Joint Budget Committee

We'll call the Joint Budget Committee together we have three items on the agenda for the day. The first two are companion bills they're identical bills or house bill. One thousand two in Senate bill five presented by a Speaker Shepherd and Senate pro tem hello Hickey they're transferring funds I'll recognize whoever the whichever general go first to explain them we'll talk about it both but will vote on separately. You're recognized. Joe CS movie was just shuffling it over to me. Anyway members of what this bill is Senate bill five it's going to transfer funds what what we have is at the end of every fiscal year whatever funds or are left over that the agencies have not spent certain agencies those have to be returned to the state that is normally done within two or three days after June thirtieth however there is a a portion of those that do flow in later this year there was a little over thirty something million dollars that was has flowed in from that and what we're looking to do. Is use that money and of it seventeen point four is going to go into what's called the That's the restricted reserve that requires a fifty percent vote that's going to flow in there which would give it a balance of twenty eight point five million. And then there's another restricted reserve account that we have that has a that takes a three fifths vote avail C. fourteen point two million flow in there which will take that total up to fifty million dollars that fifty million just that some of you all heard. Thank you all know we're trying to work out an issue that's happened with the B. D. E. kind of our thought is that we're holding that there during all of our calculations discussions some bills that are going to be coming up at a later date to correct some problems that we made may need that money for that so that's why that's sitting there it at as such around as such around number. In addition to that If you look at section two of the bill. There's also going to be a one time transfer out of out of long term out of the long term reserve fund which a lot of you have been here and we don't ever do that the thing is is there's a transfers coming in from another account with the FNA and it's going to be in the amount of fifty million dollars so that fifty million is going to flow into long term reserve it needs to be done that way and then we're going to take it out a long term reserve. Put it into or let me rephrase it whatever it does that we're going to give the chief fiscal officer of the state. the ability to transfer it out of long term reserve and he's going to put it in what's called general general revenue allotment reserve account. General general revenue allotment reserve account. Recall also always requires a vote of this body to take money out however we're also giving him the discretion to take it out of that account and put it into a quick action closing fund. But the contingency is with this economic development project that you all have been hearing about that all aspects and attributes of that have been fulfilled so before that ever will happen everything will have to be in any this body will of past will have to head past the recycling tax credit bill that you're going to be considering Probably in Revenue and Tax is I don't we are revenue tax on both ends so there's there's some steps that have to take place. So that. I'll be happy to try to. The one I had any questions we look like we've got one from a representative Payton. Okay. Thank you Mr so on the transfer in and out that we're granting the thirty to the chief fiscal officer to put it in a quick action closing fund. How much of that is going to be part of the incentive package that that's going along with our tax credits for the recycling. Steel plant it is the fifty million although there's two there's two fifty millions shown with on this bill. Like I say one of them is to fund the restricted reserve account which is going to sit there the other fifty the other fifty is the incentive the incentive that would would be for the economic development process when we consider the tax incentives that were going to be considering this session for economic development this is fifty million dollars on top of that yes so that would be correct okay thank you thank you Mr. Thank you representative. Senator flowers you're recognized. Thank you so Senator Hickey is that the fifty million dollars and you referred to in section two is coming from somewhere and I notice the languages may make a one time transfer of up to fifty million from the long term reserve where it what where is this money coming from this money is coming the way the statute is is set up that once the chief fiscal officer we have we have a property relief trust fund that once the full commitments have been made with that that that money automatically sweeps over automatically switch over to the long term reserve fund and that will be done by twelve twelve thirty one excuse me yes that will be done by twelve thirty one of this year we've already verified that with that with the FNA. In the total amount will be fifty million are at least fifty million it will be exactly fifty million. Okay and then you we made some comments concerning a project that everyone knows about. Hello I we can use a refresh my memory of on schools know about this yes I don't I don't think at this point it is what it is there's a project up in the which we've dealt with before with US steel formally big river steel they're looking to doing expansion up in that area however of course legislation there's some there has to be some qualifications met us so we can be any qualified still manufacture however it's going to be specifically because there has to be a huge investment made by that company so that is it what you're talking about are you speaking about what's in the recycling bill. No ma'am this is separate from that this this is a this is a cash incentive. It's also going to have through. commerce economic development is also going to have to call backs there's gotta be some positive cost benefit analysis also it's included from that stand four point as far as there being called back for the state however it is a separate it is a separate part of it separate from the recycling tax credits that's in a bill by itself that's going to be considered in Revenue and Tax. So the fifty million dollars that may. Well for one time transfer from. the long term reserve should general revenue a lot that reserve fund. That's going to be receive you thank. By the end of the year. What is that what what did you say that for. Is that connected to the to the. Well this is this is this is how their script contingencies on this. what the. The recycling tax credit bill it will have to be passed by this body it will have to be passed by this body. If the transfer is going to happen happened from general revenue allotment reserve two quick action if this body if this body does not pass the recycling tax credits for whatever reason which I don't that's up to you all. That second part that would never that would not leave the reserve allotment account it would not ever it would not flow to quick action that money would just sit there which would be the appropriate place the way that we've restructured the tax bill the long term reserve requiring certain percentages and balances there that would be the appropriate place for that to see it. No money could be taken out of that by a L. C. again it would take a full vote of the legislature to do that. The fact that I still feel a little confused with the maybe stash in the center of our yes I thank movies Speaker Shepherd want to dress the issue maybe you can clarify thank you from your Speaker a couple points to going back to of several questions here one just clarifies this is this fifty million is all part of the same project but there there are two different bills there's the recycling tax credit bill which is what is sitting in Revenue and Tax and then there's this fifty million dollar transferred that's part of this bill but it's all the same project so I just wanna be clear on that and then up with regard to the fifty million or any other expense that that arises out of the recycling tax credit bill all of that has to be factored in two eighty season Alice's the project and I believe under the the and they correct me if I'm wrong but under the companion bill that actually creates a new a new. Eligible category are a new entity category to be eligible for these credits which the credits already exist. We're just creating in by way of this other bill an additional category but in order to qualify for those credits the state has to determine that the project has a positive cost benefit to the state of Arkansas and I just asked to to be clear that is to the taxpayers of Arkansas correct not just to the the general the economy as a whole so the fifty million and any expense related to those credits under if it's ever utilized there has to be that determination if by chance the project is not come to full fruition there clawbacks attached to the fifty million dollars as well in order to protect the state. Senator flowers you good. I'm each lead back up. One follow up this for clarity in and out this will be the end of it. So we're only talking about one fifteen million dollar pop that's correct that's correct and that's that's a good question because it's identified twice in the bill and actually asked the question of the drafters why is it in there twice and what I was told was the first allows the transfer and the second is what actually I guess implements the transfer thank you. You're good Senator. Senator Rapert you're recognized thank you. Senator Hickey I just wanna make I want to make very very clear on what we're about to do this is related to big river correct and US steel okay okay so that US deal separate from that. So we're going to have another one. No Sir it's my understanding and I don't know I think that the big river still has been there's been some type of buyout or purchased by US steel okay all right that's what I want to ask you questions will make sure I understand your do you recall what we've already invested in that project taxpayer money in the past because we had a I think it was one of our first big decisions to make as it related to utilization of that amendment I personally don't remember what we as a state have done the question was asked how much this will help the company hello the company that how much they would have put in and it was a little over five billion dollars once just once this project is in place so I don't remember your specific question because we were looking at it from the company standpoint I'm getting some help here they say that it was already fifty that we have done before and so this fifty million is is one time and that's it again. This tax credit this is this is for the new project that that they're about to be expansion and in that's going to be part of the thing the the our understanding with with all this in the way it's done is that it's it's this new project that they're going to do is nine hundred jobs of those nine hundred jobs seven of them are going to pay a a minimum of a hundred and twenty thousand and then there's gonna be two hundred jobs they say they're going to pay a minimum of sixty thousand and of course that's where the the cost benefit analysis comes in you know because of those taxes are being created off of that money not absolutely Larijan creation I continually support that it has throughout the last decade here so. Who's benefiting here so these tax credits. Are going to go to a private employer correct. Well. That that's that's also because part of the stipulation in the tax bill is you know or probably remember from before is that you know if it's owned by a qualified retirement system in their case is going to be teacher retirement what they'll do is they'll they will actually have part of those and they'll probably sell them back to the state because what we've done this says that the state will also be able to re purchase those for eighty percent of their eighty percent of their value maybe I wasn't clear Senator Rapert Providence writer is it a private employer Senator Rapert yeah I thank the fifty million is for infrastructure for the site for US steel if water sewer roads and stuff like that okay to to get it off the ground it's not just cash money going going to the company represent Jett Jean is correct okay so the info that's that's what we're trying to figure out but is to support this project which which one hundred percent yes Sir okay we'll IBM that's all my questions for now you know we just shut out law enforcement on a twenty five million dollar tax credit to help them and now we're doing fifty I just wanna make sure I know where our priorities are well I guess I will have to come into that I actually had you know had a huge conversation yes the with all the law enforcement and I explained the I explain this tax credit and so they've been they've been filled in at the difference between the economic to the economic development cost benefit analysis where it's actually a higher ratio than one to one and how that actually nets out to the state to be a better things so we and then we and then had those conversations because I was afraid that they may somehow look at that and not understand what was going on. Thank you Sir. Thank you senator representative wouldn't. I'd like to offer you still got a question. All right you're recognized. Thank you Mr magisk. Three quick questions. Your term of transferring the fifty million how long term reserve is that is that the one we're changing the catastrophic yes Sir that's within that tax bill okay the total. Economic development costs will be up to seventy seven million is that correct coming the twenty seven increments and then the fifty four infrastructure no Sir. And this may be were Senator flowers there's actually three meet there's three fifty millions that are. That are listed within the bill. Section to section two actually has two of those fifty million as a Speaker said. That is just one fifty million dollar part of money in that deals with the economic you sent in saying. The other fifty million that is a total separate thing that's going to go into the restricted reserve account and that restricted reserve account is in no way tied to this economic development project and it will require a voter veil see if that money is taken out okay my last question is who tells the chief fiscal officer to move the money. It will be contingent it'll be contingent on. The tax credits the way that that bill if it's passed that that that is all passed and that all the claw backs are in place and everything to that nature and as far as the chief fiscal officer I had a conversation with him the money the money will be moved out of long term reserve into that. General revenue allotment reserve account it was that that that will happen so that one step will happen the contingencies are on the next step and all of that has to be in place so once that is in place which was is it within that other bill and says it has to be for qualified still manufacture that's when he's able to do it all of that also must transpire by March March thirty first of twenty twenty two. This one will fall go ahead on on the transfer on the on the moving of the money. Who who who will tell him is it based upon the dollar amount let me back up okay. Or is it an internal. Word to him to move the money or does the project have to be at a certain point were all those eyes are dogs in the teaser crossed I'm trying to support all eyes are dotted in the teaser crossed so as far as the the sale of. The financial standing of the project yes but let me also be clear through commerce economic development they are they're also going to have documents you know they're very detailed as far as you know how the draws are going to be done what particular projects how much it goes through in other words is represented gene said It there's X. amount for the sewer or whatever that those will be detailed out so that those dates disbursements we made in those draws okay but he's he'll have someone in busing him that knows for sure all that's been taken care of yes Sir elector early in and that's actually where they go through there be through commerce and the FNA they'll be working together on that particular thing on thank you Mr chairman thank you Sir thank you Sir. Thank you representative wouldn't Senator Hammer you're recognized thank you Mr I just wanna Regis statement written down make sure kind of captures what we're doing here the restructuring is to create a mechanism for funds to flow that under the current arrangements cannot flow in order to meet the needs of the project is that a fair characterization of the bill. Probably would just a little little bit of our Chevy audits almost I say that are limiting factors like the Speaker said that it already exists but basically what this does is have the qualifications that is going to take for the for those to transpire right and that that was provided in a handout in the chambers of as far as all the requirements that have to be met for that if I remember right. It was and I think I think the Speaker actually had his sent out an email did is a little bit quicker than we did okay and will any old Fund titles or accounts go away because we are creating a my understanding that we are creating on page two line seven this on allocated restricted reserve majority it is that a new account or is our new account is being created any old accounts they're going to go away or we just that and that is existing accounts that we set up during the last you know assembly okay we set up the restricted reserve the that takes three FIIs and also the fifty percent so those are already in place they already have current balances in on. And there's not going to be another account this going to go away the only thing let me rephrase that the only thing within the tax bill of course will be the renaming will be the renaming of the long term reserve to the catastrophic reserve fund couple reasons of course and I don't want to get into Senator Dismang is a discussion here but part of the reason for that is a lot of a lot of us struggle sometime with the different you know whenever we're talking between long term referred reserving restrictive zero accounts so it's actually going to be a benefit for the membership so that we're having these discussions that there's no confusion also and his teachers teacher retirement going to be the recipient as far as they're they're gonna by a majority of these. That would that would be my assumption yes Sir okay again the way that we structure dat in previous sessions Actually we had to go back an amended bill and I came in those two thousand fifteen so that they act so that we actually get the opportunity to buy a home with eighty percent right that's why notices state gets bomb up first the or entity with the state is that right well the oven a bill the state itself okay and a couple quick ones the end it sounds like it's the expansion of an existing industrial park based on comments chair may well go about infrastructure is that is what this money is intended to do as I understand it who owns the property of which these expansions are going to occur upon Izard county or who is it that actually owns that property I will say US still consume money as anybody here know that the because. The standard option. Not sure to purchase. That is currently under an option to purchase so in other words I guess they're waiting to see if this incentive package happens before they exercise that option and I will if there if the option is exercised you know if the title or older will be US steel. I'm getting a nod that we we think it will of course as private business and if they. I have some. A subsidiary or something that's their business so I don't want to overstep what I'm supposed to say here okay that's what what's what we think is going to happen no don't mistreat them all all in favor want to see the jobs up they want to see this happen but we're about to give help me understand this your respond to this we're about to use taxpayer dollars and we're about to give money to a private entity that ultimately is going to own the property that's going to be developed out in the way of infrastructure through this and then they're going to turn around a purchase that property would you address the rationale behind that other then I'm in favor of the jobs in favor the project district get my mind around that we're going to we're going to do this and they're gonna end up holding the property. I think it goes back to the cost benefit analysis nothing happens aside from the transfer which the Trent the transfers just allow for the chief fiscal officer to move from one fund to another but as far as actual expenditure nothing is going to happen in less I project meets those requirements one of the requirements is at having a positive cost benefit analysis to the state of Arkansas and so that would be somebody that ADC or I don't know if they engage an outside firm to do this they have to make a determination that even with the expenditure of fifty million dollars and even with the cost of what those credits will cost the state that the state of Arkansas will actually benefit financially positively from this project and so that's that's what the E. eight BC is brought to the table and I think that's what we're you know having to rely on as to why would we expendable ends and ultimately goes back to the to the fact that it's gonna have to be certified as a positive cost benefit to the state and as far as we know what we did with the previous you know the original one when they came and asked for the big left they fulfilled all the projection all the projections all the expectations they haven't they've fulfill what they originally promised the first summer I and my understanding is that they have met and exceeded all expectations of actually been on a think I've read in the press that they were actually that were what what's the word I'm looking for they were meeting expectations earlier than what what was overachieve maybe that's the right word additionally on it's not in this bill but those credits we free up those credits how many times over the last. This would be our third project and so I think that so far the track record has been very positive as to other similar projects in that area and and what we're looking to do here and you know one of the things that clearly we would love to have all the time the world we would love to be able to to get a bill out there and have weeks and weeks and weeks and months to look at all this Yet I know from my standpoint I think Senator Hickey standpoint but what what we've been advised made to see that you know there's some uncertainty as to whether this project would come together then there's the uncertainty of whether it need to be on this particular call but it ultimately things have come together and my understanding is that this project the determination of whether this project goes the state of Arkansas or whether it goes to another southern state will likely be made within the next week to two weeks is that fair to say okay and now I'm not the you know I'm just I'm aligned with eighty six tell me but that's the information that we've been provided so I just want to give a little bit of context of that as to you know how this is come together you know obviously we'd love to have more time to of two rolled out had these kind of conversations and we appreciate you all these questions because that's that's important role first played here are thank you. The Cavenaugh if you're recognized thank you Mr chair my question just pretty simple on the clawback how is that actually work so we have somebody has to give a call back how do we get our tax dollars back from the company. You know I think I think we'd have to probably deferred ADC to talk about that because those would actually be. Structured into the agreements with the private businesses so I don't know if if at some point if the the committee wants to hear from someone from ADC who could talk about how what that looks like and how the clawbacks actually work I think those would be the the they'd be in a position to answer that. Follow up. So are they different for each project I guess is my question is are they what we do is have somebody made the C. come up here. Your do a good job charges mediating right now. Identify yourself. Thank you Mr chairman Mike Preston secretary of commerce executive director of any DC. Ugh thank you representative Cavenaugh yes that's correct we will into an agreement with the company that will structure the clawbacks and how we do is different between you know each project that we do it could be you know some form of repayment of of the funds that were or deployed it could be you know a lien against the property or some type of holdings within the company so we'll evaluate that as we you know finalize our discussions with the company follow up how successful are we if a company does not follow through. To the guidelines how successful are we at getting some of the tax dollars back eight you know I I'd like to think that we're we're pretty successful and and not having to go into and DO clawbacks and being able to work with the company but I think we you know are fairly successful in in realizing that you know we are the state and that we can come in and recall of those those funds if if expectations are not meds met so I'd say we're pretty strong in doing so I would have a you know figure right off the top of my head for quantitative your project to take several years of analysis to to look through but I I would just say we're pretty strong there thank you. Thank you representatives' senator Jeff feel you're recognized yes motion at the proper time Mr okay we got a couple more on the board create your motion. Are you senator flowers just one question of. Mmhm maybe Mr president K. and answer this teacher retirement. We have an interest in this company. I thank shareholders. That is that that's correct and on the original project they were they were larger shareholder entries what what percent. They hold in this company a proximity one percent is one percent you know what that is in terms of dollars I do not know ma'am. Okay they have a representative on the board. They did on the original big river steel not on the U. S. steel. And so I'm sure you've consulted. With a teacher retirement board. We we have been in in a consultation with them yes ma'am and they they're in agreement with this proposal that's correct thank you. All right. Representative Payton you're recognized. Thank you Mr this is just the technical language questions we may need to deal with that later I understand on section three the first paragraph there the intent is for a one time transfer I'm concerned about the language Mabini in need and need a little bit of modification so if you don't handle that right now may we talk about later I'm probably wrong it just looks to me like a good lawyer could argue that that could be construed to be more than one transfer. Line twenty eight says transfer from time to time. A sum not to exceed fifty million dollars. I'd like to narrow that down to aggregate some not I don't know why says time to time unless we're looking at multiple transfers that would add up to the fifty million. I think that's an and I think the bill drafters the back room there but I think that that that's just to allow the possibility of of several draws up to the fifty million dollars so we could just forward in there that it's an aggregate sum of fifty million dollars not to exceed an aggregate song but. But that's just a concern we might want I know we're on a short time frame and amendments are gonna be hard to do down the road so I want to point that out thank you. It's fine. Go ahead Senator. We're talking about in section two what is section three section with the other thing is I think you have to read that in concert with section two as well which section to RT says that it can only be a transfer of up to the fifty million dollars was my understanding but we can look will double check that to make sure that there's no. That we haven't given any greater flexibility there than up to the fifty million dollars and that's all that they're asking for so you know that's that's all we're intending to allow. Thank you. Senator call where you have a question. Okay Senator Clark you got questions. You're recognized I liked what of. Representative Payton had to say but my question was if we made that change that he talked about with the bill still be germane. Yes Sir my vote would be that it would be. All right let's not bring city business in joint but. All right. Senator Blake Johnson you're recognized. In the cost benefit analysis whoever does that will the in state jobs be parallel with what is that that company now will you I mean that you know if if. Sixty percent of your work force lands in the state of Arkansas forty percent work their lives out of the state of Arkansas will those will those be parallel in a cost benefit or will it all be assumed that they live in the State. That's a great question center and it is accounted for in the cost benefit analysis we refer to as leakage and there's some standard norms and the econometric modeling that's done with this but we want to take it a step further and look at the actual that are on site with the the current location and that's what we base the cost benefit analysis on so that is taken into account yes Sir thank you Sir. All right Senator Hickey is bigger Shepherd L. closed. Yes yes Sir our of Senate just feel fast Mr are we need to do to open we're going to we're going to start first. Whatever you want me to do house bill one thousand to you or your house bill of thousands user identical bills and bills Senate bill whatever okay we'll take them up one at a time have a motion and asked them to not go back to. Cross your heart. I have a second we have a second any discussion all in favor say aye. Imposed. All right Sir Chesterfield MO Senate bill whatever the number Senate bill five. Hi motion to have a second. I have a second any discussion all in favor say aye. Any opposed and nexus Senate bill three Senate dismaying people take up right here. Yes Sir thank you Mr chairman members this just adds three billion dollars and supplemental that's with a B. two the American rescue plan a preparation for the Department finance administration it maintains an is underneath the section thirty eight of ACT nine nine seven which means all the stipulations and oversight by the legislature remaining intact can be followed with this additional supplemental preparation we have to take any questions any questions for the senator. Senator Rapert you're recognized do we have an update up to date list of all of the projects have been funded with both the cares Act as well as the R. funds we do I would direct you to the pier Committee reports the very and they'll be a outline it's an excel spreadsheet that that you can see how everything's been spent the remaining balances and that sort of thing. I'd like to ask your staff could help since we're in a tight window here if they can pull that information together forming give a damn if you if you committee members about one okay there it is thank you. Thank you what will send out of electronic copy to all members if that'll that'll help again moving forward if you do have questions on that that is something that we do monthly in the peer committees and it's always available for you to review in addition to that you'll be able to see any funds expended restrict reserve for and any other accounts so there is a tracking their I just be aware. See senator Jeff feel you're recognized motion at the proper time or any other questions I'll take a motion do pass do pass on Senate bill three yes do I have a second we have a second any discussion. All in favor say aye opposed folks we have done our work Preciado Jr we are germ.