Wednesday, April 09, 2008

State Budget Changes: Beebe Covers His Flank

Governor Mike Beebe gives a thumbs up to his compliant accomplices in the state's print media such as the AP's Andrew Demillo, who went the extra mile and far beyond to protect the Governor from criticism.

Governor Mike Beebe , with the help of a cooperative state print media, completely dominated the legislature and got everything he wanted in the Special Session. The state's severance tax for natural gas will be greatly increased, and all of the money will be kept by the government, mostly to spend on roads. Beebe elected not to use any of the funds for a tax cut. None of the bonanza will be shared with the taxpayers.

While he was winning that immediate battle, the decision to keep all of the money in Little Rock certainly raised some questions. Questions like, "why wasn't the severance tax money used for a major tax cut? The state treasury is overflowing while families are hurting. What good are new roads when we can't afford the gas to drive on the roads we've got?"

Those were difficult questions to answer. The state is currently sitting on a $140 million dollar surplus; the natural gas finds are certain to boost tax revenues even without a tax rate increase; and the Governor had made a commitment to eliminate the other half of the sales tax on groceries. With families hurting far worse than state government, why the urgency for a special session to raise taxes even further?

It appears Beebe and his friends in the corporate media have gone into spin-overdrive to protect his flank on this one. I believe the surprise and premature release of the low state budget projections for 2009 was an attempt to blunt some of the criticism for Beebe keeping all of the money for himself and returning nothing to the taxpayers. “Something’s weird,” Richard Wilson, assistant director of research for the Bureau of Legislative Research was quoted as saying when informed by a reporter about the revision. And indeed it was. The projections were not supposed to be available for another month.

The state paper laid out all of the facts, but you had to really read between the lines to put it together. A superficial reading of the front-page-above-the-fold story left the casual reader with the impression that the state government was about to be short of money and would have to tighten its belt. That of course would give cover to the Governor for his failure to share the bounty of the severance tax increase with We the People.

The pundits who are supposed to analyze all of this are so far missing in action. AP writer Andrew DeMillo was even worse. His reporting made Beebe look like some kind of epic hero, redirecting people's attention to his grocery tax cut and asking him if he regretted giving us back so much now that the state was short of money! If this story is any indication, Andrew DeMillo is to Mike Beebe as Baghdad Bob is to Saddam Hussein.

The truth is that Beebe gave us as little as he could get away with on the grocery tax cut. He was running against a guy who was promising to cut it all at once, and both should have known that we had the money to do so. The tax cut was 121 million dollars, but we were sitting on a record surplus many times larger. And the money was still coming in. Despite the grocery tax cut, we have accumulated $144 million dollars in extra surplus over the past year. This means we could have eliminated all of the tax on groceries and still had a small budget surplus. The reason we did not do that is because Mike Beebe is calling the shots, and he wanted the government to have the money more than he wanted you to have it, plain and simple.

Since Beebe now exercises great influence on how General Improvement Fund money is spent, it is to his personal benefit to hoard as much extra tax money as he can and wait as long as possible to return it to you. The GIF money is the interest money from all the extra state revenue sitting in the bank all year. The more money sits in there, the more interest is accumulated. And that means that Mike Beebe's barrel of pork money gets bigger. He can buy a lot of influence with that cash. This is one reason why the ledge defers to him now.

So perhaps the Governor hears complaints that he is keeping all of the money while families are hurting, and suddenly the state releases figures that show, by golly, the state is going to be hurting too! Why, that is the reason they had to keep all the chips from that tax increase. Its for the children! Only families have children too, and they actually live there.

The ballyhood "shortfall" of $107 million in 2009 is only a projection, and a convenient one at that for a Governor looking for political cover for his tax increase. On the other hand, the surplus of $144 million is real and sitting in the bank earning interest for the GIF fund Mike Beebe oversees right now. If there is a shortfall in 2009, it can be more than paid for by the overage from the last 12 months. Not only that, the latest figures from the article show that tax collections are higher than expected.

I am way long here, so please hit the jump for the rest of it....


Blogger Mark Moore (Moderator) said...

The state print media did a wonderful service for Mike Beebe today with their stories of how the state government may have to cut Medicare or may have to cut other spending. They did ask Mike Beebe if he gave us back too much of our own money with the grocery tax cut, but none of them seemed to have asked him the brain-dead obvious question:

"Governor, if your office knew that there would be a projected shortfall in the General Revenues in 2009 then why did you just last week rush through a special session in which you insisted that 95% of the money from the tax increase would be diverted to roads? If there is a shortage, doesn't that decision endanger Medicare spending, for the children?"

As it stands, "the children" are Road Kill, run over by the Beebe Special Session Express.

Folks, don't worry about the state government and their politically timely "short falls". While I agree our country is headed for rough times, the natural gas boom is just one reason that revenues will not be greatly hurt in dollar terms. And even if they do, remember they already have the money on hand to make up for it.

Don't worry about the government and any press reports about their "shortfalls". They are going to get their money, and yours too if you let them.

9:47 PM, April 09, 2008  
Blogger Bill Smith said...


Right on! Keep the fire burning under Beebe. I doubt if there has ever been a tax that he did not like. Limited Government is not in his set of priorities. I received an email from some of your supporters recommending your story, liked it, and posted a lead and link to your story:

9:32 PM, April 10, 2008  
Blogger Mark Moore (Moderator) said...

Thank you for the kind words.

5:19 AM, April 11, 2008  

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