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Arkansas Legislature: Fiscal Session 101

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fiscal-sessionQ:  What is the Arkansas Legislature’s fiscal session?

A:  What most folks call the fiscal session is actually the final step of the legislative process of appropriating money and funding state agencies for the upcoming fiscal year that begins each July and runs through the following June. The Arkansas Legislature’s fiscal session convenes in even-numbered years. A fiscal session can last no longer than 30 days, unless three-fourths of the House and Senate approve a one-time 15-day extension.

The fiscal session begins with a joint session of the House and Senate where the Governor formally addresses the Legislature to explain his budget priorities.

Q:  How does the appropriations/budget process work?

A:  It is important to understand that appropriation is only the authority to spend money. This is not the same as having funds available to spend, nor does it convey a right to obtain the funds; it only gives the agency the authority to spend. Agency funding is the money available to an agency.

Arkansas’ appropriations/budgeting process has two parts: budget hearings first, followed by the actual legislative fiscal session where lawmakers pass appropriations bills (laws) giving state agencies the ability to spend money and the Revenue Stabilization Act that gives each agency actual dollars.

BUDGET HEARINGS: Budget instructions are sent to state agencies in May of the year preceding the start of the new biennium, then the agencies submit their budget requests to the Governor. Agency budget hearings are held first, then public budget hearings are held where the JBC reviews (at a minimum) the budgets of “the Big 6” — the Arkansas Departments of Higher Education, Education (K-12), Corrections, Community Corrections, Human Services, and the Health Department. Lawmakers can bring any other agency budgets up for review as well.

During the review, each agency explains their needs and specifies the Governor’s recommendations, and the JBC then decides how each agency appropriation bill will be written.

The JBC then uses the information from the budget hearings to direct legislative staff in creating the initial appropriations bills for the fiscal session.

FISCAL SESSION: Lawmakers in both chambers review and discuss appropriations bills while in full session, making changes along the way before they vote on each bill.

Toward the end of the session, legislative leaders meet with the Governor to decide, based on the next fiscal year’s projected revenue, how much money each agency will actually receive (funding). (Funding can be much lower than what an agency is allowed to spend due to outside revenue from grants or other revenue sources.) Then the Governor and leadership put the Revenue Stabilization Act into bill form.

The JBC reviews and acts on the RSA, followed by the Arkansas House and Senate, where it takes only 51 votes to approve. When the Governor signs the RSA the process is complete and state agencies are funded for the upcoming fiscal year.

Q:  What about Arkansas’ requirement to have a “balanced budget”?

A:  While Arkansas law does not require the Legislature to pass a balanced budget, the law does require the Governor to submit — and to sign — a balanced budget. The Revenue Stablization Act, with its specific funding pieces, is the cornerstone of that balanced budget. (The Governor is also required to change each agency’s approved funding — but not the appropriation — if/when revenue projections are less than forecast.)

Q:  What is an appropriations bill?

A:  An appropriations bill is a legal document — the law — that allows a state agency to spend money, specifically money from either the State Treasury (as required by the Arkansas Constitution) or from bank accounts under the control of the various agencies. However, the dollar amount appropriated is not always the final amount approved by the Legislature for any specific agency (funding). The amount of money specified in the appropriations bill is different, however, than the amount of money an agency may have due to other revenue sources.

Discussing budget hearings, one lawmaker observed, “A lot of discussion goes into the appropriations bills; they are the mechanism by which an agency can spend money. A lot less is said about the actual funding that goes forward.”

Q:  What is the Revenue Stabilization Act (RSA)?

A:  This bill is the law by which the Legislature funds state agencies. During the fiscal session the Legislature cannot take up non-appropriations bills unless a supermajority of both houses agree to do so. The RSA is a non-appropriations bill, so you will see the Legislature pass special resolutions on the first day of the fiscal session so they can vote on the annual RSA at the end of the Fiscal Session. (If the RSA doesn’t pass, Arkansas would revert to the previous year’s RSA.)

Q:  What is the Joint Budget Committee (JBC)?

A:  This legislative working committee of 28 Senators and 28 Representatives (56 total) deals with the state’s finances. Appropriations bills are passed by the JBC, then by the House and the Senate (with a supermajority) before moving to the Governor’s desk for signature. When the Governor and legislative leaders craft the Revenue Stabilization Act, the JBC reviews and acts on it, followed by both legislative chambers (where it takes a simple majority to pass).