking about our ability to be able to step in and say no. You are not going to raise student tuition and fees, which is, frankly, the dirty little secret many times of our students. We may hold the line on tuition, but we're jacking up the fees to students that are maybe not even on campus.
They're maybe taking online courses, but they're still having to pay fees for a hyper facility or whatever. However, I think we need to be able to have the ability to see how those revenue streams are being developed, how the expenses are being, you know, one of the things I was out of state and through the wonders of Internet, I was able to watch the audit hearings through live streaming. and you know it's quite disconcerting to find out that in in the midst of all of this
financial crisis starting to come to a head or to be discovered that a three percent pay increase was guaranteed to the faculty now I know that they had gone without for some time but that really was not the responsible act to follow through on that commitment um you know you also mentioned that when there's this process of Henderson becoming part of the ASU system that the current board would no longer exist but in the run-on sentence it seemed to be
indicated that they would and you just have to correct me on this that the same individuals would possibly be reappointed and I think that that is a concern and and I'm not laying all the blame on those those trustees and I appreciate that Dr. Markham said that one of the things that's being instituted are discussions about proper board training so that board members trustees better understand fiscal statements they understand that what they're being given
is maybe not a complete picture. They know how to ask the questions. So anyway, I cut you off before you could answer about the board moving forward. Sure. I may
Representative Douglas House
Unverified
4:58:34
have misspoke. The Henderson State University Board will completely cease to exist. There will be no reappointments. I think I said current board, and I meant current ASU board, which obviously had nothing to do with any of this that happened at Henderson. So that board will no longer exist at all. I think if you want to look at, for a comfort level with regarding students, you just simply have to look
at what our track record has been. Since we're talking about universities, I'll use Arkansas State and Jonesboro. They are the sixth most expensive out of 10 universities in the state. The second largest institution and the largest research institutions in the state, we have kept their tuition increases to a very, very minimal level. And that's certainly what we're going to do, continue to work forward. We understand, as Senator Chesterfield said, the needs of our students and the types of students that we serve, because many of them are first-generation
students and come from backgrounds where they can't afford to do that. The 3% raise that was given to faculty members was based on a document that was provided to the Board of Trustees that suggested they were going to have a positive year-end balance. They certainly did not. I mean, nowhere close to that. So I can't speak to how that was developed, why that was developed. obviously I wasn't there. Every faculty and staff member except for the classified staff, the lowest paid, have experienced a 3% pay cut this year and a 4% reduction in the match to
their retirement fund. So they have all taken a major hit as a result of this. I will tell you that they have been extraordinarily accepting an understanding of that primarily because I think they have hope for where we're moving in the future, the way that we're putting our budget together. We're actually doing a zero-based budget and making every single expense and line item be re-justified before it's going to be able to be funded next year. But you're going to be talking about an entire different governance structure, an entire different set of rules and regulations that are put forth. We don't allow our campuses to budget enrollment growth that may not
occur, and then you're immediately in a hole, which is something that was occurring here. There's so many different parameters and safety measures and things that will now be in place for Henderson that never were. And Representative Jean was right. It won't be formal until January 1st. But informally, we had part of the merger agreement, a transition plan where the acting president's actually reporting directly to me and we are functioning as if that campus is a member primarily because I didn't want to have to wait another year and potentially some other decisions be made that would put us in a worse situation than we were already in. But Representative,
I can promise you that if there's any information you'd like to see in the way the budget's developed in the types of expenditures that we have the types of cuts that have been made the rationale for those where the money goes we're certainly an open book and are happy to
Speaker 468
5:01:27
provide that because we want to make sure everyone understands what we're doing why we're doing it and
Representative Mark Lowery
Unverified
5:01:32
how we're making this we're turning this around well and president welch i do know even when you were just operating under a memorandum of understanding that that the asu system was doing amazing work of going in and digging deep and finding out where the issues were and so
i do appreciate that and and mr chairman i appreciate your your patience with with my questions i i would just uh echo what a number of members have said is that i i think moving forward uh it would be best for us to have a shorter term agreement with a revisit sure understanding that um you know it can't all be done in one fell swoop right uh that this this didn't happen overnight um and it's not going to be fixed overnight but i i think to kick the can down
the road and give a date so anyway thank you yes
sir all right senator dobson you are recognized
Representative Jim Dotson
Unverified
5:02:31
for a question thank you mr chair um and i'll be brief we've we've spent over an hour on this and And so this is with regards to just your general overall appropriation and your requested increase for Henderson State specifically. It's 79.94% increase in appropriations.
Is that on the cash appropriation? It's a cash appropriation.
Speaker 592
5:02:55
And I'm just wondering why you're trying to increase it $42 million when you have a deficit.
Speaker 493
5:03:01
Well, Representative Dotson, we're not quite sure why it got reduced as far as it did. It's never been this low. It was
Representative Douglas House
Unverified
5:03:09
reduced significantly a year or so ago by the previous administration to the point that we couldn't even operate under the level of the cash appropriation that we had. And so the request really is just taking back to what has historically been the norm.
I wish I had an explanation for why the decision, like for the capital cash appropriation, used to be $20 million. They cut it to $1 million last year. I mean, that's a boiler or a chiller. I mean, it was a very, I don't know. But this is really trying to get back to where it's historically been without understanding why it was ever cut that severely in the first place.
Speaker 593
5:03:45
I don't have the 10-year history in front of me, but do you know how much was spent in the last year on that?
Representative Jim Dotson
Unverified
5:03:53
DHE's probably got those numbers. And I'm sure we're going to go all through that in a little bit. that's not cash this this section here so when we get back to that i'll get
back in the queue thank you mr chair thank you senator stubbleville you're recognized for a question what have you done
Senator Gary Stubblefield
Unverified
5:04:24
i guess i allowed you to run the technology by the way mr chairman i appreciate your suggestion a few minutes ago it only made me feel half as bad moving it to 2004 uh dr welsh you know i've heard it said that we have a responsibility as legislators to uh to make sure that these institutions stay viable well i would also say that the institutions have a responsibility to the taxpayers to make sure that they keep their
financial housing order because it's the taxpayers who ultimately pay you and are responsible. And I don't know of one taxpayer that can go to a bank for $100,000 even with no interest and get an eight-year blue note. I don't know if anybody can do that. So here's what I would like to suggest. I have an alternative motion, Mr. Chair. Well, we're not taking motions right now, but... Well, since the buck stops with the Chancellor,
or the president of Henderson State, and if I understand this correctly, he was making $20,000 a month? Is
Speaker 473
5:05:36
that correct? A little less than that, but about $230,000 a
Senator Gary Stubblefield
Unverified
5:05:39
year. Then I think it would be only reasonable that Henderson State pays back at least $20,000 a month. That's a quarter of a million a year. At least we will get some of the taxpayer dollars back. So I have a motion at the proper time. Well,
you're in line for a motion. all right thank you all right representative lundstrom you're recognized for a question
Representative Robin Lundstrum
Unverified
5:06:04
thank you um so i understand we did have insurance or errors and emissions insurance at the time this incident occurred yes ma'am how much was that insurance i think it was a million dollars has anybody filed on that million dollars it'd be great to have that now no one has filed
Speaker 604
5:06:29
wouldn't that be a good thing to file on I don't know I'm not sure what the grounds to file on that would be
Representative Robin Lundstrum
Unverified
5:06:36
I mean mismanagement mismanagement on the board malfeasance somebody really screwed up just the good old honest truth I'm not sure you
Speaker 604
5:06:44
could file I'm not sure if that would
have I think that's something we can look at when JPR looks into
Representative Robin Lundstrum
Unverified
5:06:51
this it would be good to have that
thank you thank you okay senator ervin you're recognized for a question it's mainly
Senator Missy Irvin
Unverified
5:07:00
discussion on whatever motion is going to be made but well i mean it's a process question because i mean this is this is
this correct me if i'm wrong is is allowing the agent blr to create an appropriation bill that's just an authorization to create the
appropriation bill we're still going to have to have this come back before special language subcommittee is that correct during the fiscal session yes ma'am this if
Speaker 261
5:07:28
you adopt this language or some version thereof it will be amended into the henderson state university
Representative Jim Dotson
Unverified
5:07:33
appropriation bill right which in then turn would go before the joint budget committee like you stated right so
Senator Missy Irvin
Unverified
5:07:38
i mean there's just a lot of
discussions a lot of ideas being thrown around i'm just not sure and i probably would support every single one of the suggestions that was thrown around it just seems like for process purposes maybe um and this is mainly more speaking to the motion whatever's going to be made um that this get more hammered out and brought back before us at a later time that's
my suggestion thank you all right senator bond you don't
want to talk do you thank you I'm behind Hickey. All right. Senator Chesterfield, have you got anything new to add?
Well, we're going to get there. All right. Let's see. Seat 13. Who is that? Representative
Representative Johnny Rye
Unverified
5:08:34
Rye, make it quick. I got you. Is that it? There you go. Thank you, Mr. Chairman. Question. Sir, I know that the intent may be here. What I'm concerned about is if Henderson State goes in with ASU
and, you know, you don't go up on your rate, the tuition, you know, to make this up and things like that, ultimately once that merger happens would that not fall to ASU if we couldn't pay that back no sir because the the debts
Representative Douglas House
Unverified
5:09:08
are all independently held with the independent appropriated and accredited institutions so it wouldn't be a liability of any
Speaker 467
5:09:14
one of the other campuses thank you mr.
chairman all right and it's the last question
Representative Wooten, you're recognized. Thank you,
Representative Jim Wooten
Unverified
5:09:26
Mr. Chairman. President Welch, I'm fascinated by your use of the terminology zero base budgeting. Right. Are you in favor
of that? I am in this particular instance, yes, sir. I mean, I
Speaker 493
5:09:40
think we're... Oh, you're hedging on me now. Here's the situation, Representative Wooten. There were expenses that
Representative Douglas House
Unverified
5:09:49
were underreported and revenues that were inflated. And so doing it this way gets us a 100% understanding of what the real revenues and expenses are.
It's a lot of work. Now, I'm also a little more supportive because I'm not there every day having to do that work, so my folks out there that are doing it. But I do believe it's the appropriate thing to do right now to ensure that everything is necessary to make sure that we don't have bloat, if you will, in some of the cost categories and try to get as firm an understanding on the absolutely essential parts of the budget that are needed because we know there's going to need to be additional cuts. There's going to be a need to be additional changes that are made to that budget, and we want to make sure we understand it before we start doing that.
Representative Jim Wooten
Unverified
5:10:29
Follow-up. So it is a good, unique way to determine the needs of an
agency. Absolutely. Because it makes them rebuild their whole budget every two years. and look at every line item. Is that correct? That's what we're doing. Yes, sir. All right. Thank
Speaker 344
5:10:52
you. Thank you, Mr. Chairman. I wanted to add one thing
Speaker 431
5:10:57
to that, Representative Wooten. I think it also will answer Representative Dodson's question.
The zero-based budgeting in this instance is going to be necessary for us to determine what is appropriate in those appropriations. At the agency, we don't have a lot of confidence in the way some things were reported through ACES or to our agency from that institution. When we look at some of their financial reportings, they didn't report anything for capital improvements, and we're pretty sure that that's not correct. So we did ask for increases to some appropriations until we can really get a sense of what is accurate and what is needed in which category.
Representative Jim Wooten
Unverified
5:11:34
so miss markham you you you
too are saying that it is a legitimate way of budgeting for state agencies or municipalities or whatever i think in this instance
Representative Jim Wooten
Unverified
5:11:53
qualification this instant that didn't answer my question do you do you see it as a way and I realize I'm putting you on the spot because ultimately it's the governor's office decision
but it is a valid way to determine the expenditures of the state agency. It certainly is a way. Thank you. Thank you. Representative Wooten, I can tell
you're a good fisherman. Senator Hickey, you got
Senator Jimmy Hickey, Jr
Unverified
5:12:29
a motion for us? I do. let me try to make one statement beforehand to the committee if you all don't know and you heard a little bit of this leg audit referred the henderson state fiasco or whatever you want to
say to jpr we're going to have multiple meetings we're going to begin tomorrow morning solely to have the committee to allow us to issue uh subpoenas if we need to hoping that we don't but we're getting that in place. We're expecting four to five meetings. I promise you that JPR is not only going to get to the bottom of the barrel, we're going to go six inches below it. In addition to that, Leg Audit had left their report open so that we can refer it back.
So if they need to refer it out to anybody within the judicial branch, that option will be available too. So with that, and I've heard a bunch of different suggestions, and I know we'll all have one but I want everybody to understand that this is special language special language is just year for year to year it wouldn't be a standard banking practice that we'd go all the way out to 2028 but it would be a standard banking practice that we would do like
a balloon note on year from year to year to go along with the special language that is what this motion will do saying that we will look at it every year so the way that we would do that and mr anderson even helped with some of this is what we would do is we would strike the word by june 30th and put no later than june 30th of 2028 mr chair i did hear you say 2024 but if we do no later than that and we look at it year to year but if you have a problem we can do something
And then put, or, as recommended by the General Assembly, upon review of the loan status, which shall be presented to the ALC or JBC no later than June 30th of each year. And then I also heard you say, though, at the beginning of the meeting, we need to say that that would be effective immediately. Is that correct? That would be part of my motion. Okay. You've
heard the motion. Do I have a
second? Second. Any discussion? all in favor say aye
Speaker 165
5:14:50
any opposed the ayes have it Dr. Welch appreciate you Dr. Welch I hope you appreciate me not asking why you didn't
Speaker 5
5:15:14
keep the mess of business open alright Ms. Markham You've got one more, don't you?
Speaker 622
5:15:20
Well, I have the next agenda item. Yes, Mr. Chair. This is
Speaker 431
5:15:26
simply an adjustment to our authorized positions. For all of higher education, we are requesting an adjustment reducing the number of authorized positions by 45. Okay. This is
reducing 45 positions, right? That's correct.
and increasing are y'all adding to the pay scale no we are
Speaker 431
5:15:49
not so we have you know the separate
higher education class and compensation plan which that gives the campuses discretion okay to adjust okay any questions do i see
a motion don't go to sleep on
me we got a motion in a second all in favor say aye any opposed all
right we're done with you oh yes i'm sorry sorry senator urban had
Senator Missy Irvin
Unverified
5:16:22
a question hi thank you um my question is
just within your budget appropriation um i am in 2011 uh the general assembly passed legislation to create slots at mississippi state for veterinary medicine um and that was a bill by Representative Gillum and Senator Dismang, and then also was an appropriation bill that was passed in 2011 to fund those. However, I know that those have not been funded. So I, and that was 2011. That was a long time ago.
In doing some research on this, I found six osteopathic medicine slots that were there and had been funded in inquiring with Director Secretary Key. wanted to see if we could why those were necessary because we now have two DO schools in the state of Arkansas and could we ship that funding over to that's those slots at veterinary medicine for Mississippi State and so I wanted to ask about that and I guess the information I received was
that you had moved and shifted that funding already and um so did you do that uh with why and how did you do that and you know my concern go ahead and answer that question for me first yes thank you for that question um we eliminated the osteopathy um slot
Speaker 431
5:17:50
i believe it was in the last regular session that was struck from the language because we do now have in-state osteopathic schools. We had a few students that were in slots at out-of-state schools that we
were honoring our commitment to them through graduation. During the time that those slots were phased out, the slot fees for all of our other programs increased. So we didn't actually add slots anywhere. We just needed that additional fund for the increase for our other medical education the mississippi state slots in the last regular session i believe it was representative davis allocated funds from the private and career education division that has moved under department
of ed so that the funding that comes in from those student protection funds when it gets above a certain level we will be able to start funding the mississippi state
Speaker 638
5:18:45
we just haven't gotten to a level of revenue there that we were able to make
Senator Missy Irvin
Unverified
5:18:51
a commitment for the mississippi state slots well thank you my follow-up is it i find it troubling that we pass legislation and this legislature agreed and stated that those slots were needed in 2011 and here we are in 2020 a lot of the kids in eastern arkansas it's closer program and many of our colleagues we can tell you
we don't know a large animal veterinarian under the age of 60 in the state of arkansas and with us being predominant with so much cattle farming in the industry and we have a huge poultry industry the Mississippi State program is designed particularly for those two operations for cattle and for poultry and so we pass legislation we pass appropriation funding and then this decision was made by a department of higher ed to just ignore that and then give increases to
the current slots so how much I would like to know how much money those osteopathic slots were and how much these increases were were those negotiated with those institutions were they structured in the same similar way that we actually have the ability to see if they were actually going to come back and practice in the state of Arkansas because this appropriation bill and legislation was passed I thought was done in a responsible way to for us to be able to have that ability to hold them accountable with that funding. So I guess I want
to know how that decision was made, why it was made, and why this legislature continued to be ignored on this issue that we passed in 2011. And it's necessary and it's needed. Okay. I'm
Speaker 431
5:20:29
going to try to take those one at a time. The 2011 program for Mississippi State was a loan repayment program. That is funded. So we are currently, beginning this year, have started funding the loan repayment program for students who go to Mississippi State and relocate back.
The slots for students who are actively attending were added in this last legislative session, and that was contingent upon enough funds being taken in through private and career ed. Okay. All of the other occupations, those are SREB contracted slots. We don't have any control over the fee. We basically get a bill. every year that says this is the amount that every state has to pay in order to secure these slots. And what they do is they save those slots for Arkansas students and they guarantee Arkansans that number of slots.
I spent, I believe this summer before last, visiting all of our vet schools that we have partnerships with and I visited Mississippi State and also visited our program at LSU because that's where most of our slots are. Honestly, the programs are very similar. They both have large animal vet options at each school. I understand. I mean, because I know we've all
Senator Missy Irvin
Unverified
5:21:36
been here for a really long time, and I appreciate the answer to that question. I mean, I'm just looking at the fact that East Arkansas kids want to be closer to home. And Mississippi State and Starkville is really close to home,
and it's a phenomenal program. And we've had this in place since 2011. And so, you know, I would like to know specific information about how much money you're talking about. And I have a problem with what your statement was about we just get a bill and we have to pay for it. That really goes against all the procurement things that this legislature worked on to give us the ability to negotiate to get the maximum out of a taxpayer's dollars that we are responsible for.
So I'd like to see those contracts and see how that is done because I don't like that at all. And I don't think that's acceptable. I think we should have the ability to negotiate that and direct our money where I think it's best needed and utilized for our citizens. So, I would just request that information and I want to be able to look at your bill and I'll be probably placing a hold on your bill because of that.
Thank you. Thank you, Senator. Senator Bond, you got a question?
Representative Justin Boyd
Unverified
5:22:59
I do. Well, just before we go into discussing all the institutions, I wanted to ask you and Senator Elliott to kind of put this bug in our ear, just so we all understand the difference between the productivity funding formula and more of a cost allocation funding formula. It's my understanding productivity funding formula is providing some good results. But under our cost allocation formula, wouldn't it show that we're behind on higher ed funding?
Speaker 643
5:23:27
Can you explain that? Yes. so our productivity funding model does not
Speaker 431
5:23:34
take cost into account we have some controls in place for things that are traditionally high cost but it's not a one-to-one consideration when we look at funding we have seen some very positive results as a result of productivity funding and it's in terms of outcomes so the things we are funding are the things that we are getting But that's not to give any indication of sufficiency of budgeting for operations purposes.
Our previous model used the Delaware cost model, which is a nationally recognized system for determining need of an institution. That cost model produced recommendations of about $130 million above and beyond what higher ed as a system is funded in Arkansas. so we were not able to get that fully funded before we introduced productivity funding so if you're asking like are we fully funding the need of higher ed in arkansas no i mean we're coming in a good 130 million dollars annually below that level so that money um you know two and two is
four and if you're going to get to four and the the state pays for two then the students pay for the other two and that's that's where we you know run into the issue of tuition increases and things like that. That is to make up in the gap for sufficient funding for operations. Well,
Representative Justin Boyd
Unverified
5:24:50
and that was what I was getting to. I appreciate the directness of your response. I'll often wonder why tuition is going up and costs are going up, and it has to do with the state level of funding in part also, and I think we've sort of turned a blind eye to
Speaker 431
5:25:04
that. I appreciate it. Thank you. Well, and I will say that, you know, costs do rise. That's just a fact of doing business in a
growing economy with inflation and other things that are very real cost, especially when you have labor-intensive organizations that 70 to 80 percent of their cost are people. You can't automate a lot of the things that happen in higher ed, so it's a necessary thing to continue. It's definitely something we need to keep an eye on. Tuition and fees are an ongoing concern, but when we look at our peers in other states, we're the most affordable state to attend college for our students, so student affordability is still, it's on our mind. We reward that in the productivity model to keep
costs down, but we do a lot with very little, I think, in Arkansas, and we should be proud of what our higher
ed institutions can accomplish for that. All right. Thank you.
Chair
Unverified
5:26:00
Thank you, Senator. Senator Blake Johnson, you're recognized. Dr. Markham, I appreciate your productivity model, and some of those issues that I didn't like is still there and in the career and technical and two-year colleges that are
are getting reduced funding because of the way that structure is are you guys gonna address that as a board or do we need to consider that taking that model and and and doing something with it because you know if it takes those are job creation, job training institutions and they're being reduced in funding because of the way that model is structured and it's been that way you know I talked to you about it almost a year and a half ago so can you
Speaker 431
5:26:46
talk to that? Well I can say that from the two year perspective there are about 50-50 on the institutions that gain funds based on this recommendation and those that lost funds so you know it's a bit split on whether or not a two-year college is increasing or decreasing. A lot of that is a function of size and enrollment, and when you look at their enrollment patterns, many times that is a reflection of that. You have to have students to produce credentials, and those that are getting smaller produce fewer credentials.
There are other ways for them to gain funds through the productivity model, but there's always a consideration of whether or not the weightings and controls are accurate and where they need to be. we have the funding group that looks at those those consequences of the things that we've put in place regularly we meet a couple of times a year to look at the model and see if if adjustments are needed we made a couple of adjustments in the last session mainly to the two-year college side of the model because of some of those impacts that we saw so I don't know if that answers your
question but it is something that we look at on a
Speaker 331
5:27:54
continuous basis all right I appreciate it. I just,
Chair
Unverified
5:27:58
you know, those are jobs and job training, and I think those things need to be, you know, weighted. I understand, you know, everybody was, you know, whenever my generation, we've got to go to college, but we've got to have people that can work and be trained, and, you know, we have, whether it be another, you know, productivity model or some kind of model for that job training in the future
to help those institutions grow. Thank you. Thank you,
Senator. That's all the questions. Would you send her that information by email? Senator? Okay. All right,
we're going to ask Mr. Henry Rice to come up. He's going to give us an overview of the four- and two-year institutions. It'll be a broad overview as custom. we have the representatives from the universities out here if you have a
specific question for Pacific University let us know and they'll come up and answer any questions if you'll identify yourself Mr. Rice you're ready
Speaker 650
5:29:08
to go thank you Mr. Chairman Henry Rice BLR so if you'll look at the document entitled, Summary of Institutions of Higher Education. That's handout E2D. That should be
Speaker 651
5:29:21
on your desk. So this is a summary of appropriations
that we hope will assist you. If anybody doesn't
Speaker 651
5:29:33
have a copy of it, let us know. Go ahead. Thank you, sir. We hope this will help you with
Speaker 650
5:29:40
your decision-making today. You'll be looking at making a decision on the appropriations for treasury, cash, and other appropriations that are within the Lime Green Manual on your desks. There are three parts to this summary. The first part you will see on the first page is for Treasury Appropriations, which are paid from the Revenue Stabilization Fund, Educational Excellence, and Workforce 2000 funds.
So if you look at it and you're reading from left to right in the columns, it's going to show you the institution or the fund. It's going to show you the page number that corresponds in the budget manual. and it's going to show you the authorized appropriations that they currently have in their acts for this fiscal year and the next column is the arkansas higher education coordinating board recommendation that's the a heck b rec and that's for fiscal year 2021 the next two columns are going to show you the change in dollar amount and the percent change
from authorized and authorizes their current enacted appropriation the far right column has asterisks in it and there's a legend on the second page but one asterisk will show line item changes two asterisks will show either the addition or deletion of a line item and so on the bottom of the first page you're going to see the total for all the institution all the four-year institutions and on the second page you will see a total for the two-year institutions in the same
format and like I said earlier these are the Treasury Fund Appropriation summaries so on the third page you have the cash appropriation summaries and these appropriations are paid from their tuition and fees sales and federal funds and it's also in the same format the very last page is what we call other appropriations and that includes tobacco funding special revenues from court filings that go to the University of Arkansas and UAL our law schools breast
cancer research funds among others mr chairman that's all i have on
this summary members any questions for mr
rice representative meeks your question mr rice or one of
Representative Stephen Meeks
Unverified
5:31:55
the institutions right okay uh the the question that i have is on page one on the total treasury appropriation request i guess i'm curious like on uams we've got the colorector cancer screening line item sickle cell disease program child abuse
neglect program uh nothing against any of these programs but i'm wondering why they would be showing up on this schedule are they like considered separate institutions or something representative mix these
Speaker 654
5:32:25
are non-formula entities that are within the uams uh i guess you could say the UAMS system so and
Speaker 650
5:32:33
some of them receive general revenue and that's why it's on the Treasury appropriation request page that you reference so any
Representative Stephen Meeks
Unverified
5:32:41
program with any of the universities would show up on this list so any on the
Speaker 650
5:32:49
first page those are the Treasury appropriations and those are appropriations that receive general revenue educational excellence or workforce 2000 funds okay I guess I'm just
Representative Stephen Meeks
Unverified
5:33:01
kind of curious why cancer screening would be on here so I think the key is they get general revenue if it's
if it's totally private it would show up okay any other questions all right anybody
want to have any of the institutions come up and ask any questions you're recognized yeah sure is anyone
Representative Frances Cavenaugh
Unverified
5:33:46
from Black River Technical College here Black River Technical? Yes. Anybody here? Okay, thank you.
Representative Lowry, you're recognized for a question. Who do you want up? okay go
Representative Mark Lowery
Unverified
5:34:19
ahead thank you thank you mr. chair and i'm flying a little bit blind here i don't have any of the reports in front of me but i wanted to ask about it because i understand that this is part of the ua systems budget not one of the institutions but any information that would tell us what the request is for the next fiscal year for the arkansas school for math and science and
Arts yes that is that broken out separate
Speaker 650
5:35:03
page number okay yes sir on page 103 of the manual there is an appropriation summary and it's going to summarize the following appropriation sections it has a state
Treasury section and a cash appropriation section and I'm
Representative Mark Lowery
Unverified
5:35:27
looking here at historical data I'm just trying to get a handle on is there I don't know
why this type is getting smaller and smaller in my eyes getting worse and worse I think so what what kind of an increase is anticipated here in the the request for that particular campus
Speaker 285
5:35:50
so in talking to ADHE there should be in
Speaker 650
5:35:57
the legislative recommendation for 2021 there should be about a $24,000 increase which was not shown on page 105 that's their state treasury page so the most accurate appropriation leg rec recommendation would be it's 12 million 652 thousand
Speaker 285
5:36:20
which was recommended by the this committee at the beginning
Representative Mark Lowery
Unverified
5:36:25
of the biennium okay and that that increase and I know that that's a small amount
but that increase is is there a specific uh item that that is requested for yes sir that's
Speaker 654
5:36:38
operating expenses operating expenses okay thank you very much thank
you mr chair thank you representative senator chesterfield you're recognized
Senator Linda Chesterfield
Unverified
5:36:48
yes mr chair i need to go back to authorization 101 could you tell me on what the appropriation is based for each of these institutions is it solely
Speaker 650
5:36:58
student population. Senator Chesterfield, the recommendations that are shown before you are the AHECB recommendations so that includes the productivity funding model which is 80% based on the effectiveness of an institution and 20% based on the affordability of an institution. Those are for the entities that are formula entities. What
Speaker 285
5:37:21
that means is I'm sorry I'm not trying to confuse you no you're not but I'm
Senator Linda Chesterfield
Unverified
5:37:26
trying to get yes what role does enrollment play in any of this
Speaker 285
5:37:31
I suppose that the number of credentials is probably strongly correlated to the amount of enrollment okay gotcha yes
Senator Linda Chesterfield
Unverified
5:37:40
ma'am all right thank you so
much hold on president were you trying to light up. Do
Speaker 400
5:37:58
it again. You're recognized. Thank you, Mr. Chairman. I've got questions about
ASUBB. Anybody here from ASUBB? Y'all come forward.
if you'll identify yourself and representative wouldn't have a question I'm
Speaker 672
5:38:34
Jennifer Methvin I'm the chancellor at ASUBB
Representative Jim Wooten
Unverified
5:38:36
thank you chancellor absolutely I've got a question on page two of the appropriation request it shows a minus $139,453? Yes, sir. How have you done that
Speaker 344
5:38:54
or what is that? So that is basically a
Speaker 678
5:38:59
product of the productivity funding model. We have at ASUBB
Speaker 680
5:39:06
continue to decline slightly in enrollment and as was just pointed out, we were performing so well in credentials that that's one of the areas of the productivity model while we still perform very well to keep improving over ourselves. And so that's an area in which
Representative Jim Wooten
Unverified
5:39:25
we lost in productivity. Okay, somewhere today, and I couldn't find it, I saw a number of
Speaker 680
5:39:32
179,000. Right, that's the actual loss in the productivity formula. Yes, sir.
Representative Jim Wooten
Unverified
5:39:37
Why is there a $40,000 difference? Well, that may
Speaker 680
5:39:41
be a question I don't know the answer to,
Speaker 650
5:39:46
and I need to know. Am I on? Okay. I believe that it's the 2% appropriation adjustment that comes in after the $179,000 loss that you mentioned, and that's the difference. It's a 2% adjustment? Yeah. Policy for the school. Yes, sir. Yes, sir. and ADHD may be able to speak to that the 2% appropriation adjustment but you
Speaker 678
5:40:15
are correct about the roughly 178,000 is is the loss in productivity yes but it goes to
Representative Jim Wooten
Unverified
5:40:21
the productivity formula it's been put in place yes sir Nick Fuller deputy
Speaker 430
5:40:32
director division of higher ed so what we've done with the operating recommendations for the schools on
Nick Fuller
Unverified
5:40:37
the formula treasury side they have a total funding recommendation which is based off the productivity model that would include the revenue stabilization general revenues but it also includes
educational excellence trust funds and workforce 2,000 funds in that total funding recommendation those funds are based off of the current year forecast which because we do not have next year's forecast for those two funds yet so what we've done in the operating recommendations, we've increased the funding level by 2% on the appropriation side to account for any adjustments within the forecast for educational excellence or workforce 2000. That way the school would have sufficient appropriation if those funds are to increase with the forecast for next year without having to come back
to the legislature again. So it's positive for the institution? On the appropriation
Representative Jim Wooten
Unverified
5:41:32
side only. On the appropriation side. Not on an initial funding side. Yes, sir. Thank you. Also, Chancellor,
I noticed that extra help wages $204,000 actual, and I don't see anything for
Speaker 677
5:41:47
the next budget. Yes, sir. I will tell you that if we got it
Speaker 678
5:41:52
down into our budget, we certainly have reduced our part-time budgets on labor,
and we are reducing, again, because of a matter of our slight decline in enrollment, really over a 10-year period, our entire personnel budget. All right. Now, is this,
Representative Jim Wooten
Unverified
5:42:09
and this is going to put you on the
spot. That's all right. Is this a directive from somewhere else, or is this a choice of
Speaker 678
5:42:19
the institution? No, sir. I hope it is smart budget management. But, again, you know, this is about our spending authority, not always necessarily what we will spend.
Representative Jim Wooten
Unverified
5:42:31
I notice personnel services matching is, well, that's down $200,000 also. So is that a budgeting decision that y'all made? Yes, sir. Okay. Yeah, I can assure you, Representative Wooden, we
Speaker 678
5:42:46
live within our revenue. All right. Thank you, Mr. Chairman. Thank you. Thank
you, Nick. Representative Kavanaugh, if you recognize her. Thank you, Mr. Chair. This is
Representative Frances Cavenaugh
Unverified
5:42:58
for Henderson State. I hate to do this, but I have a question.
Speaker 494
5:43:03
Okay. Who's the chosen one? I'm bringing back up this time, too. So, Chuck Welch, President of the Arkansas State
Speaker 693
5:43:29
University System. Julie Bates, Executive Vice President and CFO of the ASU System.
Representative Frances Cavenaugh
Unverified
5:43:34
Thank you. Over here to the right. And you kind of touched on
this when Representative Dotson asked you a question, but I didn't quite follow it. So, since we're here on your, I'm going to dig down into it. Sure. Okay, you're requesting an increase of $42.3 million. and you had made the comment that it had been reduced prior and that you were trying to get it back up. Last time you had an appropriation of $52 million, almost $53 million. You actually only spent $38 million.
So why are you needing to increase it up to $95 million? I think part of that, Representative Kavanaugh,
Representative Douglas House
Unverified
5:44:15
was what Director Markham said where we don't have comfort level that that was even reported correctly in the way that it was put into ACES or sent in because they showed zero in cash appropriations for capital expenditures, which we know was not the case. And so a big piece of it is we simply don't know, I mean, are still trying to figure out what was accurate and inaccurate in the way that those were reported.
And so unfortunately, I don't think we have the confidence level that what you have there in front of you in terms of
Speaker 467
5:44:46
expenditures in prior years is actually accurate because of sort of a continuing theme of those types of errors that were a part of the institution. And my CFO may have something to
Representative Frances Cavenaugh
Unverified
5:44:57
add to that. So you're saying that we had appropriated $52 million. They're only showing expenses. I understand there may be some discrepancies up there. That's a big difference in expenses.
And then on top of that, you want to up it another $42 million. Are you trying to say that there's $62 million
Speaker 696
5:45:21
that did not get it? I would answer that by saying if you were to look at the capital improvement line where they have $1 million appropriated, you may remember we came to the peer committee and we actually had to ask for additional appropriation because the institution was unable to do even regular maintenance
that they needed to do, you know, things like chillers and roofs that need to be repaired. So we had to ask for additional appropriation from you all, and you were gracious about giving us that appropriation. So we need to get this back to the level to where we need to do, make our capital improvements and other things that, emergencies that may happen on campus. and how much did you have to ask for we asked for 15 million I think 15 million it was 20 million
Representative Frances Cavenaugh
Unverified
5:46:14
okay so you so you asked you had to ask for 20 how
Speaker 696
5:46:19
much of that did you spend we're in the process of spending it and how much I don't have that with me but we're right in the middle of a project an energy performance contract that is 15 million
Representative Frances Cavenaugh
Unverified
5:46:32
okay so you asked for 20 you've got a contract for 15 by looking at your appropriations what you've been appropriated would have covered that if even if you're saying that only 1 million and and i'm fine with giving
you extra appropriation to cover those types of things because i understand it but bumping it up to 50 42 million when i don't have anything to back up that you need an additional 42 maybe you need additional 25 million or 30 million but I can't see where you're saying that you need additional 42 million and I can understand that you have some discrepancies and you're working through that I can understand that the 42 just strikes to be a little bit high to me for that
Speaker 696
5:47:15
I would be glad to look at it again if representative okay I just I was very
nervous on the capital and didn't want to be in the situation where we couldn't make an emergency repair if we needed to um all of this too is if we as we find things i just wanted the the ability to spend as we needed well i
Representative Frances Cavenaugh
Unverified
5:47:38
think as a legislator sometimes that's a little concern of ours that maybe you spend more than you we we might feel comfortable that needs to be allocated to that expense and sometimes we don't get into positions that we're currently in because of that but thank
you and I'll just announce secretary key said that I think there's a flu blood
bug run around Black River so it's not that they didn't want to be here and if they've got the
flu we we certainly don't want them here representative Dotson you
Representative Jim Dotson
Unverified
5:48:16
got a question thank you mr. chair This is more ASU Jonesboro, which
I'm assuming is you still.
Well, we can. Yeah, they've also got representatives. We'll see if we can take a stab at it first. So just pointed out, because it's at the top of the list, and so as far as you're looking at an 11% increase over last year's appropriation, and I realize that's the legislative recommendation from the fall budget hearings two years ago, But looking at your actual spend, you had $141 million that was spent in 18-19,
and this is increasing your appropriation from $213 million to $237. You see where I'm at there, by an extra $23 million? I'm just wondering, is it necessary to go ahead and increase that appropriation if you didn't come close to even
Speaker 705
5:49:14
needing it last year? If you looked at Representative
Speaker 467
5:49:25
Dodson, of course there were no expenses and capital improvements
that were shown for that year. Certainly doesn't mean that couldn't be the case for next year. Okay. So I think that's
Representative Robin Lundstrum
Unverified
5:49:38
a big piece. That's $41.4 million there. which
Representative Jim Dotson
Unverified
5:49:42
is already kind of covered in the 213 from the I mean it was 41 million you're asking to increase that 3 million to 44 so I mean I I get that I just wondering is there a need for increase
Speaker 705
5:49:58
in preparation if if there wasn't anywhere close to increasing actual expenditures
Speaker 710
5:50:11
answer it we'll let you hit representative Dodson typically that we like to allow room for
Speaker 696
5:50:20
federal grants to be received right but I would say that we're certainly willing to reduce that down to the 213 if
Representative Jim Dotson
Unverified
5:50:28
you'd feel more comfortable are you currently anticipating an extra 23 million dollars in
Speaker 696
5:50:33
federal grants this year well we actively seek them
Representative Jim Dotson
Unverified
5:50:37
definitely all the time I I mean we approve those every month through through peer if when you
have one coming up if if there is a need for that I just I don't want to just be increasing your preparation twelve and a half percent every single year because it was I mean that was how we got out of whack in in excess appropriations when we reduced all these a couple years ago and so if we're just have it on the autopilot where it increases 10 12 percent every year without the need for it if you're not anticipating it i don't want to get in that habit does that make sense yes sir it does okay
so so you would be fine to reduce that to 213
Senator Jimmy Hickey, Jr
Unverified
5:51:27
yes sir i would okay thank you senator hickey you're recognized thank you this is uh dr welch i want to make sure i understood one thing that you all said you said that and i'm looking at this on the henderson i mean this is more for information from okay you said there was a zero appropriation for capital improvements it was one million that
had been reduced from 20 the year before okay but you all have already
found where there was more money spent for capital improvements in a million did i understand that correctly they spent more than a million yes sir so it was
Speaker 716
5:51:59
spent out of some other line items All right, and
Chair
Unverified
5:52:12
Craig thank you or did or something. Yes, sir. Thank you, sir Senator Blake Johnson you're recognized I'm gonna go back to Representative Dotson's and how about we meet in the middle with what the University of Arkansas is ask is a four point
seven one percent and that's that's probably about twice what Arkansas State was requesting the increase even at 4.7 so if we're gonna if we're gonna do that how about we do do the same for the ASU as we do the University of Arkansas at 4.71 who are you asking a question to Representative Dotson because I
Chair
Unverified
5:52:57
University of Arkansas is asking for twice what this is even even though the ASU is at 10% and universities at 4.71 So that would make them even Mr. Chair in percentage wise Recognize Senator
Representative Jim Dotson
Unverified
5:53:17
Johnson since since Chuck there is such a big fan of zero-based budgeting in certain instances. I'm just talking about trying to make us hold everything flat unless there's an actual need,
a demonstrated justification for an increase. And so that's without having autopilot increases. If there's a need for it, I don't care if it's 10% increase, if there's an upcoming federal grant or capital expenditure that they're anticipating, it's just having it automatically increase each year is what i i was trying to get away from so that's my response so we're going to keep everybody flat is that what you're
Speaker 257
5:53:58
saying well their appropriations not i mean
Representative Jim Dotson
Unverified
5:54:02
their funding can go up and their spending can go up but
if they don't have a need for excess appropriation i don't see why we need to increase it just automatically
y'all through yes sir senator chessfield you're recognized thank you mr.
Senator Linda Chesterfield
Unverified
5:54:23
chair if for instance they get into grant writing mode and are able to access far more money than we have in the appropriation what does it require they do come back because i would anticipate that they would
be looking for funding in as many places as they possibly can legally to help mitigate what is going on with them so what would you have to do then come back here and ask us to increase it to what you had already asked for in the first place yes
Speaker 710
5:54:51
ma'am we would come back through Pierre thank you looks
like the last question so far is representative Wooten Thank you, Mr. Chairman.
Representative Jim Wooten
Unverified
5:55:09
Maybe we need to increase the university 10%, not worry about the 10% at ASU University in Jonesboro. You're talking about two different creatures, two different institutions. Would that be a fair assumption, President Welch? Certainly two different appropriations, yes, sir. My question is maybe the university needs to increase six more percent rather than you being cut six percent. Is that a fair?
Representative Robin Lundstrum
Unverified
5:55:40
Well, I think it's just what Representative Dawson is talking about, cutting, is the increase, just to keep it back
Representative Jim Wooten
Unverified
5:55:47
at a flat level. Yes, sir. Right. Follow-up. What's your enrollment at
ASU Jonesboro? It's just right around $14,000. just
Speaker 464
5:55:59
slide at 14,000. Mr. Rice, do you know the
Speaker 667
5:56:06
enrollment at Fayetteville? Yes, sir. Just one
Speaker 650
5:56:11
second, please. Let's see. As of fall of 2018, Fayetteville, University of Arkansas, Fayetteville had 27,778 students. Almost twice. Fees and tuition. Thank you, Mr. Chairman. you through
Chair
Unverified
5:56:38
yes sir all right anybody else well
now y'all get excited again representative womack you recognized well actually this is
Representative Frances Cavenaugh
Unverified
5:56:51
representative kavanaugh you're changing seats on i changed seats on you i appreciate it um When it's time for a motion,
I have a motion. Okay. Let me see. Who's
in 15? You're recognized. Yes. Yes, thank you, Mr. Chair.
Representative Denise Jones Ennett
Unverified
5:57:22
Is somebody here from the University of Arkansas Fayetteville Rural Education and Autism and Related Disabilities?
Speaker 735
5:57:52
You will introduce yourselves. Yes, sir. Joe Steinmetz, Chancellor, University of Arkansas. Randy Massanelli, University of
Representative Denise Jones Ennett
Unverified
5:58:12
Arkansas. Michael White, University of Arkansas. Representative, would you repeat your question? Yes. Can you tell me how many students you have enrolled
Speaker 735
5:58:18
in this program? I don't have that number available in front of me. Okay.
Speaker 165
5:58:22
That's it. That's it? Yes. Gosh, that was a lot of effort for nothing. Okay, thank you, guys. All
Representative Jim Dotson
Unverified
5:58:46
right. Y'all will get her that information? Thank you. Representative Dotson. Thank you, Mr. Chair. This one will be for the University of Arkansas system. University of Arkansas system.
Donald Bobbitt
Unverified
5:58:52
Dr. Bobbitt, if you would introduce
Chair
Unverified
5:59:09
yourself. Absolutely. My name is Donald Bobbitt, President, University of Arkansas
Representative Jim Dotson
Unverified
5:59:18
System. Representative Dotson, you're recognized. Thank you, Mr. Chair. Dr. Bobbitt. Over here. The,
this is a similar question I had for ASU with regards to the, it just seems like the automatic increase is sort of a, it's an automatic increase.
your looks like last year in your line item if i'm looking at it correctly you spent about 64 million dollars but your preparation last year was for 147 million and you're asking to increase that to 166 which is almost 100 million dollars extra do you have a anticipated need for that if you look at the
Speaker 745
6:00:00
entities that are part of the u of a system it includes division of Agriculture, Arkansas School for Mass Science and the Arts etc etc and so
across the system if we have either deferred maintenance that we're now going to address or new buildings because of bond issues or other sources of funding outside the normal appropriation that is supposed to be an umbrella that would support those types of activities in addition to the grant funds uh that you uh that you've already heard about i will point out that this is a um you know this is the authority to spend if you have the money and our board of trustees is extremely clear
if you don't have the money you do
Representative Jim Dotson
Unverified
6:00:47
not spend the money right i i completely agree with that good um i guess just the the question overall
in its essence though is is is there an expectation that you'll spend a hundred million more than you did in the previous year this year for this appropriation the the truth of matter
Chair
Unverified
6:01:07
sir is is no I don't have concrete evidence at this point time I do know of
Speaker 745
6:01:12
potential construction projects they're not finalized at this point so I do not
know whether they will complete or at least initiate within this next fiscal year or in a subsequent year but you know I think the idea behind our budgeting group was to try and minimize the the work of this body and again I can assure you that not one dollar will be spent that isn't budgeted and
Representative Jim Dotson
Unverified
6:01:42
accounted for I certainly appreciate that I just I appreciate having the opportunity to weigh in
whenever there's an increase in in spending or something that wasn't if you don't have a plan for it specifically laid out I don't mind you coming back and asking for it and I don't mind approving increasing it it just it'd be nice to be able to be in have input into that increase or that spending at the time that you're needing it so that's the effort behind this is to try to make sure that we just don't have automatic increases. So thank you and I'll let
Representative Robin Lundstrum
Unverified
6:02:21
anybody else get in the queue. Representative Lundstrom you're recognized. I think Representative Dundotson and I were on the same page. I'm a little concerned when anybody comes and adds another hundred thousand under the budget without knowing specifically what that money's for. I think we were just thinking the same so I'll let my comment just hang out there it's a little disconcerting to see that kind of money and not a plan for it and I appreciate that you wouldn't spend it until you needed it but it's just amazing how
Speaker 745
6:02:51
quickly things get spent when it's there I would point out it's it's not a budget it's an upper limit for us and at the real the budget that the university operates under all of our pieces and parts has to do with the revenue that we take in and from all the sources and then what is approved by the Board of Trustees and again the increase it was requested was a hundred million because we can't anticipate that could be two buildings on two of those entities I do know that the Division of Agriculture their facilities are in tremendous need
of deferred maintenance in some cases critical maintenance I expect that the division will have considerable expenses this year in terms of their remodeling and bringing their facilities up to modern standards. Okay, thank you. This is
Speaker 746
6:03:41
Gina Terry. I'm the CFO for the University of Arkansas System. I also wanted to mention that we do have the ERP project that we're implementing right now, and we have to pay all of those costs before our campuses reimburse us for that,
and so we're doing that on behalf of all, including Fayetteville, UAMS, all of our entities. So we actually will
Representative Robin Lundstrum
Unverified
6:04:06
be using most of that increase for those costs. Forgive me, I don't know what ERP means. Oh, it's
Speaker 746
6:04:13
Enterprise Resource Management System. We're implementing Workday, which is a cloud-based system for all of our campuses. We're doing that over the next three years. We started this year. Our first cohort goes live on July 1st this year, and then the second cohort the next year.
So there's a lot of implementation costs, project team costs to implement as well as the software cost.
Representative Jim Dotson
Unverified
6:04:43
Okay, thank you. Yes. Representative Dodson, do you have a question? Yes, thank you, Mr. Chair. Just back on the ERP, roughly how much are you anticipating each year for that? I
Speaker 746
6:04:59
$100 million total over that entire period. Exactly. the implementation portion of it it was about 36 million we've paid some of that
cost a large portion will fall into the next fiscal year so I would guess that's probably going to be around 20 million as well as our project team who is doing the implementation right now those are being paid by the system and then reimbursed from the campuses as they work and we have around 29 provisional employees who are working on that project. I don't have the number in front of me of exactly how much that is but
you're right it's over a hundred million over the next three years.
Representative Jim Dotson
Unverified
6:05:43
But for this next year will you need that I guess it's 18.7 million dollar increase in appropriation. Yes. That will be used to pay those costs to pay those
Speaker 746
6:05:55
costs yes and I can only talk of that someone from our agriculture division of agriculture would probably have to answer the other portion of the increase because most of that relates to them thank you any other
questions all right representative Kevin off you said you
had a motion at the appropriate time now is the appropriate time let me hear
Representative Frances Cavenaugh
Unverified
6:06:26
your motion thank you mr. chair i'd like
to make the motion that on arkansas state university that we take their appropriation to the 213.925 that they agreed to and on henderson state that we take their appropriation to an 88 million rather than the 95-350. Okay, you've heard the motion. Any discussion? Okay. Restate your motion again,
Representative Kevanoff. I would like to make the motion that on Arkansas State University,
Jonesboro, that we leave their authorization for $213,825,000 that they agreed to that they need it. And then on Henderson State, I would like to take the appropriation to $88 million rather than the $95,350 that they ask. You
got that, Representative Wooten? All right, Senator Hickey, you're recognized.
Chair
Unverified
6:07:19
Yes, I think I'd like to hear from them again
Senator Jimmy Hickey, Jr
Unverified
6:07:24
on the $88 million, but I guess my question would be, and
I understand we've been through these
difficulties here in the last few years, but how far back can we go? Does Kevin have five six years ago just to see so we can see what the appropriation
was back then from a statistic the statistical type yes sir we have
Speaker 254
6:07:52
we don't have mr. chairman should I'm sorry thank you mr. chairman
Representative Jim Dotson
Unverified
6:07:57
we have what we call the a book which is 10-year expenditure history however we don't have 19 in there but
19s in these books um so i could we could put those out well can you just can you look and just tell us how
Speaker 753
6:08:10
much it was four or five six years ago what
Senator Jimmy Hickey, Jr
Unverified
6:08:13
all that was i mean i just want to know i don't want to cut them too close with what they've been through i'm gonna
Senator Linda Chesterfield
Unverified
6:08:22
have to get an a book yes sir okay
some other questions senator chesfield you're recognized i would
Senator Linda Chesterfield
Unverified
6:08:33
ask that we divide the body and roll call it
Representative Jim Wooten
Unverified
6:08:35
okay when we get to that we will representative wooten thank you mr chairman i i would like to ask the justification for the for the reduction at asu and then also at henderson state what what are we basing that decision on that
Representative Frances Cavenaugh
Unverified
6:09:02
we're about to make? Reverend Kavanaugh. On ASU, in their conversation with Representative Dotson,
they agreed the 213 would meet
their needs, so that's what that's based upon is their testimony just 10 minutes ago that the 213 would be just fine. The other $88 million is if you look at what Henderson State has been spending, even it's 38 million they had an appropriation for 52 million almost 53 million and even when they came back and asked for the 20 million that they spent 15 million on they're really their appropriation would have taken care of that I mean then inside of that I'm actually increasing
it up above what they ask just not the total 42 360 I'm actually increasing it 35
Representative Jim Wooten
Unverified
6:09:52
million 110 in 944. Are we questioning the investigation and the oversight that ASU has had down there relative for coming up with this number? I admit, you know, from 52 to 95 is a big increase.
but at the same time that institution down there we don't know what happened I hope we find out but is there a justification to cut it back to 88 well
Representative Frances Cavenaugh
Unverified
6:10:28
I think it's a justification to put the appropriation to 88 million when they can't show that they have spent 88 million that they need it even if you look at what they say they might have needed an additional appropriation their current appropriation would have covered that so this is given them above that
it's just cutting them seven million three hundred fifty thousand dollars that's all we're cutting from what they asked for how did we come up with that number it looks like it's a pretty equal number if you look at what they're saying they're needing I'll be honest with you I would feel more comfortable if it was less but I'm trying to be give them some leeway in case they do have an emergency that they have to deal with but
there's a big jump between eighty eight million and thirty eight million that they spent that's fifty million
thank you mr. chairman that's all I have thank you all
right any other questions and I I never to get a second we've got a second okay all right coming back to Wait a minute. Senator Henke, you got a question? Yes,
Senator Jimmy Hickey, Jr
Unverified
6:11:38
Mr. Chair. Of course, I'm trying to look through this book. But would it be appropriate to have them to come back down on Henderson just so that we can get a little better take on it to make sure that there's nothing that they know?
Dr. Wells, come on down. I just want to make sure. I may be fine with the motion. I just want to get a little more information. You got something you want to say? Pull up that one line. Senator Hickey, you're recognized. Yes, sir. I'm over here to your left, of course. Again, I see what you've done.
You've tried to take it up. Whenever we're looking back, it does appear like that you haven't spent any more than Representative Kavanaugh has said. do you know of any uh extraordinary items that you have that where you would need more than what she's saying i don't
Speaker 494
6:12:40
know that i could say that senator hickey but i think like if you look
Representative Douglas House
Unverified
6:12:45
at page 46 for example um in your book on cash funds for henderson state yes you'll see that the authorized appropriation for 1920 was 52 million nine 89 056 their budgeted amount was 61 million
498 745 so they had a budgeted amount higher than the appropriations amount so I think that's that's where we're just saying we there's a lot we've got to do to break this down and bring it I mean I can assure you we're not going to spend a dollar more than we have to spend there but the problem is just the unknown right now with that particular campus and us trying to get down to the heart of the matter and understand how some of these things were done whether they they were misclassified, whether they were misreported, so that we'll have a better understanding
of whether these numbers are actual, because we've encountered some of the same challenges in our operating budget, as we've looked at it.
Speaker 759
6:13:36
And the motion was for 88, is that correct? I believe
Representative Douglas House
Unverified
6:13:51
so. That's correct. Yes, sir. We think that would probably be enough, Senator, we just don't know so much right now, right.
Senator Jimmy Hickey, Jr
Unverified
6:13:58
Well, that's what, I'd rather you say, we think that's going to be enough, than no, we believe there's other items out there.
Speaker 763
6:14:04
And we understand you don't know right now. Right. That was what I needed to hear. Thank you.
Senator Linda Chesterfield
Unverified
6:14:18
Thank you. All right, Senator Chesfield, you're recognized. Yes, I had a question as well. I guess
I grow concerned when we start. Dr. Wills, just stay until this is settled one way or another. Just stay.
Because we're talking about appropriations, we're not talking about spending. And it troubles me when we decide that we're going to clip the wings of those institutions, them come back down here when if they don't have the monies, they can't spend the monies. But we're saying this is all you can spend when in actuality they may be able to get grants or anything else that might increase their ability to mitigate the problems that they have. And so I become concerned when we decide that we're going to look at budgets and decide
that we're actually talking about spending money rather than appropriating money that will allow them to step into their role to bring about the fiscal integrity of the institutions. So I am speaking against the motion. They have asked us for the authority, not the money, and I think that's a huge difference when you have the authority and not the money. If you have the money come in and you don't have the authority to spend it, you're back at phase one of the process.
So I always wax concern when we start acting as if appropriations are really spending monies. These things are not funded yet, and if we clip the wings of them and their ability to fund it, then I think we're doing the institutions a disservice. Henderson can't spend what it doesn't have. It could have $100 million in appropriation. If it doesn't get but $50, that's all they can spend. But to say you can't spend above this amount because we've decided, we know better.
And so that kind of troubles me, and so I speak
against the motion. Thank you, Senator. Representative Dotson,
Representative Jim Dotson
Unverified
6:16:18
you're recognized. Thank you, Mr. Chair. This question is more for staff, probably, Kevin. If you would take us through, for the committee and for my sake, if they come up and butt up against it say we reduce this appropriation level to the 88 million and they need to spend 90 million next year we have a mechanism in place for them
to be able to come back before us during the interim without is that correct can you take us through that process and what would happen in
that instance yes sir the peer subcommittee of Arkansas Legislative Council first the institution would submit to higher ed the request that they needed for additional cash appropriation authority that would be submitted to peer peer would look at it and review it submit their report to council and if council adopts the report then they would have the additional cash appropriation so if
they did get a grant or something like that mid-year yeah there is a mechanism in place for them to come back and request additional authority they just would have to ask that permission without
going ahead and spending it yes okay thank you Any
other questions? Revitative Kavanaugh, queue up again. I want to make sure everybody understands your motion because
Representative Frances Cavenaugh
Unverified
6:17:43
we've had a lot of discussion. So we'll restate your motion. My motion is that Arkansas State University stay
flat at $213,825,000 and that on Henderson
state university we take their appropriation to 88 million rather than the 95 350 that they had requested okay yes ma'am may i ask a question of
Speaker 696
6:18:09
representative kavanagh you sure may representative kavanagh would you be okay if i put that into the categories that i need it instead of just a proportional cut yeah it's an
Representative Frances Cavenaugh
Unverified
6:18:17
appropriation wherever you need to use the 88 million i'm okay with it and I'm not trying to limit y'all I'm just saying instead of saying I need 95 million
if we can do it on 88 that
Speaker 696
6:18:28
would be great yes ma'am I just want to know could I like put
it in capital if I need it there whatever you think you need to
spend it thank you we'll get it written in the right
Speaker 339
6:18:47
place all right still got another question i guess representative wooten
Representative Jim Wooten
Unverified
6:18:53
yes you're you're telling me that you could sit here and cut 30 million dollars out of your request
for the appropriation from two from uh 237 to 213 and from 95 to 88 that's 30 million dollars did we need that to start with or did we not need that to start with well it's 30 million dollars
Representative Douglas House
Unverified
6:19:15
in in spending approval i don't realize right we
Speaker 341
6:19:18
don't have those funds it's still what we have to what we have to look at sure i mean i
Speaker 488
6:19:24
can tell you that we're being very active in um grants um and
Representative Douglas House
Unverified
6:19:29
looking at different ways that we could identify
we're looking at our first system level grant that would actually have both of these institutions in play um you know we just don't know what could come about we have lots of researchers that are doing lots of different grants there's lots of things happening um on the campuses and this is certainly the authority so you're telling me that we've given up 30 million dollars
Representative Jim Wooten
Unverified
6:19:46
in grants perhaps we would have to come back if we were to exceed the amount
Speaker 467
6:19:51
that's in there yes sir thank you mr chairman all right we're ready for the question
let me see three hands okay we got a division
Speaker 261
6:20:23
of the house we'll roll call it we'll start it with
Speaker 248
6:20:29
the senate senator flowers first alternate senator rice senator clark Senator Malick, Senator Stubbefield, Senator Cheatham, Senator Irvin, Senator Caldwell,
First Alternate Senator Wallace, Senator Ingram, Senator Cooper, Senator Flippo, Senator Blake Johnson, Senator Elliott, Senator Chesterfield, Senator Dismang, first alternate Senator Hammer, Senator English, Senator Bond, Senator Mark
Johnson, Senator Hendren, Senator Hester, first alternate Senator Pitch, Senator Eads, Senator Breanne Davis, Senator Ballinger, Senator Letting, Senator Bledsoe, Senator Sample, Senator Raypert, Senator Hickey.
I needed 15 votes, and I got four. Rev. Dawson, you
Representative Jim Dotson
Unverified
6:22:08
got something? Yes, Mr. Chair, I have a motion at the appropriate time. Let me hear your motion. My motion would be that we amend the request like ASU agreed to on the ASU Jonesboro to the appropriate level of 213-825,
Speaker 592
6:22:23
which leaves them at 2019-2020 levels, and approve the rest of the as-requested four-year institutions.
As is? As is. Restate that motion. So the motion would be to approve all of the four-year institutions as requested, the
Representative Jim Dotson
Unverified
6:22:46
AHEC-REC. With the exception? With the exception of ASU-Jonesboro and leave that one flat at the 2019-2020 level of 213. 825 million upon their agreement upon their agreement
okay proper motion have a second
no second got a second all in favor say aye all opposed eyes have it let me
see three hands you gotta be kidding roll call
it start on senate side I guess I need to
Speaker 628
6:23:36
understand Well, but they were at the table upon their agreement
Speaker 5
6:23:39
Well, they don't have to agree There's nothing written in law that says
Speaker 261
6:23:54
they've got to agree All right, call the
Speaker 248
6:24:00
roll. Senator Flowers. First alternate, Senator Rice. Senator Clark. Senator Malik. Senator Stubbefield.
Senator Cheatham. Senator Irvin. First alternate, Senator Wallace. Senator Caldwell. Senator Ingram. Senator Cooper. Senator Flippo Senator Blake Johnson Senator Elliott First alternate Not seeing Senator Elliott Senator Hammer, first alternate
Senator Chesterfield Senator Dismang Senator English Senator Bond Senator Mark Johnson, Senator Hendren, Senator Hester, Senator Eads, Senator Brianne Davis, Senator Ballinger, Senator Letting, Senator Bledsoe, Senator
Sample, Senator Rapert, Senator Hickey, Senator Got eight votes, seated 15, it failed. Seeing that. Mr. Chairman. Yes. Can
Speaker 30
6:25:33
we try one more vote just for executive rec? You want to make a recommendation? What? AHEC rec. AHEC rec. Sorry. All right.
I have a motion. Do we have a second?
I have a second. have a second okay okay roll call by division three hands i see two i see three
all right call the roll what we're voting on is is the a heck wreck which is the department of education's recommendation
nothing changed thank you
Representative Jim Dotson
Unverified
6:26:28
mr chairman for the a heck b recommendation for all the institutions Senator Flowers. Senator
Speaker 782
6:26:42
Rice, first alternate. Senator Clark. Senator Malik. Senator Stubblefield.
Speaker 248
6:26:48
Senator Cheatham. Senator Irvin. First alternate, Senator Wallace.
Senator Caldwell, Senator Ingram, Senator Cooper, Senator Flippo, Senator Blake Johnson, Senator Elliott, first alternate Senator Hammer, Senator Chesterfield, Senator Dismang, Senator English, Senator Bond, Senator Mark Johnson, Senator Hendren, Senator Hester, Senator Eads, Senator Brianne Davis,
Senator Ballinger, Senator Letting, Senator Bledsoe, Senator Sample, Senator Mr. Rainb branded? Senator
Speaker 784
6:28:00
Hickey? ? How many? How many do you have?
we've got a roll call of the House.
Representative Jim Dotson
Unverified
6:28:40
Representative Shepard? Aye. Representative Holcomb? Aye. Representative Eubanks First alternate Representative Birch Second alternate Representative Maddox Representative Ferguson Kenneth Ferguson Representative Richmond Representative Monte Hodges First alternate Representative Gasway Second alternate Representative Marsh Davis
Speaker 239
6:29:11
Representative Ladyman Representative Tosh Representative Jett Representative Gray Representative Kavanaugh Representative Meeks Representative Beck Representative House Representative McGee
Representative Andy Davis, First Alternate Representative Wooten, Representative Eaves, Representative
Speaker 248
6:30:01
McCollum, First Alternate Representative Penzo, Second Alternate Representative Crawford, Representative Lindstrom, Representative De La Rosa, Representative Grant Hodges, Representative Boyd, Representative Coleman, Representative Ward, I'm sorry, Wardlaw, Representative Dotson, Representative Womack, Representative Kapp.
all right seven so it failed we will be back in here tomorrow at 9 a.m see if we can find some common ground representative meeks you're recognized uh if the chair would allow
Representative Stephen Meeks
Unverified
6:30:59
one last motion on this matter my motion oh well if i thought we were going to get anywhere i would well this one might pass well let me hear your motion and then you can decide whether you want
to take it my motion is that we go ahead and adopt all the four-year institutions except for ASU Jonesboro and Henderson State the two that are controversial so that way when we hear this in the future these good folks that are not involved in this don't have to come back down here so my motion would be we approve everybody else hold over those two for a future i think at the i just don't think we
need to do that i think i think they all need to go together so i'm not
going to hear your motion all right thank you
though uh you know i'm gonna tell i'm y'all don't need to drive back up here uh now who knows asu probably needs to be here but but i would say for the
rest of you nobody had any questions no concerns don't come back tomorrow and if if we need you we'll staff will call you and hearing that we are adjourned
Agenda
A. Call to Order
B. General Revenue Official Forecast/Executive Balanced Budget for Fiscal Year 2021 - No Committee Recommendation Required
C. Act 678 of 2019 – Government Financial Disclosure and Accountability Act
D. Consideration of “Flag List” schedule
-Break for Lunch-
E. Institutions of Higher Education Budget Requests for Fiscal Year 2021
F. Other Business
G. Adjournment
Documents
| Title | Type | Pages | Source |
|---|---|---|---|
| Agenda — JOINT BUDGET COMMITTEE - PRE-FISCAL SESSION BUDGET HEARINGS, Mar 4, 2020 | Agenda | 2 | Official source ↗ |
| Exbibit C Agency Response for Unappropriated Cash Funds (7) | Exhibit | 4 | Official source ↗ |
| Exhibit D Flag List | Exhibit | 23 needs OCR | Official source ↗ |
| Exhibit E 2b FY21 Revised Approp Amendment Request Letter | Exhibit | 3 | Official source ↗ |
| Exhibit E 2c FY21 Personnel Change Request | Exhibit | 6 | Official source ↗ |
| Exhibit E 2d Fiscal Session Appropriation Summary (2) | Exhibit | 5 | Official source ↗ |
| Gov Forecast and Balanced Budget | Exhibit | 11 needs OCR | Official source ↗ |
Speakers
Speaker 1
Representative Lane Jean Chair
Unverified
Speaker 15
Speaker 20
Speaker 30
Chair
Unverified
Representative Stephen Meeks
Unverified
Representative Jack Ladyman
Unverified
Speaker 41
Speaker 39
Senator Joyce Elliott
Unverified
Speaker 58
Speaker 60
Speaker 69
Speaker 82
Senator Will Bond
Unverified
Representative Justin Boyd
Unverified
Representative Joe Jett
Unverified
Speaker 104
Speaker 62
Speaker 103
Senator Trent Garner
Unverified
Senator Jonathan Dismang
Unverified
Representative Frances Cavenaugh
Unverified
Speaker 147
Speaker 161
Senator Mark Johnson
Unverified
Senator Jason Rapert
Unverified
Speaker 177
Speaker 182
Senator Linda Chesterfield
Unverified
Speaker 192
Speaker 194
Representative Johnny Rye
Unverified
Speaker 203
Speaker 206
Representative Jim Dotson
Unverified
Representative DeAnn Vaught
Unverified
Speaker 248
Speaker 254
Speaker 255
Speaker 261
Speaker 250
Representative Dwight Tosh
Unverified
Senator Jimmy Hickey, Jr
Unverified
Speaker 302
Speaker 328
Speaker 330
Speaker 316
Representative Jim Wooten
Unverified
Speaker 110
Speaker 359
Speaker 121
Speaker 115
Representative Douglas House
Unverified
Senator Terry Rice
Unverified
Senator Jim Hendren
Unverified
Speaker 397
Speaker 399
Speaker 344
Speaker 410
Speaker 336
Speaker 405
Speaker 420
Speaker 105
Speaker 429
Speaker 430
Speaker 431
Speaker 432
Senator Missy Irvin
Unverified
Representative Jeff Wardlaw
Unverified
Speaker 163
Nick Fuller
Unverified
Speaker 464
Speaker 479
Speaker 494
Speaker 467
Speaker 495
Senator Gary Stubblefield
Unverified
Representative Robin Lundstrum
Unverified
Speaker 488
Speaker 482
Speaker 531
Representative Rick Beck
Unverified
Speaker 548
Senator Breanne Davis
Unverified
Speaker 561
Speaker 563
Speaker 564
Speaker 571
Speaker 575
Speaker 579
Speaker 512
Representative Mark Lowery
Unverified
Speaker 468
Speaker 592
Speaker 493
Speaker 593
Speaker 473
Speaker 604
Speaker 623
Speaker 165
Speaker 5
Speaker 622
Speaker 638
Speaker 643
Speaker 331
Speaker 650
Speaker 651
Speaker 654
Speaker 285
Speaker 400
Speaker 672
Speaker 678
Speaker 680
Speaker 677
Speaker 693
Speaker 696
Speaker 705
Speaker 710
Speaker 716
Speaker 484
Speaker 257
Speaker 667
Representative Denise Jones Ennett
Unverified
Speaker 735
Donald Bobbitt
Unverified
Speaker 745
Speaker 746
Speaker 753
Speaker 759
Speaker 763
Speaker 339
Speaker 341
Speaker 628
Speaker 782
Speaker 784
Speaker 788
Speaker 790
Speaker 792
Speaker 239