LITTLE ROCK — Gov. Asa Hutchinson said Friday he will cut $70 million from the state’s budget for the last two months of the current fiscal year, which ends June 30.
Hutchinson said during a news conference at the Capitol he is ordering the budget reduction because state revenues are lagging below projections.
Savings that have been generated through efficiency measures will allow the state to cut the budgets of certain agencies without affecting services or laying off employees, he said.
“We expect to be able to fully fund operations for the year,” he said.
Hutchinson told agencies in February to prepare contingency plans in the event of budget cuts.
The governor said Friday one thing that contributed to the budget shortfall is his $100 million middle-class income tax cut, which lawmakers approved in 2015.
“Our (individual income tax) refunds this year are $479 million. Last year’s was $360 million. So you can see a little bit of the challenge anticipating refunds with the tax cut that was put into place,” he said. “The good news from that is that because of the refunds there is more money in citizens’ pockets this year that they will be able to spend on our economy, and that is the purpose of tax cuts.”
Hutchinson said the shortfall is “a miss on revenue and not a miss on spending.” He also noted, “to put this in perspective,” that the shortfall is a small percentage of the state’s $5.2 billion budget.
State Department of Finance and Administration Director Larry Walther said Friday, “From my standpoint it’s a difficult time. I don’t like to have to do this. But it’s incumbent on DFA, me and the team at DFA, when we see that there’s a requirement that needs to be met then we’ve got to take it to the governor. We’ve met with him on numerous occasions and we’ve decided now is the time.”
Walther said the agency tried to figure the $100 million income tax cut into its forecast for the current fiscal year, but “even though we put in an additional amount of refunds in the budget, they’re exceeding that, both on corporate and individual.”
Sen. Bryan King, R-Green Forest, said Friday it is “misleading” to claim the shortfall is a miss on revenue and not on spending.
“That’s what everybody says when they overspend. But here’s the thing: This guy’s a spendaholic,” he said. “He’s trying to say, ‘I didn’t overspend.’ If you’re spending more money than what’s coming in, guess what? You’re overspending.”