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Governor Beebe's Weekly Column and Radio Address: A New Year for Arkansas's Budget

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While the beginning of July marks the halfway point of calendar year 2011, it also marks the beginning of Arkansas's fiscal year, which runs from July to June. The budget approved by the General Assembly this past winter is now in effect and includes an additional reduction in the sales tax on groceries.

A new fiscal year gives us a chance to assess the financial state of our State. We were pleased to end the year with a surplus, which will provide funding for state-obligated payments and general-improvement projects. Those projects include the continued support of our Quick-Action Closing Fund, an important tool in bringing new jobs to Arkansas.

An unanticipated surge of revenue in June provided tens of millions of additional dollars for the legislature to allocate when it convenes for the 2012 fiscal session. There is already speculation about the best ways to spend that money, but any such discussion must consider the slow recovery of the national economy.

Arkansas was one of only four states able to enter the past fiscal year without a budget deficit, a distinction shared only by North Dakota, Montana and Alaska. This new fiscal year has seen that number grow to eight, with Indiana, Wyoming, West Virginia and Delaware also reaching solid financial ground. While it is good news that we've kept Arkansas in sound financial shape, it's bad news that 42 other states are still struggling. That struggle will be amplified in many of those states when federal stimulus funding ends.

We are not an island, and the slow national recovery will continue to weigh on Arkansas's financial progress, as will other factors here at home. The same national report that lists us among those eight states without shortfalls also predicts that we could fall off that short list by next year. And the primary reason is a simple one: Medicaid costs.

I've talked before about rising Medicaid costs and the need to overhaul our system. We have projected a shortfall of about 60 million dollars for next year's Medicaid budget, a deficit that would have hit this year if not for stimulus funding and the Medicaid Trust Fund. Even with reforms, the surplus revenue we've accumulated may be needed to shore up Medicaid for the short term and avoid cuts in services to young and senior Arkansans.

To be clear, Arkansas starts this new fiscal year in good shape. We've handled our money conservatively and are again in a position envied by most of our sister states. And while we will continue to sustain our responsible spending practices, we also will keep our eyes focused on the future. In an uncertain national economy and with rising Medicaid costs approaching, we will remain resolute to care for our people and for our state.


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