SJR16 of 2015 – How much state money is enough to assist big business with super projects?
By David Ferguson
Introduction
Voters are likely to want to go over proposed amendments to the Arkansas Constitution with a fine toothed comb after feeling deceived by Issue 3 in 2014. After approving Issue 3, many voters were surprised to discover the “ethics amendment” they approved: (1) Continued to allow lobbyists to pay for legislator’s meals; (2) weakened term limits; and (3) authorized much higher salaries for legislators and other officials. Issue 3 (now Amendment 94) was sponsored by Representative Warrick Sabin (D) and Senator Jon Woods (R).
If you don’t want to be surprised again – please start learning about all the new proposals and ask your own questions before casting your vote!
SJR16 of 2015
Senator Jon Woods of Springdale has another constitutional amendment and it will appear on the November 2016 ballot. The Secretary of State has not assigned an issue number yet. At this point it can only be identified by the legislative resolution number – SJR16 of 2015.
The Popular Name of the proposal is, “An Amendment to the Arkansas Constitution Concerning Job Creation, Job Expansion, and Economic Development.” Who could be against a proposal with that name?
The proposal wants to make sure you focus on the message of “Job Creation, Job Expansion, and Economic Development.” Those words appears in the Popular Name, at the beginning of the Ballot Title, and in Section 1 of the amendment:
SECTION 1. INTENT. The intent of this amendment to the Arkansas Constitution is to encourage job creation, job expansion, and economic development.
Now you know how it will be sold, but what will it actually do?
CHANGING AMENDMENT 82
The proposal makes several changes to the Arkansas Constitution. In this article we will focus only on Section 8 of SJR16 which would amend Amendment 82 of the Arkansas Constitution. Other parts of the proposed amendment will be reviewed in a later article.
The Ballot Title for SJR16 includes this phrase:
REMOVING THE LIMITATION ON THE PRINCIPAL AMOUNT OF GENERAL OBLIGATION BONDS THAT MAY BE ISSUED UNDER AMENDMENT 82 OF THE ARKANSAS CONSTITUTION.
Amendment 82 has to do with general obligation bonds for economic development. Amendment 82 was proposed by the legislature, adopted by the people, and became effective January 1, 2011. It hasn’t taken long for the legislature to want to expand it.
Amendment 82 is for the funding of so called “super projects”. The most recent Amendment 82 project was approved earlier this year to provide of $87 million to assist Lockheed in developing more production in East Camden, Arkansas.
Opponents of Amendment 82 projects claim it is crony capitalism, because it picks winners and losers. For example, opponents cite how Amendment 82 was used to support Big River Steel with a $125 million bond issue, when Big River Steel is a competitor of an existing Arkansas business Nucor Steel. Nucor Steel was not given that advantage. On the other hand, supporters of Amendment 82 projects point to jobs being brought into the state and on how the projects can help other Arkansas businesses because of contracts with the big business or by being able to gain new business because of new employees brought into their area.
Currently under Amendment 82 the state can pledge no more than 5% of its general revenues to support such projects. The proposed amendment to the Arkansas Constitution would change that. Supporters of the new amendment say 5% might not be enough someday.
So, how much of Arkansas’ general revenues do you feel comfortable with dedicating to assist big business ventures? (Remember, when you dedicate funds to such projects it also reduces funds available for the rest of the budget – unless you increase taxes.) Would you feel comfortable with doubling the limit from 5% to 10%? How about raising the limit to 15% or 20% or 50%? Surprise! Under SJR16 of 2015 there is NO LIMIT on how much state revenue may be pledged to economic development projects. Theoretically, the state could approve the use 100% of its general revenues or even more than 100%.
Do you think this governor and this legislature would approve an outrageous percentage? Neither do we. But the proposed change in the constitution doesn’t expire with this governor and this legislature. The amendment continues on in the future. Do you trust future leaders not to risk bankrupting the state?
Why it was the proposal written without any limit whatsoever? The legislative record on SJR16 does not provide much information. The proposal was debated on the floor of the House of Representatives on April 2, 2015 and Representative David Whitaker asked,
“Was there any thought given to raising the cap instead of wiping it out altogether.”
Representative Lance Eads who was presenting the bill responded to the question saying:
We are close enough to the cap and then the concern several people had, if we had other opportunities, would we need to keep coming back. This doesn’t take away any of the oversight the legislature and the executive body has. So, it’s still if it is not a good project it still going to come though this body to determine if it is good or not. We ultimately have the determination to make that decision. This at least gives us the flexibility to be at the table on any project we want to consider.
Our understanding of Representative Eads argument is – (1) No matter what cap increase might have been written into the legislation, some people might want to go higher; (2) Trust your elected officials; and (3) Not having a cap means you would never be excluded from negotiations for having already reached the limit on how much of the state’s money you can dedicate to this purpose.
We think you will want to hear more from both supporters and opponents. A good place to start is to watch the House debate on the resolution. You can watch it at this link: http://arkansas-house.granicus.com/MediaPlayer.php?view_id=2&clip_id=1666 The discussion begins at the 14:30 minute mark and you can skip to that point. The video includes statements for the amendment by Representative Eads (R), Representative Mark Lowrey (R) and Representative Deborah Ferguson (D). Those speaking against were Representative Douglas House (R) and Representative Nate Bell (I).
It is not just a question of how much revenue should be used to assist large companies with super projects. It is also a question of how much state revenue can be dedicated to this use before it hurts the funding of state services or harms the ability of Arkansas taxpayer to seek tax relief.
With the proposal removing any limit, you are asked to trust politicians and future politicians to get it right. This certainly give us concern.
The election still over a year away, so we hope you will listen to arguments for and against and make up your own mind.
Conduit for Action will review other parts SJR16 in a future article. There is much more you should be aware of before going to the polls in November 2016.