Arkansas lawmakers conclude work following approval of tax cuts, education legislation

From the state’s first female governor to an overhaul of the state’s education system, the 94th General Assembly brought unprecedented change to Arkansas. After three months of work, lawmakers adjourned Friday and plan to return on May 1 for the official end of the legislative session.

“It started with a slow trot and ended with a mad dash to the finish,” Rep. Carlton Wing, R-North Little Rock, told House members Friday.

Senate President Pro Tempore Bart Hester, R-Cave Springs, said he appreciated that the Legislature did not have to extend its session in order to achieve the goals set forth by its members and by Gov. Sarah Huckabee Sanders.

“We hit our goals at a good time, and I think that says a lot about where the state of Arkansas is,” Hester told the Arkansas Advocate after the Senate adjourned.

Approval of Sanders’ top priorities seemed like a foregone conclusion thanks to a Republican supermajority. (The 100-member House has 82 Republicans, the 35-member Senate 29.)

While lawmakers did pass legislation to support the governor’s goals to cut income taxes and significantly change the state’s education and parole systems, there was bipartisan pushback, especially on the creation of a universal school voucher program.

House Minority Leader Tippi McCullough, D-Little Rock, said this session was different from her previous two because there was “a barrage of bills at the end” leading to very late nights. 

The governor-backed education and parole legislation was also unique because they were “omnibus” bills, which McCullough said made them difficult for Democrats to support in their entirety.

“Culture war” bills led by several GOP legislators also took up a lot of time as dozens of Arkansans came to Little Rock to speak for and against bills to ban drag shows, restrict pronoun usage and prosecute librarians for distributing “harmful” material to minors, among other things.

To fund all this legislation, lawmakers approved a $6.2 billion general revenue budget, an increase of $177.7 million, for fiscal year 2024, which begins July 1. The majority of that increase supports K-12 education and the Department of Corrections, Joint Budget Committee chair Sen. Jonathan Dismang told the Senate Thursday.

Most appropriations take effect on the first day of the upcoming fiscal year. Meanwhile, most bills become law 90 days after the Legislature has adjourned Sine Die, the official last day of the session. Bills with an emergency clause become law as soon as the governor signs them, while others specify a specific day to take effect.

Education

The LEARNS Act changes multiple aspects of the state’s education system, including teacher pay, per-student funding, graduation requirements, annual student testing and an emphasis on elementary schoolers’ literacy. 

Opponents criticized rushing the intricate 145-page bill through the legislature in two weeks time, while proponents praised provisions to expand “school choice.”

The legislation creates the Arkansas Children’s Educational Freedom Account Program, a voucher program that will be phased in over three years and provide 90% of the annual per-student public school funding rate for use on allowable education expenses, including private-school tuition.

The new law also raises the state’s minimum teacher salary from $36,000 to $50,000 and requires all teachers to receive at least a $2,000 raise for the 2023-2024 school year. State officials said they will provide funding to ensure districts can afford the $50,000 minimum.

The LEARNS Act repealed a mandatory salary schedule, but requires districts to create a schedule to qualify for the state’s funding to support teacher raises. 

McCullough filed a bill early in the session to increase teacher pay to $50,000 and said she credits Democrats for that number being incorporated into the LEARNS Act when it was filed a few weeks later.

Yet much remains uncertain about the specifics of the new wide-ranging law, with the Arkansas Department of Education (ADE) expected to develop rules and regulations in the coming weeks. Hester said he sees public anxiety about the law as based in “fear of the unknown.”

“The concerns that people have will be remedied when kids in Arkansas can read [and] when teachers are getting paid a fair wage,” Hester said.

Members of the public were invited to apply for working groups that will provide input on LEARNS Act policies. The application period closed Mar. 31, but selections have not been announced. 

There is also much uncertainty surrounding funding sources. ADE estimates the legislation will cost $297 million in the first year and $343 million the second year of implementation. By fiscal 2025, the plan will require $250 million in new state spending, according to the department’s projections. The state already spends over $2 billion annually on public education.

Lawmakers approved legislation to increase public education funding by 2.8%. Officials estimate so-called “foundation funding” will cost $75 million in fiscal year 2024 and $132 million in fiscal year 2025. 

Per-student funding, which will increase from $7,413 to $7,618 for the 2023-2024 school year, is determined through a funding formula called the matrix. Legislators have long complained about flaws in the complicated, 20-year-old funding formula, so Rep. Bruce Cozart, R-Hot Springs, filed a bill that would allow lawmakers to develop a new funding model over the next two years. 

The Senate rejected the legislation Friday morning. 

Criminal justice

The 131-page Protect Arkansas Act restructures Arkansas’ criminal sentencing and parole system. 

The bill does away with automatic parole eligibility for convicted felons and requires those convicted of the state’s most serious offenses, like rape and murder, to serve 100% of their prison sentences behind bars.

Supporters of the bill said it will make Arkansans safer by locking up violent offenders to “incapacitate” them and prevent further public harm. Opponents argued that increasing prison sentences is an ineffective and expensive way to try to reduce crime.

Arkansas’ incarceration rate is already among the top five highest in the U.S. The state imprisons more than 550 people per 100,000 residents, a significantly higher rate than any other democratic country in the world. 

In conjunction with the bill, Gov. Sanders announced the state will seek to build a new 3,000-bed prison that she estimates will cost $470 million to build with an annual operating budget of about $31 million.

The state hasn’t funded significant new prison construction since the mid-2000s, she said.

The legislative package also includes measures to recruit and train correctional officers, establish the Legislative Recidivism Reduction Task Force, create a public bail reporting system and allow inmates who give birth to remain with their newborn for at least 72 hours after birth. 

The measures in the bill aim to be implemented by the start of 2025.

Tax cuts

Arkansas lawmakers also approved a $124-million tax cut for Arkansas’ top individual and corporate income tax rates during the final week of the legislative session. 

The new legislation reduces the top individual income tax rate from 4.9% to 4.7% and lowers the top corporate income tax rate two percentage points to 5.1%. Budget officials estimate the cuts will cost the state $186 million in revenue in fiscal 2024 and $124 million the following year.

The tax breaks’ effective date would be retroactive to Jan. 1, meaning taxpayers would see the benefits in the current tax year.

The individual income tax cut impacts Arkansans earning more than $24,300 a year, roughly 1.1 million people in the state.

Arkansans on the lower end of the tax tables would see a smaller percentage of the benefits. An analysis from the Institute on Taxation and Economic Policy published by Arkansas Advocates for Children and Families, which opposed the legislation, estimates that 80% of the cuts would go to the top 20% of earners in the state.

The tax cuts followed phased-in cuts for lower, middle and upper level earners lawmakers made over the last few legislative sessions. In August, the General Assembly in special session accelerated cuts to the top corporate and individual income tax rates.

Hester said the state has “cut income taxes responsibly” over the past few years and seen growth in both population and revenue as a result.

McCullough said it was “so disappointing” that these tax cuts targeted the state’s top earners and corporations because “that’s money that we could have done a lot with education-wise.”

Moving forward, she said it will be interesting to see how tax cuts and increased funding for the governor’s education and public safety initiatives work together or against each other.

Legislators also approved a bill to phase out the state’s “throwback rule.” The rule is an obscure tax policy that requires multi-state corporations based in Arkansas to report income from other states where revenue from product sales are not taxable, thus “throwing back” the tax liability to Arkansas.

Culture wars

Sen. Gary Stubblefield, R-Branch, introduced a bill on the first day of the session in January that would have banned drag performances near places that children frequent. It was the first of many bills focused on hot-button social issues, introduced and advanced by Republican lawmakers with the stated goal of protecting children.

Other such bills would require a person’s gender assigned at birth to determine where they use the restroom at school or in public, classify gender-affirming health care for transgender youth as potential medical malpractice, restrict teachers’ use of pronouns and names that do not match students’ birth certificates, and open the door for librarians to be charged with a felony for distributing content that parents and elected officials consider obscene.

All of these bills made it to Sanders’ desk, and some have been signed.

Democratic lawmakers and LGBTQ+ rights advocates spent the session vocally opposing these measures, calling them an attack on transgender Arkansans’ basic rights.

“I’ve heard parental rights this whole session. Parental rights, parental rights, unless your kid is a transgender child and then you don’t have rights,” McCullough said. “You don’t have rights to take them to get the medical care they need. You don’t have rights for them to go to the bathroom where they identify, where they feel safest.”

Public pushback resulted in two bills being amended, including Stubblefield’s drag bill. It was altered beyond recognition in February to survive a potential court challenge, and the version that Sanders signed into law as Act 131 does not mention “drag.”

Senate Bill 270 awaits Sanders’ signature after it cleared the Legislature on Tuesday. It initially would have criminalized adults’ presence in a bathroom that does not match their gender assigned at birth if children are present.

The House Judiciary Committee amended the bill in March after five hours of testimony from 40 witnesses, including two plaintiffs in a federal lawsuit against the state for passing a 2021 ban on gender-affirming health care for minors. The bill’s applicability is now limited to adults who enter a bathroom with sexual intentions.

Several members of the public told legislative committees that Arkansas would be less safe for transgender people under the range of legislation and that they were considering leaving the state.

Hester said lawmakers do not want anyone to feel unwelcome in Arkansas.

“The state Legislature believes a person that is transgender is equal to everyone else,” he said. “We push back when a person that is transgender says we have to agree with them.”