Note I’ve updated last night’s report on Gov. Asa Hutchinson’s move to transfer more than $100 million in cigarette lawsuit trust fund money to state reserves to lower the cost of state borrowing, perhaps for use, the law change says, to provide corporate welfare to potential industrial prospects.

Sen. Jim Hendren, who’s carrying the bill for the governor, says it will be amended today to require two-thirds votes for use of the money from the reserve fund in hopes of increasing support before the Joint Budget group hearing the bill.


The balance – about 105 million – would be transferred to our Long Term Reserve fund. None of it would be spent unless Governor submits requests, certifies there are no other funds that could be used, certifies sluggish economic growth has resulted in less than 3% revenue forecast growth and then is approved by legislative council or Joint budget committee. We are going to amend so that it will take a 2/3 vote to approve which is what is required now. (Except by entire legislature). Failing to have it available for emergency uses is why the state gets no credit for a reserve fund when they determine our bond rating which affects schools, colleges, and economic development bond costs.

He also responded to my question/criticism about the bill’s little-noticed end to the provision in the 2000 initiated act on the cigarette lawsuit money (damages for costs to Medicaid for treating smokers) that says the money may ONLY be used for health programs.

Don’t disagree – but hard to argue we haven’t taken some big steps on healthcare – in event of downturn we will still have to meet our MEDICAID match requirements so depending on where dollars are moved could likely still be used for healthcare. I’m not too excited about using it for economic development projects and probably wouldnt support such use.

But we really do need to start building a credible long term reserve and I would hope we build it up to 4-500 million. Then I hope we heavily scrutinize any withdrawals.

Sen. Joyce Elliott’s criticism remains valid, I think. Reserve funds have been depleted by tax cuts that have not spurred growth sufficient to sustain government at existing levels.