From the Arkansas Advocate:
The Arkansas General Assembly on Wednesday approved legislation to increase the state’s general revenue budget to $6.49 billion for fiscal year 2026, a nearly 3% increase from the previous year.
As is typical, state lawmakers approved the Revenue Stabilization Act on the final day of the legislative session through two identical bills — Senate Bill 637 and House Bill 2003.
The RSA is nearly identical to the budget Gov. Sarah Huckabee Sanders proposed in November. The largest portion of the $182.5 million increase to the state budget for the fiscal year that begins July 1 is an additional $90 million for the state’s Educational Freedom Account program.
The school voucher program, which permits state funds to be used for allowable expenses such as private school tuition, is expected to see an increase in participation during its third year, when eligibility opens up to all Arkansas students this fall.
The legislation also increases county jail reimbursement by roughly $9 million to $34.8 million. The state reimburses county jails for holding state inmates when there’s no room in Arkansas prisons. Expanding prison capacity has been a priority for Sanders, but lawmakers failed this session to approve a $750 million appropriation bill to support the full estimated cost of a planned prison in Franklin County.
Sen. Jonathan Dismang, R-Searcy, sponsored that bill and told colleagues the estimated total cost of the proposed 3,000-bed penitentiary is $825 million, but several lawmakers said they believe the cost will top $1 billion and were unhappy that the administration couldn’t provide more details on the project. Franklin County residents have also objected to the prison’s location and to the state’s purchase of the property without involving local officials.
In the House Tuesday, Joint Budget Committee Chairman Rep. Lane Jean, R-Magnolia, highlighted a $13 million increase to the Department of Human Services Grants line item, which he said would support maternal health.
Sanders in her proposed budget called for a $13 million increase for Medicaid to help support recommendations from the Strategic Committee for Maternal Health that she convened last year to address the state’s poor maternal health outcomes.
Arkansas has among the nation’s highest maternal and infant mortality rates, according to the Arkansas Center for Health Improvement. Arkansas is the only state to have taken no action on a federal option to expand Medicaid postpartum benefits to 12 months from the current 60 days. Sanders has refused to expand coverage, saying to do so would be duplicative of other health insurance options for new mothers.
The RSA also includes $3.15 million for a performance fund that Jean said would support the governor’s new state employee pay plan, which is expected to cost a total of $139 million. Lawmakers last month approved legislation for the plan, which aims to clarify promotion ladders within state agencies and improve recruitment and retention by raising some salaries to labor market rates. State agency leaders should be able to accommodate the updated pay schedule within existing budgets, the governor said last fall.
Jean told the House Tuesday that the RSA projects the state would be left with roughly $300,000 in surplus funds, though he noted that would likely be closer to $250,000 because $50,000 would be allocated for highways. That is significantly less than the record billion-dollar surpluses seen in recent years. The decrease in surplus funds could be contributed, in part, to several rounds of tax cuts by Arkansas’ last two governors. Sanders and the Legislature cut taxes three times in 15 months, most recently last June.
To further support the governor’s proposed budget, lawmakers also approved Senate Bill 636 Wednesday, which would transfer $572.79 million in surplus money to various funds and set-aside accounts.
“It’s spending a lot of money, I’m not debating that point, but I think it’s all needs that the governor came up with. House got some needs that we asked for, Senate’s got some needs,” Jean said Wednesday.
SB 636 includes an additional $90 million for the EFA program and $100 million for the Medicaid Sustainability Set Aside Fund, among other things. When Sanders proposed these set-aside funds in November, State Budget Director Robert Brech noted they would only be used if necessary and are not part of the RSA, which prioritizes state government spending and balances the budget.
“It’s not known at this time if those will be necessary,” Brech said then. “In the event they are, those set-asides could be used and then built into the budget afterwards, but what we didn’t want to do is put too much money in the RSA when it wasn’t needed.”
A worksheet for surplus funding and set-asides for the 2025-2027 biennium presented to the Joint Budget Committee Monday also proposed transferring $250 million to a correctional facilities fund through Senate Bill 633. That bill was pulled down Monday.
