by Karl Kurtz
Given the differences in their size, Arkansas and California governments usually get compared to one another only because they are right next to each other alphabetically in a typical 50-state table. But in his budget message last week, Gov. Arnold Schwarzenegger urged that California adopt a spending control provision modeled on Arkansas's revenue stabilization law.
Of course, this generated the expected derision from Californians who don't like to be compared to any other state. "If I wanted to live like Arkansas, I would move to Arkansas," scoffed California Senate President Pro Tem Don Perata.
In "Schwarzenegger hopes to model state budget process after Arkansas," Aaron C. Davis of the AP went out and did his homework, producing a mixed review of how well the Arkansas system works.
Going beyond the comments in the AP story about the Arkansas system, the Arkansas Bureau of Legislative Research has a very detailed Powerpoint presentation, "Financing State Programs in Arkansas," that covers the revenue stabilization law. In case you don't want to wade through all 77 (!) slides, the revenue/spending system is covered in slides 33-47. In simplified form, this policy requires the legislature to place the minimum level of funding for each state general fund program into a category A. This amounts to around 90 percent of estimated available revenue. Additional levels of support for state programs are placed in category B (another five to seven percent of estimated revenue) and still further amounts (the available balance) into category C. Category B funds are spent at the governor's discretion only if adequate revenue is available, and category C is expended only after B.
In its assessment of the program, the Bureau of Legislative Research points to the following benefits of the law, which was put into practice in 1945, saying that it:
- Removed the dedication from major broad-based taxes
- Provided a fund distribution from a pool to various operating funds
- Allowed the legislature to set their funding priorities every two years [the Arkansas General Assembly is biennial]
- Prevented deficit spending
- Reduced funding instability due to changing economic conditions
- Assured agencies of even cash flow.
So far so good, but the Bureau's presentation also points to some unintended consequences of the law:
- Permitted the approval or mandate of a program without providing funds to implement it, raising unrealistic expectations
- Allowed the Governor to manipulate financing and timing of legislative enacted initiatives
- Permitted agencies and the Governor to determine programmatic priorities within funds and disregard legislative intent
- Created uncertainty in the agency financial plan for the year.
Advocates of legislative branch independence and the ability of the legislature to balance the power of the executive in California or any other state should take a close look at those unintended consequences before adapting the Arkansas system to their own states.