Legislative Joint Auditing

The members real quick I'd like to recognize Senator Stubblefield for all for now. Yeah I don't know how many of you know this a center Caldwell lost a family member this last week and I that's related to your related funeral funeral is today but if you would just join me in a moment of silent prayer on family would appreciate it and I would appreciate it so let's just barriers for a moment of silent prayer. I thank you very much. Thank you senator thank you Committee our first order of business today will be the adoption of minutes of the January seventh two thousand twenty two meeting everybody said those a little while under email. is there any questions or comments. All right then I would like to have those standard opted without objection. Thank you next on the agenda is the adoption reports of the executive and standing committees first up will be Senator Stubblefield with the executive committee report. Are the executive committee met thirty five or the tenth two thousand twenty two staff reporters committees the audit special investigative and shortage report scheduled to be presented to the standing committees and the full legislative joint auditing committee this month in the new business there was not an objection for staff to act on a request to audit Arkansas department Human Services rental assistance program funds and other businesses general discussion occurred about the use of funds of COVID nineteen contact tracing with no additional business to discuss the meeting was adjourned the next meeting will be of the committee is scheduled for Thursday April seventh sat seventh two thousand twenty two I move for adoption this report thank you senator or any questions or comments or for. We have an a a motion I have a second. I have a second all those in favor say aye All opposed no thank you Committee next up is a report on. Counties municipalities representative Hillman you're recognized thank you Mr chairman the committee met yesterday to consider first on consider the minutes from the January six meeting and then we reviewed eight reports differed from the January sixth meeting officials from two entities or present to address repeat findings from these reports the three previously deferred reports were filed and five were deferred to the April seventh meeting the Committee reviewed eighty five current reports of these two were certified to the bond board six were referred to the progress at unit attorneys officials from two entities were present to address repeat findings of their current reports the Committee filed eighty four current reports and deferred one so that officials could attend the April seventh twenty twenty meeting to address for the findings. Mr chairman I move for the adoption of this report thank you Sir of any questions or comments on this report. Senator Garner you're recognized thank you Mr chairman I appreciate my co chair read this report we're having a slight issue or bring to the committee's attention is kind of it's a curse retiring we had an issue with the Newton County sheriff and a report we had and it's been multiple meetings now we're kinda asked him to be there and he sent a letter last time so just wanna bring to the committee's attention that we think there's an issue that needs to be brought up just wanna do it more public forms will be heard that we appreciate the crucial but next meeting thank you Mr chairman thank you senator. Any other questions or comments. All right all those in favor of adopting reports say aye All opposed no all right thank you that stands adopted. Our next up the report on standing committee for educational institutions represented very you're recognized thank you Mr chairman the standing committee on educational institutions met yesterday February the tenth of the committee reviewed a total of thirty one current audit reports which consisted of thirty school district report for the year in June thirty twenty twenty one and one school district report for the year ended June thirty twenty twenty the committee filed the current audit reports that were brought before it as a result of a request from the staff the committee adopted a motion to give notice and make proof of loss to the governmental bonding board regarding the Arkansas State University systems January twenty twenty two internal audit report of concerning Henderson state university representatives from a issue system were present and answer questions related to the internal audit report. Mr chairman at this time uh mode option of the report thank you Sir any question or comment on that report. All right we have a motion and a second. I have a second all those in favor of daca reports say aye All opposed no thank you the standard opted. nexus reporter standing committee on state agencies are representative of all you're recognized thank you Mr chair twelve reports were on the committee's agenda yesterday to reports with findings was were presented the Department of Parks heritage and tourism incorrectly made us sick leave pay out resulting in an overpayment to an employee the department of labor and licensing also had a finding related to incorrect sick leave payouts as well as an incorrect annual leave payouts the nets over payment for these eleven incorrect payouts totalled approximately sixteen hundred dollars additionally the department had numerous issues regarding accounts receivable balances findings related to the former director of the architects board of which is now part of the department of labor licensing included losses of inventory items pay roll checks improperly received and purchases made without proper approval of the adequate supporting documentation in addition architects Board did not retain all minutes and agendas of public meetings various agency staff members were present to report on how the agencies intended to address the audit findings and to answer committee questions during the meeting and the committee adopted a motion to file the twelve reports with this I would may for adoption of this report thank you are there any questions or comments. Miss miss Springer did that I'm issue a moment ago you got one nine. Thank you good morning thank you Mr chair you did I wanted to inquire regarding the of reports with respect to the educational institutions I would like to have a copy of the audit report with respect to IndusInd State University okay we'll we'll work on that I apologize I just thank you didn't see you see our time on our any questions or comments on this report. All right see in on all those of the in favor moving for adoption say aye. All opposed no not that stands up to thank you. Are moving right along next we'll have a real special report on Arkansas state government transformation annual cost savings report for the period of July first twenty twenty through June thirtieth twenty twenty one this comic a Wilson will be present at force you're recognized. Thank you Mr chair. Ex five sixty five of two thousand nineteen states It is the intent of the General Assembly that the transformation and efficiencies Act of two thousand nineteen shall result in efficiencies to reduce the duplication of services and administrative costs and reduce overall state government general revenue expenditures. Cabinet level departments created by the transformation process are to identify and eliminate excess administrative expenses unnecessary expenditures and duplication of services answer report those savings all efforts to operate efficiently to the General Assembly. This report is presented in accordance with X. eleven eleven of two thousand twenty one that requires legislative audit to verify the amounts and cost savings reported by the you think cabinet level departments each year. This report does not you bet you wait agencies or processes improved managerial support or improved delivery of services to citizens as a result of transformation. The objective of this review were to verify cost saving information reported by the fifteen cabinet level departments. Review supporting information for and determine the reasonableness of transformation related cost savings identified by the if the department. Determine the reasonableness of other cost savings identified by the fifteen departments but not directly related to transformation. X. eleven eleven of two thousand twenty one requires the fifteen cabinet level departments to submit the following information no later than August first of each year. Cash expenditures for the past two fiscal years categorized by appropriation classification. The calculated difference between cash expenditures for the past two fiscal years. A specific item is ation of cost savings identified by the department. Identification and explanation of the cause of the cost savings related to either transformation or in other because. Schedule one on page three summarizes the required information submitted by the fifteen cabinet level departments schedule to our pages for the report saying provides the required information submitted by each department by appropriation classification. It should be noted that according to department staff Kobe nineteen has affected the ability to achieve certain savings. The extent of the impact of Kobe nineteen on anticipated savings to the transformation is a no. In total the fifteen cabinet level departments. Reported the following. Increased expenditures of two point five billion dollars one fiscal year two thousand twenty two two thousand twenty one. These primarily related to the state's response to public nineteen and related federal funds if for departments Human Services commerce education and finance and administration. Transformation related cost savings of one point six million dollars. Other cost savings of fifty seven point nine million dollars. Legislative audit verify transformation related cost savings of one point six million dollars at three departments all or part of the transformation related cost savings identified derived from vacant positions rather than surrendered position. The department's retained the ability to fill these positions at a future date. All the reported other cost savings totaling fifty seven point nine million dollars legislative audit verify fifty four point eight million dollars but was unable to verify three point one million dollars. As noted is scheduled to cost savings included bun pay off as well as items related to Kobe nineteen including salary and benefit reductions created by not filling vacant positions travel expense reductions and park closures. The Department of Education overstated savings in operating expenses by two point seven million dollars after incorrectly a meeting thirty six point one million dollars in federal expenditures and the department of finance and administration overstated savings by three hundred ninety four thousand five hundred seventy five dollars as a result of reporting cost savings in specific business areas there were actually expenditures transferred to other business areas. It should be noted that the if the department is buried in how they reported the required information. Mister chair this includes representation management responses from the department of education and the department of finance and administration are provided in their entirety in appendix a and officials from these departments are present to answer committee questions. Thank you. looks like Senator Garner. You're recognized thank you Mr chairman so this kind of brings up the whole debate about transformation I member whatever that process to happen and we her numbers up fifty twenty thirty forty million dollars in savings per year and I think that if I'm reading this correctly staff correct me the only number we can find across the whole board is about one point six million dollars actually save directly from transformation the rest of it was either normal government efficiency issues or COVID nineteen M. M. I. N. correct in my assessment of that that directly related based on the information you got one point six million is the savings from transformation center this is the second report dealing with transformation the first report was issued of a year or so ago and in that report that was where we look at those numbers that the executive branch gave as far as the the transformation I think that they. There there were two different amounts stated in that report. One was the first. Estimated savings they have is twenty six million and then they came back later and made a presentation where they said the B. fifty seven million dollars of savings and we were not able to identify of basically any savings in fact it it came out there were some relocation expenses of six million dollars and so What what they were claiming with some reductions in budget announcmenet some reductions in the performance fund some surrendered positions and various things but as far as actual dollar reductions we were not I not able to verify that you know what this report does there was a an act passed that required them each year because the initial like just required them to present those numbers for one year and so the General Assembly came back city each year they need to to identify actual reductions in expenditures based upon of whether they were transformation related or other related and so that's what this report is and if you if you look at the the schedules behind there that back that up the the the transformation savings that are listed in the report is one point six million which is basically due to personnel decreases in the transformation and shared services for the Balkans that most of all the other savings of the fifty seven million or some sort of either reductions in personnel related primarily to either COVID or or like the parks were not able to open and function. Yeah I mean I remember the initial report I appreciate you give us an office of what it was so I guess this is the next phase of we heard this will be a continuous Sabin moving forward of a significant amount one point six million is not a sniff at but it's also not transformative as we were so when as originally pass I guess my question second question thank you Mr chairman is. Was this information sent to you all from the agency saying yeah this is what we have identified was there any kind of I'm not I'm not putting disparaging on authors that you would make an awesome job I'm guess I'm wondering the raw information you got was it from the agency saying yeah we save this order Joel cross balance that cross check it and say no no wait a minute this is actually this this isn't safe from that what kind of the analysis that was done with a fuel they send it in and they identified whether it was transformation or non transformation related and then we went out and and did the verification on the on the the major numbers and that is that correct me yeah okay what was the DYS difference between what they said they state versus what we found and I think you said when you were in the report I'm trying to get that number. Well I I think that during the process some of the agencies did change their their numbers of a little bit as far as from transformation on transformation some of it change but if you look at the at the notes that are attached to the very schedule it'll come to you what what they are I mean they there are of it may be reductions in expenditures but a lot of that is just related to personnel positions that were not feel various items. Thank you Mr chairman thank right created. So just just for my question were you asking for a number right then because we've yeah I guess what I'm asking for is you want me to to expand on it is did they say they say ten million dollars so used DHS and transformation we look at the numbers now actually save half a million because they were trying to do now if if that number is closed in fine if it's for part you may be. Wonder why these agency heads or site or agencies are saying we're saving so much money for transformation reality our auditors find that's not true I said I don't know the numbers on to speculate on that board yeah yeah and and to answer that a it requires speculation on my part for sure but but I think you've figured it out. Are there any other questions or comments and we do have some people yeah we've got a few popping up here hang on Sir just build your little little Ford online who's a. this list make sure you're recognized thank you Mr chairman I have two questions if it's okay the the. First question is is on the savings do we know if they achieve savings but then took that savings quote on quote and apply it somewhere else in their budget so that that that total overall savings and gets reduced order anyway now that well again the I think that was one of the things in that first report they reallocated a lot of rise and and they were they were claiming that is savings we said now that's that's not a savings that this has to do with cash expenditures and and so it H. if it was reallocated it should not matter on this it still should show up as an expenditure okay and then my follow up question is that the two point five billion dollars for the the code fund and you may have already answered this if that two point five billion dollars was backed out. Would we see any additional savings was most of that just we had federal money so because we had federal money we need more police to handle that in a course during the pandemic we need more people to handle that but if we got rid of the federal money would be reducing those positions and thereby saving the state additional money is that makes sense what I'm asking or is there any way to calculate that. I don't know I mean obviously that they may have had to increase and in some instances I think that the the number of employees may have increased because of the COVID in other cases it decrease because of the code and you know I know it corrections that was that the the problem right that they had down down there as far as parks along the parks were closed so that that had a a decrease as far as the operating expenses in that department so you know backing a lot of this money was just flow through grants and they had to have the administrative staff to to function and in distributing those funds okay so I I guess ultimately my one get two as we may not know the full long term impact of transformation tool get passcode get pass all this extra money. Would that be a correct. The. I have a I would. What what say. Whatever S. thank you Mr. US senators Phil you're recognized. Yeah. Well they were they were popping up as I was saying my name you didn't get on the from the line that you're close. Page two again and I'm seeing other cost savings of fifty seven seven point nine million dollars could you tell me what constitute a fifty seven point nine. DO not asking again. On page two the results of the review increased expenditures of two point five billion. Of this school year twenty twenty one a transformation of related cost savings of one point six and then other cost savings of fifty seven point nine could you explain to me what if the seven point ninety is yes ma'am if you look at schedule one on the far right column. There is a listing there and out of the various decreases in expenditures and to really follow that you have to look at the individual schedules that relate to each one of those And we have notes on just about everyone of those explaining what they are again most of that is personnel related and that's what's confusing because you keep saying aye personnel related with the biggest cost in government is personnel is in a yes ma'am so why is it that that's not considered a big deal if we reduce personnel as a result of trend I mean we're not saying that center Chesterfield what we're saying is it was not related to the transformation okay it's just is it what happened regardless of transformations that would yes ma'am so that's that's clarifying it because when you do lose personnel I know you lose money but had we not had transformation we would have had the savings anyway is that what you're saying yes ma'am our how does one get to that conclusion Roger. It had nothing to do with combining those agencies or anything pulling that together what it had more to do was it was the impact covid okay Thank you. All right of center Garner you're recognized in. Thank you Mr chairman so I'm just kind of looking back to numbers it looks like the bulk of the savings was that the Department of transformation and shared services that's where one million dollars of the one point six four transformation related so call savings was done mostly in regular salaries I guess I'm asking like because they're general increase in expenditures went up seventy million dollars from FY twenty twenty to FY twenty twenty one. So if their budget grew by their expenditures grew by seventy million how are they saving a million just cause transformation I mean are they is that kind of the money going somewhere else now I mean I that's pretty significant increase in the amount of budget unless I miss reading this. The I think we do have some representatives from the department transportation I mean for transformation of who who's here today are you whoever's here representative yeah I had board please. Thank you if you'd please a. Turner Mike Sullivan recognized I mean tell us your name and and the represent please yes I'm Alex Johnson chief of staff at transformation church services had been shipped chief fiscal officer at transformation church services thank you would would either one of you care to. Respondents Senator Garner question yeah can we ask need to Mr chairman. I will have to say as a cabbie ought that the former chief of staff miss and purpose was the person who did the bulk of this so we made it sound like we don't know as much as she does but will hope to try to answer questions as best we can in identifying most of the increases they are associated with employee benefits division of one of the largest ones is claims that we have no control over claims that that something that is strictly related to health and welfare of our population and of course we feel like COVID probably played a part in those increase claims as well. There was also some issue with the way accounting was done with an EBT there were several things that were found in twenty between twenty and twenty one and I change the way they reported things they had switched accounting systems and so there's a lot of A lot of problems with numbers between twenty and twenty one in comparison for AB de. We also did have some COVID expenditures we had about three million dollars I think in PP that the department purchased and distributed among many of the agencies within the state. Okay ma'am so the twenty million dollars additional operating expenses are you saying aye All cover related R. M. or is that accounting trick and ended that the eleven million nearly professional fees and services what was the increase in that that is EVD professional fees and services are tied to claims so as claims go up the processing of those claims has to be paid that's a professional to be in service correct. Are the one million you're saying your savings that's the proper that is regular salary. Was that salary say because now your own you different system because the transformation was because we upgraded the system and other efficiencies were found within the computing system how did you all say that roughly million dollars most of those savings were due to the fact that there were positions within agencies that were able to be combined so that we didn't have to have additional employees so any time that we found deficiencies of someone retired or left the our employee we often did not re hire those and we always look to do that a committee of the agencies before transformation had their own lawyers so those lawyers are mainly code if you will so that they can serve other agencies they don't just work for one agency and we are trying to help with our senior executive when miss and purpose laughed no one knew was hired we are now sharing those responsibilities among staff that was already there okay finally do that increased work load is there been any issues with burnout with employees feel like they have too much on their plate have they got increase in their salary because of it is but what has happened to employees because if you're going to put more burden on lesser people typically that means I got to do more worker there has to be some kind of compensation mechanism have you seen that. I personally have not Alex you may want to speak to that that's more your now in in some of them at some of the departures maybe it was to G. S. O. three is that we're doing the same type of work maybe we hired a GS of force that was an upgraded position and did did take on more job responsibilities that would have an increase in pay but we didn't hire that either way so I get to you get ready to lower people in higher a higher wage and be able to say the calls point well in in for three to go to four that's not it not a great John but we're just trying to look at every position as they vacate and see what else can they take on what is their capacity and then how could we hire that if we needed to upgrade the position since they're doing more work okay thank you chairman Norman. All represent Springer you're recognized. Thank you Mr chairman I'm this may be a question for staff on page two of the report is indicated that the department of Education overstated savings in operating expenses by two point seven million after incorrectly omitting thirty six point one million in federal expenditures can we have more explicit for the nation as to what that related to the committee commission of thirty six point one million. What type of expenditures for the. Of somebody from a form of education here I'd like to come to the. Thank you ladies for coming. Please state your name and affiliation for the record. Greg Rogers department education thank you Sir can you address miss Springer's questions about where you see the scripts the. So when we were trying to do the calculation of our savings for the past year we looked at the all the the times before with the federal funds in the state funds as reports said there was a lot of COVID nineteen response funds that we were given out of past year so in our calculations we tried to back out federal funds since it was so much higher this past year due to COVID nineteen money coming to the eighty. That's what we're trying to do is try to get more of your reflection of the savings because we saw the covered nineteen increase funds and I've come to us okay that clarify restoring. I'm not sure I understood what is so are you saying that moneys received B. R. yes Sir will. Placed in the wrong account or I'm not we were trying to back out the COVID nineteen increases in spending that we had over the past year of flight S. R. one the first time was around a hundred and twenty million dollars and then we had another release of federal funds for COVID nineteen investor to around five hundred million and those the and we had to send those out to the district so when I booked it shows those expenditures but that was additional funds that we've gotten from the feds as relates to Kobe nineteen so and analysis we were trying to pack those funds out of what we spend as a reflection of trying to get to a more true accurate reflection wedding savings would have been without having the COVID nineteen response funds included. Thank you. You wanna keep your keep working on this story a little more clarity are you comfortable. I thank I think I have an understanding okay thank. Well I think what happened is that they just did not include some other federal funds in the reporting is and the as far as the the revenue and expenditures relating to that is that the bottom line on the right yes because we're trying to get those that related to cover it up. And I'm I guess I'm trying to find out what specific so you just same basic answer funds were misquoted into the the projected savings and is that what you're that's what I'm trying to figure out what type of what type of funds were. Or they specifically are you saying they will all answer that you were trying to back out no I'm saying that the overall savings that we would have had without the as refunds would included that two point seven million dollars which is what we were trying to show so when you put the COVID funds back into their obviously it was unexpected funds we had that we were spending so it wasn't as much savings as we were anticipating having or or thought we would have due to the response the COVID nineteen was was the amount thirty six point sold is written report was thirty six point one million wasn't actually that amount. I don't I don't bring reported I don't remember I'm sorry. Okay thank you all represented Mayberry you're recognized for a question. Can I get those from the Department of trance formation back out sure sure. Thank you Mr. Ladies if you don't mind just one more time for the record state your name again in your filiation thank you Alex Johnson transformation shared services chief of staff thank you have a ship transformation insurance services to fiscal officer. Okay thank you so much for coming back up and I don't mean to put you on the hot seat but when when we pass this we were hoping obviously from much greater savings for taxpayers of the state of Arkansas and I think we can see that we might not have achieved that and so as a legislator I want to know do we need to continue down this path did we make a mistake by passing this what could we do differently how can we improve things that we do achieve the savings that we were expecting to get. At I do think that we are on the right track one of the purposes or at the goals of transformation and was not just to save money but improve processes and improve the lines of communication and we saw that we have it hence we had fifteen points of contact to disseminate information out and we've also seen that buys smaller departments especially like in labor licensing department of health can binding services and having a larger support organization to do these what we called shared services and one of my first job in state government was that the Department rules services is a five person agency we cannot print money to roll communities we were one of the first to merge into another department we went to ATC so that point I no longer had to remember how to hire people or work on the budget or did marketing for the I. T. because we had all of those things that ATC and not commerce so we had a shared services functions to support us we weren't getting audit findings because we didn't know we're doing we're a small five person shop so I think the transformations a lot more than savings I think that we will realize more savings over the next few years that. Like where we are now in the first few years of it we're still combining or still doing a lot of the stat I that might cost them now to realize money later. If that helps so. Not necessarily the cost savings at this point but you're you're stating that it is there's greater efficiency absolutely yes I mean we have fifteen has we have fifteen secretaries with fifteen chiefs of staff we have fifteen she fiscal officers we have fifteen HR manager so we're trying to get information out we have those fourteen other contacts that we can reach out to you will get that information out a lot before you have the smaller licensing boards or and all of the boards that went into the department of health that might be a one or two person shop that it's hard to get information to and might not have a full time staff so now we have the better line of communication and and more sharing of resources. Thank you thanks for the delays no honest but you're not able to come today yes she had a something come up with her husband and I have a doctor's appointment okay thank you sorry representative Dotson you're recognized thank you Mr chair order right. On your capital outlay it looks like four point three million dollar increase in that capital outlay expenditure line and also in the loop so that services line you had a two million dollar increase which is almost fifty percent increase in that line item do you know what those related to an why those large jumps for their. What I need to check we think it's either the Justice Building construction for the commerce building but I need a follow up to be sure on that you can I get back to you yes please thank you. All represent speech you're recognized. Thank you Mr chair hi my question is to set her listing how many folks was hired to run this transmit transformation. At the transmission shared services are department yes so we had an after the transformation efficiencies Act we have six divisions so four of them came from DFA that be procurement personnel employee benefits and the Building Authority so those are all existing employees came out of the estate entity S. S. I. G. I. S. with the standalone that's geographic information systems and they can entity SF and then not forgetting DIS information systems that the state network they were also a stand alone so it's all existing departments that came in and now As divisions and most of most everything was was shared resources positions that were already there we did not add new positions they were transfer positions in from other markets. Yeah. So bottom line when you all were moved up to do all of this with someone hired to take your place our. To take. Yes my position that my position was an existing position the same as paddy's was they came from departments that merged into ours that that's my understanding but I was I was not here July twenty nineteen so I can check on that and confirm that we did not add any new positions. Okay I just wanted the bottom line of you know was more tired in order to do this you know that I'm confinement and follow okay if that's okay I would appreciate okay thank you thank you Senator Stubblefield. Thank you Mr rose have a short question Alex. Tell me this is the first statement until until we see a huge slowdown. In the number of COVID cases. And federal funds is associated with those COVID cases we're really not gonna be able to get an accurate number on the cost savings of transfer of the transformation process in general. Is that a fair statement. I believe it is because it's going to be a very difficult match money flowing in yes and so and those things need to be expended so people are in me has to be spent by can't set on that money that money is meant to do good and so are agencies are are using that many Nicks spending it or. So many things unemployment Infrastructure all the things that are going on so in my opinion cut trying to compare twenty FY twenty to FY twenty one is almost an impossible task and I think it may be that for at least one more year it may take more than one year to get through the COVID process and to see our government go back to what we would call normal. Okay thank you Mr. All right to a representative berry you're recognized thank you Mr chairman and you know I'm just an old country boy not the brightest bulb in the chandelier but when when this report is a is a car annual cost savings report but just as an example you see throughout all the different departments but though this State Parks heritage and tourism so they closed all the parks which naturally you're going to operating expenses the eight million dollars and you take out the salaries because of the parks are being close and everything that pretty much eats up the the eleven million dollars that the supposedly of State so has there been analysis and I know we've got a lot of brilliant accountants and everybody over and parks and I mean and transformation insured services I assume but up it looks like somebody could come up with analysis to give the legislature some type of idea of what we would have saved if we would have saved anything which I kind of question of if you took all of COVID out of this us equation so has anybody looked at any of that because pretty much the cost savings is code related into salaries because this doesn't tell the legislature anything about so saving any money or cost efficiency and the of transformation process thank you Mr. So Mr McLarty was that a question to these ladies are more of a. That the I guess a question in regards to that that is the question that is the question has there been an analysis made taking out all the code related expenses and to at least give us some idea based on previous years of where we were we would be because this really doesn't tell us anything until like Senator Stubblefield says you you we get out of covid well we're really not saving any money if we continue down this road with COVID over the next several years so it be great to know what we are actually saving our department has not I'm not aware of any other departments at analyzing that either. Not senator Chesterfield you're recognized for a question yes thank you Mr chair there during transformation we purchased a number of buildings that we not. I we purchased the commerce building which is the only out of commerce building is that the only one. Yes I believe corrections purchase there's prior to transformation okay I believe it was is that the only Is everybody in. Is your full capacity the commerce I think they have a little bit of space left I know there's one division I believe in. One division in. One division that has not moved to commerce so what divisions that. I work for services and why is that. It on that day were when I was going to have to you know what thank you serves an audience that has those answers. Here comes in several. Thank you for coming in please a state your name and affiliation for the record. Jim Dotson chief of staff commerce that's here for another part of the agenda happy to answer the question DDS the plan was to move them into the commerce building they currently own number two capitol mall they own the building down there right now we were trying to work a plan where they could potentially move but the main thing is we will make sure we don't cause any physical harm in the process and so currently the there at number two capital mall and I don't see the situation change to everyone the everyone in every entity is now I in a state owned building and not renting from anybody else. With respect to commerce. Period well I can speak to other a second safer commerce we have for example the Division they're not X. they're based out of a hangar out of the Little Rock airports are leasing space there but the rest the commerce agencies or either in the commerce building R. as in case you have yes they they own that building and all that Alex speak to the rest of the government Mr I'm not going to beat it to death but as a part of this if we owned buildings why we leasing buildings because if there's savings it would seem to me in a rant that would be a substantial savings so I'm just trying to find out what buildings do how many buildings do we actually own I can send your report at that we we on a fair amount but for example and the asus service center I believe used to have a private leased and then you union plaza tower down on capital they had two floors there and we were able to take them out of that private leases that them into a state building so we have prioritized looking at private leases in getting in them and state owned buildings but I can definitely follow up with a report of what we have where people are and what the status is if it's leaking priorities that your savings have been as a result getting the purchases yes ma'am I thought it is the rent is the amount you're paying toward the loan more than the amount you were paying when you were ranting and I think that needs to be a question that we we have an answer to as well okay all right thank you. All right representative Brady you're up next thank you Mr chairman I'd also like a copy of the report that you plan on sending to Senator Chesterfield and to take you back on her question. I haven't understand in the footnotes and I haven't seen anything but I'm I missed it of the one point six million on here that said dental fighters transformation savings is any of that directly related to real estate. We have had real estate savings but the the look to see if that included in here in the report that often John Mister Norman you medicine all these answers to you to get out to the yeah the the McGregor if an. I do have that on the list though but just one second we're checking or. We have to look at the break down and get you an answer on that okay just include that in the email you sent thank you if. All represent right you're recognized question sure thank you Mr chairman you know what I wonder is you know you talk about all this federal money that's coming in the last couple years and we know there's there's going to be a point where school falls now all of our budget should basically are increasing well if we took the federal portion out of that we may look you know pretty good at this point but we're talking about a lot of federal money I just wonder what it would look like if you if you back that out because Senator later in the future this thing is gonna change what will be left holding that situation ma'am. Well looks like folks back and are there any more questions or comments for department of transportation. Here. I get a list of all of the buildings that have been processed transformation as well yes ma'am all right thank you all right thank you senator there were a couple buildings going back to that first report just images prior to transformation but there were a couple of time makes building in the Verizon building or both purchased prior to transformation and and there were I think Bonds issued in total of forty three million dollars to purchase. Yeah there's always a good idea this is kind of a snapshot to those savings you know we had that first report a year ago where. I would have guessed the bill would of savings we showed up if they existed then this is a you know just a snapshot of a time period so. there's gonna be a lot of information if anybody truly wants it that we can get out of that first report. are there any more questions yeah yes of residence Springer. Thank you Mr I'm just looking at the results of the review that was done here are there any recommendations from the audit division to any of these divisions are I. E. transformation with respect to how things should be done in the future because I notice here and and on page two that the there are different departments of very dumb how they reported information required by the act. And so there are some differences here so are there any breeding recommendations on how to proceed in the future I think that's one of the things that there there's not in the report but that's something that we're working with the committee to try to come up with maybe some ways to amend that act so that there can be more uniformity and in the reporting of those and more communications with the agency is trying to get a consistent reporting on those so that we can all of all agree what needs to be and how it needs to be reported our thank you and I would just like to say the department of education up to speak with Mister Rogers. And I have a better understanding of what it is that there they were doing thank you so much thank you our representative may very. Thank you I I know you're gonna get us a report which hopefully will have more this information but just off the top of the head eight I hope this is easier at the victory building we lease space over there what what currently is housed over in the victory building. I have I think I think audit is in the victory building I think is that the only thing because I know department that folks sending secretary of state I don't believe that there are any of the fifteen cabinet level department in the victory building but. I can check on this to see who's in that building okay that's the only two I know of that okay so it so those are still there I didn't know some of them had moved out with all this okay and then the DHS buildings downtown are those owned by the state or those leads to you know that the agent the agent's owns owns those okay. Okay thank you. All represented by you're recognized. Thank you Mr this this will be for a staff and I apologize that step out a few times of it may have been asked but how much of the savings went back to general revenue. I'm not aware of of really any savings that went back to the General Revenue I mean obvious obviously if they if if there is a net savings than a lot of that of. would not be spent but as far as what we're listed in this report is the reductions in expenditures and Possibly. What we were listing was one point six million in in potential savings but I'm not for sure if any of that really went back to the general revenues are not okay and and what what's the definition of savings. Well this would be a reduction from one eight recording to the act it's reduction they compare years and it's it's actual savings where in in in the first if you recall in that first report there were a lot of items that were not had nothing to do with the actual reduction in expenditures and so the act that the General Assembly passed wanted that the agency's compare actual expenditures from one year to the next so these are actual dollars going out as opposed to a decrease in budget or something of that nature thank you Mr. All right any other questions or comments. I guess everybody's been satisfied thank you for coming today and we will we will consider this report reviewed I appreciate your. Coming down force next up is a special report on the cost benefit analysis of selected economic incentive projects January first two thousand eleven thirty December thirty first two thousand twenty Mr met is going to present the force and you are recognized when you're ready. Thank you Mr cherry the consolidated Senate act of two thousand and three combine the existing economic development tax incentives primarily into for statutory and five discretionary economic incentive programs legislative audit is required to repair a cost benefit analysis of the economic incentive projects annually this year's report also includes a review of the Arkansas tourism development program. The objectives of this report or to. About UA controls over the awarding and issuance of C. I. A. and Arkansas tourism Development Act program incentives by the Arkansas Economic Development Commission and the department of finance and administration to determine the overall effectiveness of the CIA programs and the Arkansas tourism development program as well as to determine the effectiveness of selected CIA projects review. This chart which appears on the bottom of page three of the report shows the distribution of CIA finds by region incentives awarded to companies total seven hundred seventeen million dollars and incentives use total almost six hundred and twenty seven million dollars. This chart which appears on page five of the report shows the distribution of CIA finds by incentive tight statutory incentives accounted for eighty one point eight percent of all incentives awarded an issue while discretionary incentives made up the remaining eighteen point two percent. Exhibits three and four on page four of the report right now I'm the CIA awarding and issuance of funds by both calendar year an industry. In two thousand thirteen legislative audit began reviewing CIA programs on a project by project basis and with the accumulation of data from these individual reviews we are not able to draw overall conclusions about the cost effectiveness of entire programs as shown in exhibit six on page seven of the report as well as on the slide. Among the four statutory incentives three resulting in a net positive benefits to the state and of the five discretionary incentives awarded one returned a net positive benefits with one or turning a negative benefit for the three remaining programs more projects will have to be completed and reviewed before legislative audit can draw conclusions about their effectiveness. Okay in regards to the R&D programs on the previous slide it should be noted that ACT three hundred twenty seven of two thousand nineteen. Change the twenty percent research and development incentive from statutory to discretion. And limited eligible expenditures to wages and benefits additionally the program is now a credit of up to a maximum of twenty percent instead of an automatic twenty percent. And this act also requires credits to be based on the incremental amount spent that exceeds the baseline established from previous years spending legislative audit has not yet reviewed any projects under these new rules. In addition to draw conclusions on the overall effectiveness of programs legislative audit staff reviewed fifty five individual projects that receives the I. incentives for this report these incentives were offered for tax years two thousand seven three two thousand and nineteen. Investar is primarily designed to retain existing businesses that have been in the state for at least two years and invest five million dollars in the construction and equipment of the fifty five projects reviewed in this report thirty five received only invest or and to receive a combination of invest Arkan other incentives. For the twenty remaining non invest art projects of the the state invested an average of just under nineteen thousand dollars for each of the approximate thirty seven hundred new full time jobs created. The Arkansas tourism Development Act. Created a non CI a discretionary tourism incentive that provides sales and income tax credits to approve companies operating tourism attraction projects in Arkansas. Approved projects must spend at least five hundred thousand dollars in high unemployment counties and at least one million dollars in other counties. Eligible costs must be anchored within two years of project approval. Projects and high unemployment counties are eligible to receive a twenty five percent sales tax credit on eligible expenditures and projects and other counties are eligible for a fifteen percent credit both credit can be carried forward for nine years. There've been a total of sixteen tourism projects approved there's a tourism incentive since two thousand and nine the program contains both the sales tax and an income tax component legislative audit work focused on the sales tax incentive portion of this program which include which included approximately forty two million dollars in sales tax incentives issued for this time period less than two hundred thousand dollars in income tax credits were issued for the same time period. So these projects are not review all awarded and used to resume sales tax credits and income tax credits are illustrated in exhibit seven and eight on page eleven for the period for the entire the period of the program which is nineteen ninety eight three two thousand and twenty. Legislative audit staff selected ten of the sixteen projects for referred for review all ten projects met the eligibility requirements and minimum minimum spending amounts and were awarded the proper credit. To determine the cost benefit affected the program legislative audit considered the usage of the incentives that were awarded for the ten projects reviewed sixty two percent of total credits awarded have not been used for the life of the incentive program forty two percent of the credits awarded to participating companies have not been used demonstrating that the projects have not produced a sufficient increase in terrorism to utilize the credits that were made available to them. While new sales tax was created by companies participating in the program in seven of the ten projects review the increase in sales tax was not sufficient for the state to realize a positive return in addition few jobs were created as evidenced by the lack of utilization of the income tax credit portion of this program overall this program has not had a significant positive economic impact on the state. Additionally a weakness and DFA's controls allowed companies to claim and receive credits in which they were not eligible to receive. Of the ten companies reviewed six had at least one month and which a credit was claimed in excess of their increase US tax liability the amount of the excess credits allowed to be used totaled over one hundred thirty six thousand dollars and over ninety percent of this amount had been recovered. At the conclusion of our field or. Based on analysis of the overall CIA projects legislative audit staff concluded that the tax back and manage Arkansas create rebate and invest our programs have an overall positive COSTEFFECTIVENESS while the in house research and development and the research and development targeted business projects have had a negative COSTEFFECTIVENESS. More projects will have to be completed and reviewed in order for legislative audit to conclude on the remaining programs additionally in the Arkansas tourism development program has not resulted in a significant positive economic impact on the state. Mister chair that concludes my presentation of management response from ADC as provided in appendix C. and the FAA's response as provided on page twelve and there are officials from both of these agencies present today to answer committee questions thank you I thank you Mr math of looks a question questions I'm gonna go and ask miss months Smith and Mr Gehring I thinker both here today just come on come on the table if you wouldn't mind. We may we may have a holler some other people in this moment but I think it's good place to start. Thank you Anna senator stated would you please a state your name and affiliation for the record. Thank you Mr chair Paul Garin department finance administration assistant revenue commissioner thank you Tiananmen Smith. IDFA administrator and office of excise tax thank you senator garner you're recognized. Thank you Mr sort if I understand this correctly it seems like there are three programs that make up a significant amount of money that or being found be cost ineffective which means they are not working for their intended purposes the in house research and development which is seventy million over nine years the target business at eleven million and then the tourism which for twenty two year period that from numbers you always been about thirty seven million dollars so that's one hundred fifty plus million dollars over number years of taxpayer dollars going to incentivize companies that the analysis just said there or defective and are working is there any kind of consideration to get rid of those to change that money into a more efficient program that's the Senate come out of money that every year it seems like it's being cost efficient I'd love to know if there's any discussions on changing that significantly so that taxpayer dollars are used for the most bang for the Buck. And senator garner that that might be of of questions to for commerce to address Well I mean we certainly agree that in economic incentives should have a positive cost benefit affect to the state but certainly from a DFA's perspective we are responsible for processing the credits when they are redeemed by a taxpayer on their return okay I mention this in this price question you can answer for these kind of projects what's the average business that receive these look like are they typically out of state business we're trying to recruit in here are they Arkansas small businesses get these incentives worth the bulk of this money going to. As an average profile of who receives by. Senator I don't have an average profile for a recipient Mr Seah mon Senator wait we might have a if you don't I'm sorry to interrupt but we might have people that are better suited to answer the question Is anybody from the economic development commission here or or anybody that. Not have a yep please come to the table and we're and likes it when you when you arrive please a state your name affiliation for the record one more time. Jim Watson chief of staff department commerce. Clint o'neal W. Director ADC thank you guys senator I heard the question let me let me take a take a crack at first all the spec to the RD programs I think was noted as well and the presentation by lack audit in footnote as well and report those programs have already been changed for the very reasons noted in the report in two thousand nineteen we amended the statutes to make it really more clear that we're trying to drive wage growth and that was really not clear I think prior to the amendment that statute so in order to claim the credit now you have to demonstrate that the wages attributable to our in the working your business have increased over a baseline. And if they could increase so that base and then you get the credit and so by definition the only way that you can that get incentivized if you're actually growing wages which is what we'll be doing this state it is available is for businesses who were in the state of Arkansas is not it's not really a attraction are to recruit people in the state is to encourage businesses that are already in the state to invest in R. and D. what we found is that if a business does that they are more likely to stick they're more likely to stay a business that's not investing is business the business going go out. And so is the purpose of incentive for the spectators and tax credit that would be you know traction projects like large theme parks large hotels with conference facilities those in these sort of businesses that would benefit from that. All right but the report saying they aren't benefiting from that it's it's targeted to them I think we would agree with the conclusion Bilic audit that you know their business they're gonna miss or not taking advantage of tax credit let's make sure that we understand what the what the conclusion is of where god they're not saying that we have spent money that's not producing a return what they're saying is that we've issued tax credits that haven't been taken advantage of so released my cast perspective the state sought out a month you haven't taken advantage of it. I think our perspective is the past ten years and the travel and tourism industry has been somewhat challenge we had two major recessions one triple to code and there can be other reasons that work there that's maybe holding back a business being able to generate more bookings that would lead to claiming that correct. Okay for my second question as far as the average profile of the companies that receive the bulk of this instead of money. I don't know that there's a good vote for the tourism tax credit be again someone is operating a hotel someone who's operating a large scale Sullivan news all right I don't buy this the this white this is what I hear from Arkansas business all right I'll try to do a nice way let's do it this way I hear that they try to get their holder this credit and they cannot get it this is safe for the big projects outside weathers the ark invest whatever it is that when they try to go to the department of commerce to get these kind of credits if there are certain Arkansas based based businesses they get told no they get told they don't meet the analysis and they told they can't receive this credit now if your big fancy product or somewhere else some other form market seems like those that are put on the top but those Arkansas based business as I've heard from numerous one said they are left out when it comes to that so we're Senator spending a significant amount of money I'd like to know if that's true from your assessment no Sir that's not true all right well I have many people who disagree with you thank you. All right Senator Elliot you're recognized for a question. Thank you Mr chair I have a kind of a specific question then a generalized questions one is. The incentives that we might have for us to create businesses in Arkansas that are placed based do we have something specifically like that for example if there we keep talking about how rule Arkansas is dying but I'm not aware of what that specific thing is so that state and Willisville Arkansas we wanted to grow in some way what did we say to somebody there too that we could come to you and get some help and begin to grow things so that role Arkansas doesn't just apply yes ma'am. I'll take a crack at that and then Clint what we'll have Sproson good answers as well you know let me give you a good for instance that we're trying right now okay tell strategies we lost a power program with four different communities to help these communities identify ways to bring in retail this state can be anchor businesses in a community right now in rule or roll Arkansas you have dollars leaking out community going to other cities for people grocery shopping or maybe doing some shopping what we're providing them some very useful information about the spend in their community that they can then in turn take to a company and say we have these folks in our community or willing to buy from your business will you consider locating a business here that's one of things that. I think you look at other opportunities look at US steel the expansions happening in Osceola Mississippi County I'm here with thought Mississippi County ten years ago that we would say ten years later it is the largest steel producing county in the United States had a Pennsylvania ahead of Alabama so part of it as well as helping the communities see their strengths and help them market their strengths. And then I think there other programs that we're looking at bringing online there's a a program that is being funded by the federal government and the American rescue plan called the state small business credit issue and it's about fifty million dollars that will be available to businesses to start businesses and what things are going to focus on is making sure that we're not just putting that money in areas of the state that already have developed business base but in role Arkansas's well those would be two examples what now I have a follow up to what you just said because what's what's happening with the big river steel is that's not the focus of my question because what I'm what I'm looking at is it just seems to be a model that is insufficient to assume a big river steel that's going to come basically and rescue us my question has to do with I live in say hope Arkansas I'm not looking for big river steel but there are people here with real talents there are possibilities here. Where are we with investing and thinking more creatively about rather than give it to the big river steel because that's not going to come to hold. How do we help people see their possibilities and grow where they are not recruiting somebody to come in. Sturch right here and because if if we're not doing that we're always at the mercy of when that company gets ready to leave and it's kind of like we talk about teachers of we grow our own that's the kind of thing I'm asking about and if that's something we talk about later that's fine but I'm not talking about break bring in somebody and to do something that makes us see what I'm asking you yes ma'am I understand your question okay I think from our standpoint where we're dedicating our efforts is growing the number of jobs and a lot of times that means finding employers or in you know incentivizing employers to grow the number of is that still a good model. it is it is a model that does produce a benefit for the individual worker and for the taxpayers of Arkansas is still a good model for rule Arkansas yes ma'am I think it is clear about say so yes under if I can add some comments there I mean the basic economic development of jobs come from three places they come from existing industries in Arkansas that are expanding that's where we put the bulk of our priority on that's our largest division is arcs existing business resource division helping Arkansas companies be successful the second areas from entrepreneurs from small businesses thirty area is from business attraction projects of companies that were previously in Arkansas two to induce them in. I would brought it out into two categories one of being incentives and the second being financial assistance so in sentence some of these programs like create rebate the ones that we are looking at. A company potentially creating under jobs in here versus neighboring states were putting an incentive package on the table and then we know that it's going to have a good return because it's a performance based incentive I don't believe that strategy is sufficient alone so I I do believe it's important that we focus on all three peel colors of job growth one thing that we did eighty see about a year ago as we created a new division called small business and entrepreneurship development so we wanted to streamline a lot of the services that we are providing from business development science technology minority women owned businesses we still have all three of those divisions. Ladies have programs but we wanted to streamline our efforts for the situation that you've described the the small towns the collaborating with the small business and technology development centers around the state not every company is ready to enter into a financial agreement with the incentives based on eligibility requirements some companies need help in writing a business plan they need help in finding access to capital so I do believe that our strategy has to be focused on all of those areas. Thank you and and let me get to my Mr if you will I just have a generalized questions I want to ask and I'm sorry let to maybe more than I thought it would. But for for all the years that I've been involved in CSL and going to all these meetings and and seeing and hearing presentations about the research on the use of incentives. I have yet to go to a meeting where we hear the actual research where these incentives are the best but method we should be using to attract businesses yet this is what we keep on doing. I understand we keep on doing what we know how to do and what we're used to doing but year after year we get this information that there are few things that really will help us grow economically and it's never a huge huge giveaway unless you just that's what the businesses can make us do and that's just what we do. So my question is two fold. Do you know if our state particularly southern states because we seem to be the victim over and over and over because research tells us is education. Quality of life. More than anything else that will attract folks to come say to any place in Arkansas it's not incentives. But because we don't work on those things as we should we end up giving away the store because that's what we've always done and what business is going to why would big river steel not say yeah this is what we want and we will give it to them why would they not. So the big question is have we ever gotten together do you know as states and said we're not going we're not going to be held hostage to folks putting us one against the other. For us to have a great to sustain economic development because that's what we end up doing it we don't do it Mississippi will do it if missing with if we don't do it Alabama would do it we are going to give them some kind of consortium and just trying to say no we're not going to do this because they need us don't think. they they do need us Senator Elliott and I think it is a mutually beneficial relationship I don't know that we can agree with the premise of the statement there that this is all about the incentives is not all about the incentives in terms of the hierarchy of the decision making you talk to these businesses the conversation does not begin and end with how much money are you putting on the table there's it's a part of the conversation no doubt about that but especially today and the market there in today's labor market rent today it is about workforce quality in you can put all the money on the table that you want to try to attract companies but if you cannot make the case that you have the qualified workers in place to fill those jobs they're not going to come here and so I would say it again going back to big river still going back to what's happening in Mississippi County the reason I said yes to that is because there is infrastructure in place to produce a quality workforce and and I don't think it's a it's a fair statement to say that all of our efforts or really solely on incentives there's a lot of work force improvement workforce quality dishes that are coming out apartment commerce no transformation was a previous on the agenda bill it does relate to this yes we are in the same department cabinet department with the office of skills development with department or division workforce services and ADC and so we can all walk down the hall together get a conference room have a conversation about what we're going to do to improve workforce quality it is a strategic issue and so there are lots of initiatives that we I think are bringing online to be able to improve workforce quality going back to hope you know it may not be that companies going into hope they may go in Texarkana. And hope is a part of the text can labor sheet it is a committee will distance and so to make sure that we're working with the folks know that they have the job training you have so they can go take that job be in hope or Texarkana I think that counts I Senate but it counts but I did not leave that out I said education the certification means a so those those big three things as education as quality of life and its infrastructure big river steel wouldn't be where it is we didn't have the river the river road right across and that affects over Memphis that's restriction but they've got so are we looking at infrastructure in other parts of the state that's the major reason I can't say Arkansas was in the conversation but those three big things I'm just saying no matter what we say here over and over and over the research says those three big things quality of life huge. Infrastructure. Educated workforce. Those are the big three and because we are concentrating maybe and those big if not concentrated as we should what I'm saying is not the incentives are wrong but we end up having to give larger and larger and sentence because we are held hostage to if you don't do it I'll go to Alabama you might remember Toyota as the prime example of what I'm talking about we if we don't get what we want so we think we can get a. A better deal because if we had those other things and didn't give in the store as a region. Maybe wouldn't be held hostage to to this kind of things thanks Mr thank you represent love you're recognized. Thank you Mr arm I want to go back to one of the slides your term I think a sentence that we're giving away the average incentive I think it's it was not between eighteen and nineteen thousand so I was just going to ask what was an average pay of those jobs in which we gave those incentives to. What what what is the average salary. Yes Sir if you look at Page seventeen of the report. I know this is a free a lot of information here both on page seventeen towards the bottom. There are average hourly rates projected actual. And then actual final year total I think that's the number you're looking for is the actual finally your toll of these and again these are just the individual projects that we reviewed for this report. So. It would be thirty one dollars and thirty two cents. Okay so I'm sorry Sir that's that's only for the individual project for the for the overall it's not shown on this exhibit you would have to take at those and take average which I can get that together for you because I was just I was just interested in that so. So would you roughly say thirty. Okay the the actual you can look at all if you go on the previous pages you can see that number for each individual project we don't have that number for you know across the board I can get that together for that you can on pages starting on page. Of fifteen is where this schedule begins and on that same line is the actual final year wage and then right above it is the average for the for the life of the incentive okay all right I just want I just want to have the number so thank you. Senator Garner you're recognized. Thank you John push back a little bit about this tourism. Development Act you said earlier you said that basically the problem with that is that people are taking advantage of it but when you read into the numbers it looks like they are taking advantage of significant portion of it but that it isn't producing the results for the state for them in this idea that the last ten years are to resume industry and economy has been destroyed and devastated you pain earlier is a little bit silly I mean on the Arkansas Development website Arkansas leads the nation in GDP growth at three point nine percent tourism strive sector thriving here's another thing from your own website tourism in natural state ushers in economic growth. So the idea that somehow there's been some historic last ten years with the tourism sector in Arkansas is is is barely surviving just simply isn't true based on multiple reports it seems like more than likely that this massive government incentive program isn't doing the job needs to do and should find another way to use that money more efficiently because tourism is here they're just not using this credit because it's probably not working out for so thank you allow me said Mr. Amendment they will have a response removal. I think we would to be in here agreement with Senator Garner the terms ministry in this state has not been destroyed. All right of next up representative ray you're recognized for a question thank you Mr over here about three o'clock My questions also about the the tourism development program I'm trying to understand what what are these credits helping fund on a typical project is it is it marketing is that construction what are the what are the eligible costs that we're. Right funding primarily construction. Okay construction of what what is a tip what is the typical project is the facility so let's say you know you're going to do a guiding of a large hotel conference center if Debbie an example of the expenses okay so I guess just from from a policy standpoint why should we be advantage in the tourism industry over any other industry in the state or any other sector of the economy I'm sure there's plenty of the. Sure there's plenty of businesses in all sorts of sectors of the economy that would like to be incentivized why are we advancing tourism of them. Yes Sir it is it is a public policy decisions General Assembly is made to have this incentive and I think that's an important thing to note is you've you have passed laws that say we're going to have these incentives and you charge just to administer them and I think there is a public policy decision that's been made over time to encourage tourism in Arkansas and to provide incentives for that because it is a very important industry for. Okay I just want to raise that so folks could consider whether that's prudent thank you thank you senator more. Thank you Mr and I'm I'm looking at page three of the report we have these these nice graphs and map here and so I'd like to hear your thoughts on the methodology and how this these funds are distributed and and how proportional is because not when I look at this map I see you know Southeast Arkansas witcher is corn state that I represent is disproportionate receiving these and so to touch on perhaps some of the questions of already been asked in the comments made you know I understand the areas of gross arguably may see more more funds going there but areas that need more gross perhaps are seeing less funds go there so I'd like to hear your your comments on that sure. So if you look on just a couple pages down to page five and again the grass the tables repair balik audit for we can speak to them but they're there I say our work product you can see the split between statutory incentives and discretionary incentives there all by statute but statutory incentives are those incentives that if you meet the requirements of the statute you get the incentive. Discretionary incentives empower ADC to make a decision as to whether or not the nature of the project the benefits committee conferred upon the state Warren says granting the incentive so as you see eighty percent over eighty percent are statutory incentives and then the bulk of that Investar which is a program that doesn't that's really being phased out at this point no new deals are being being written for invest or so that is a preliminary statement you know the dispersion of incentives around the state depends upon economic activities happening around the state and the number of businesses that may be present Southeast Arkansas in other parts of the state that meet statutory requirements and apply for the incentives that's eighty percent of it right there you know obviously it is an area of focus for us to help rule Arkansas to the extent that we can match a project requirement to a particular opportunity. But I think we have this conversation we come you know each year I do want to sure you. We're not some office that just decides okay here's who gets jobs today in the state it is an employer is a companies decision about where they're going to locate and whatever eight eight and can Clint can really speak their this to me because this is the vision that drives business development for us but when a project is coming online and they're trying to figure out where they can maybe locate where you see presenting multiple options and is the strength of a particular community that really drives that decision well you know that's a part of this is is back to the eligibility criteria of which companies can receive incentives eligibility criteria established by the General Assembly which is similar state to state it's based on primary jobs those jobs that export goods or services and and import money into a community and so it's not across the board we get to look at companies in every county and and apply programs that will a lot of these programs are pretty limited in eligibility criteria so a lot of the projects that we end up working with some of these incentives are along the lines of. Technology companies manufacturing companies distribution centers regional offices ones that that hit that criteria and so a lot of times it comes down to the available real estate it comes down to workforce it comes down to to a lot of competitive factors and as as jim noted we do all that we can to represent the entire state of Arkansas whenever we have an opportunity whether it be an expansion project or business attraction project and in a lot of the communities that that that tend to be favored there are ones that are well positioned from a realistic standpoint and from from from a lot of those other competitive factors with our discretionary incentives that's what gives us the opportunity and and rarely are we put in a position where or I'd say never are we put in a position where the final two choices the company's making is one in a more populated high growth area of Arkansas and one in a more rural area of Arkansas that's not experiencing growth of we we were competitive projects and typically do not present incentives certainly do not finalize incentives until we're down to one location in Arkansas and companies typically have locations outside of Arkansas at that point as well so if we're looking at discretionary incentives and we have the opportunity to win a project in a rural part of Arkansas that is not experienced as much economic development success as other parts of Arkansas that certainly gives us the opportunity to lean in more aggressively than we otherwise would and and certainly have a track record of doing that. I appreciate that I understand there's there's a ton of factors that go in and to all of this and so I appreciate that but going to represent raise questions perhaps there's you know maybe this body needs to look at the policy going forward we're going with that and with the direction with that and look to continue this conversation offline with you guys because again I want to make sure that you know the kind of to your point the issue that you made maybe some of these businesses don't know what options are available to take advantage of those and may we should a better job educating them. Thank you and I think it just expand on that just a little bit we and in particular client team are constantly reaching out to local communities reaching out to local chambers local economic development officials you know county judges mayors and making sure we understand what their community offers and what we can do to help them market their committee we see them as very important strategic partners so if any community would like to learn more about how we can help them we would love to have that conversation well ADC's been very instrumental and and helping recruit some industry you're recently even to my district I just think there's a lot more that we can be doing should be doing so thank you. Senator Chesterfield you're recognized for a question thank you Mr chair. I find it interesting as we talk about incentives. That the money's not coming back to us in terms of. Purchasing in our stores. Investing in our schools because the individuals who come with these businesses don't believe what they were. The vast majority of the in the northwest part of the state they do. But when you're talking about Osceola. The company is not companies people are living in Memphis Dyersburg. And so the school system is not benefiting because that money is not being invested in housing. As we look at incentives we. Thanking about incentivizing companies to establish some housing for their workers that role the community because you still have dying communities where the big river steel is and so it is troubling to me I I was in my hometown we have a new superintendent of schools we have a new chancellor they couldn't find any place to stay. You cannot be as effective when you're in those positions if you're not a part of the community. And that's what's troubling me I love the model in in pine bluff or Simmons is going to fund one percent a mortgage that's going the community. And we could be talking to businesses about can you will not only come here but can you help us grow community we used to have company housing. In the old days. We don't ask for that anymore but it would be nothing to put in a million dollar investment that could back create a number of homes in Osceola so I'm just wondering what are we doing to incentivize them to not only invest money in the salaries but in the communities in which they live. Some good things about sale which serve very good point senator and for the US still bigger ever still a project the way we look at that so from an incentive standpoint we're looking at at a good deal for the state of Arkansas positive cost benefit analysis and so one of things that we have to consider as we're looking at the resources that were looking to provide in the way of incentives verses what will get in return over a fifteen year period is we have to look at that leakage so we did a zip code analysis of existing jobs at big river steel in order to analyze the the potential future pattern of what these next several hundred jobs would result in so that zip code analysis resulted in looking at. Thirty percent of their current workforce live out of state so of West Tennessee and in southeast Missouri seventy percent live in Arkansas. so we factored in that leakage into our modeling as we looked at the cost benefit analysis so our cost benefit analysis is positive over a fifteen year period based on the this is a current Elsa showing that seventy percent live in Arkansas for may for from a housing standpoint I think it's a great point it's one that the local economic development organization to the leadership role in they have local incentives that they worked out with the the company that describes exactly what you what what what you described for employees that are taking jobs with the company rather than the local incentive going directly to the company it would go to a down payment if that new employee decides to live anywhere in the county so several communities within Mississippi County would would would benefit from that several housing developers have been engaged and look forward to seeing success and the growth of the housing market Mississippi County yeah and so and there's just to add to the end of that you know ad for the development finance authority is another entity of the department commerce Marco nine president after reports to secretary my pressed no one things that everyone statutory missions for actually is to provide for affordable housing in this state and one way they do this through federal tax credits that help a developer make the business case for putting an affordable housing and so the the ability we have to collaborate with acid to point out a need for affordable housing for workers in the state is key it is a huge issue and the great thing about the I think the housing it what they're doing in in in Osceola are challenged with our labor force is that it is not growing presence now our state is aging our birth rate is not replicating the loss of people as the mortality table catches up with them so we need for the long term health of the state. We need for people to move into this state and so having programs like that available so folks who maybe otherwise lived in Tennessee or Kentucky or Missouri say I know I can moved Arkansas and I can live there and I can enjoy the quality of life in our cans and has that's what we wanted some of us as well I want to do that as well but I also want if you leave if you work here live in my town. Of what's troubling and in the Jefferson County areas there are people who work at Saracens who worked for the cannabis industry but they won't be given time to the. They may go to White House. But they won't live in pine bluff and that's troubling because that's an area that needs to grow so I appreciate the conversation is cheering thank you so much when building me I appreciate it a representative berry you're recognized for a question. Thank you Mr chairman and don't want to be a horse but and I appreciate my colleagues comments Senator Elliot center Chesterfield. But Mr Hudson you mention of the word strategic. So rhetorical question if you're been the Butler Pennsylvania of Pittsburgh Pennsylvania and see what's happened when the steel industry moves out of those areas and just devastates the community so my question is a long range strategic plans because one of these days it'll happen I think it's awesome that US deals moving to northeast Arkansas but when US steel packs up and they leave because they start selling we start by and steal from off shore again as we have in the past what's going to happen to that community is there a plan or are looking at industry twenty thirty years down the road to come in and and supplement all those families and it's officer buddy that moved out just like they did And buckler and pencil and Pittsburgh. Will represent very I think that you know what happened in Pittsburgh commended pence for cabinet Butler you know there a lot of macroeconomic factors that came into play that destroyed the US steel industry you know twenty thirty years ago I think if you had a chance to watch the announcmenet what you heard from president US steel is and and really the guy who founded their help found the river still is technology company first. They are technology company that produces steel and so they're investing in technology I don't think that we're gonna plan for the day that US still goes away we want to plan for the days that U. S. still finds a reason to continue to grow in Arkansas and I think that's that's a that's the good future we will plan for it's certainly possible market conditions can change but I think with business environment that we have here largely the work that you all done with governor Hutchinson to make this a favorite place to do business unlike Pennsylvania in those days helps make the case for them to stay here keep doing business in Arkansas. Well unfortunately he won't be around thirty years now new ally but the people living in north northeast Arkansas will depend on US steel for employment and and I'd hate to see Northeast Arkansas turned into another Pittsburgh but we're we're all the factories and up empty for many years and they move on and there's a potential that less we look down the road strategically of what we're gonna do in Arkansas when they do move out and they will eventually thanks for comments. All represented right Europe. Thank you Mr chairman that was a good day up there Monday. But you know we'll you got some heavy contrast between the jobs that are being created. And the existing small towns is there. Just like Senator Joyce and in center Chesterfield you know the small towns along the Delta. If you look at the census in two thousand ten and two thousand twenty it's unbelievable. Where are factory moved in you know during fifteen sixteen seventeen and and also expansion nail your scene a big amount of jobs that are created there but here's what you're saying. Two of the major towns inside of Mississippi County lost about six thousand people. H. Hey this is what kind of concerns me because you know what you're you're looking at is a town that used to have everything that you needed that you can stay home and buy things locally is no longer there they're going toward Jonesborough you know it in my area but I'll give me example like with late for small town that had about twenty one hundred people that went down the line nineteen hundred something like that in its not just that it's it's all all across the Delta. What I wonder is this what can we come up with that can give us some small business loans to people in those small towns that maybe could revive those areas because if we don't do that now here's what will happen the turn back for our schools is is bait I mean you know elsewhere if it's seven thousand dollars per shall. You know those towns are right now paying about a thousand dollars you know per child and then the term back is coming back to to meet the local from our state level what I worry about you know is what are we going to do it's time goes only if we don't revive those tailings it's going to cost us so much money in turn back issue is going to actually really because our state a lot of trouble in that area especially along the Mississippi River yes. So represent right I mean. Click use the term earlier go just a few minutes ago primary jobs. In a primary jobs are those jobs and create jobs all right so you have somebody's working big river steel US steel they got to go down to the convenience store gas they got a bye you know some some food there they may go grocery store in town it create the jobs create more jobs right and so they're creating the jobs but were they create a method maybe criminal sale of maybe not creating Wilson you know I don't know I can't answer that specifically. The need for capital has been historically very high to help small businesses go into these communities and to be sustained those communities but to make a statement I probably could make three years ago but I can tell you right now the issue is not lack of capital. The system both from a government perspective and from a banking perspective is awash in money. Ages is just historical I mean just use there's a lot of money in the system we can debate the wisdom will not that should be the case it is the case and so capital can be deployed where it is needed and where it can be most efficiently utilized that's what's gonna happen capital under percent of time. And so if you know people if you're in a mood to start a business and that's part of what we see happening here people you're exiting the labor force to become small business people if you want to start a business now is a great time start of this particular in Arkansas in a very favorable business and business class and bankers will in money and they're programs available through the federal government and to the state to help them get off their feet and so I think our mission getting the good word out there encouraging your constituents that stay home start your business here don't start your business someplace else I will help you you know convey that message but it's it's a choice that people have got to make. They've got to want to do they got I want to take that risk and be a start that business there. You know if I could add one point to that you know we're we're seeing a lot of changes in our economy with the opportunity for a lot of people to work remotely so one of the things that we're doing in partnership with the department for charities and tourism is a talent recruitment campaign called C. Y. Arkansas. And the. There there's just a it's it's good two ways if if there's a community that has a lot of community pride people love living in that community of people enjoy the the relationships that are available the amenities the the small town feel and if they have the proper infrastructure the broad band then then that's going to attract people and and so we've heard stories of people we're we're going to to to get a family to do a video next week that moved from Phoenix Arizona to Worcester Arkansas. I didn't know anybody in Arkansas just had a favorable impression of the middle part of the country wanted to get out of a big city and have some land and in their stores like that all over Arkansas there's also stories of very talented our Kansans. That are getting the opportunity to find jobs. While they stay at home work remotely and and work for any company in the world and so I think if as we continue to build out this community pride build out our broadband there's a lot of of positive opportunities to grow our economy with with remote workers. Senate Chesterfield I mean now Elliott. Nice. Thank you Mr chair and this is a yes or no question not a discussion question of promises that we can all relax I want to know if we the state has any way provided any incentives for dollar stores to locate in communities have is that a yes or no. That's a no not eligible okay the eligibility requirements thank you all right that was last question in the queue are there any other questions or comments while they're still the time thank you guys for coming today appreciate you and your and that of. Of will just that one will stand reviewed without objection and the next item of business is other business the next meeting of Legislative Joint on it will be held April seventh and eight two thousand twenty two is there any new business needs to come before the committee. I see in on this meeting will stand adjourned thank you for your tennis.