Arkansas News Bureau 

LITTLE ROCK — In his state-of-the-state speech, Gov. Mike Beebe admonished lawmakers proposing tax cuts other than the half-cent grocery tax reduction he proposes to show how to pay for them in a tight budget. 

Taking the governor at his word, Republican lawmakers who campaigned and won on promises to cut spending and taxes already have succeeded in stripping judicial pay raises from an appropriations bill and are eyeing other spending cuts to pay for tax reductions. 

"The governor has rightfully asked us, if we as a body want to provide some tax relief, that we be responsible and tell where the money is going to come from out of the budget," said Rep. Davy Carter, R-Cabot, chairman of the House Revenue and Taxation Committee. "In response to that, I think you’re seeing people doing their homework and looking at everything." 

The session was only a few days old when House members raised objections to a $36 million appropriations bill that included a 1.86 percent cost-of-living adjustment for judges and prosecutors. 

Though the bill had already cleared the Joint Budget Committee, the House sent it back to committee and last week the budget panel stripped the COLA from the bill. The House is to consider the pared-down version this week. 

Beebe did not include any COLA for legislators or constitutional officers in his proposed $4.6 billion budget for next year, but he did include the COLA for judges and prosecutors at a cost of $475,000. 

The governor also included about $23 million in cost-of-living raises for state employees, and now some lawmakers, including Joint Budget Committee co-chairman Sen. Gilbert Baker, say they want to look at eliminating or limiting those raises as well. 

"There are a lot of people, Social Security recipients in particular, that are not getting a cost-of-living increase," said Baker, R-Conway. "Legislators and constitutional officers are not getting an increase. So I just think it’s part of a sentiment out here that we should hold the line on spending." 

And where should the savings go? 

"There are a lot of proposals out there, from the governor’s grocery tax cut to a lot of discussion about used-car tax relief, to economic-development-focused tax relief, from income tax to corporate tax (relief)," Baker said. "I think all of those will be vigorously discussed, and some compromise will be found." 

Tax-cutting bills already filed in the Legislature include measures to cut the capital gains tax, create a sale-tax holiday for back-to-school supplies and create a sales-tax holiday for disaster supplies. 

Others include offering an investment tax credit for the rehabilitation of central business improvement districts, providing an income tax credit to a parent who chooses to stay at home with a young child and repealing the sales tax on manufacturers’ utilities. Not all have been filed by Republicans. 

Beebe did not oppose nixing the COLA for the judicial branch, but he does oppose cutting cost-of-living raises for state employees. 

"It’s something he feels that they’ve earned because they went a year and a half without the usual one because we were going through tough times," Beebe spokesman Matt DeCample said. "You’re talking about a small adjustment, tied to inflation, that’s going to go to thousands of Arkansas families who are then going to turn around and put it right back into the state economy." 

Baker said he is open to giving some level of COLA to state employees "on the lower end of the pay scale," but he also noted that "state employees are taxpayers as well." 

Asked if he sees room to trim other spending from the governor’s proposed budget, Baker said the Legislature needs to maintain court-ordered adequacy in K-12 education funding, but otherwise, "it’s all on the table." 

Rep. John Burris, R-Harrison, the House minority leader, said money trimmed from the governor’s budget does not all have to go to tax cuts. 

"We got a lot of problems out there," Burris said. "It might go to build some roads, it might go to build some prisons. It may go to tax cuts, but we’re for saving money no matter where it goes." 

Republican lawmakers, who for the first time in more than century occupy nearly half the seats in both the House and Senate, say the developments of the session’s first two weeks have already made a statement. 

"Where we can make responsible cuts and allow the people to be able to look at that as us providing less government intervention and being responsible, I think that sends a clear message," said Rep. Mark Biviano, R-Searcy, chairman of the Freshman Caucus in the House. 

Democratic leaders insist that Republicans are not setting the tone of the session. House Speaker Robert S. Moore Jr., D-Arkansas City, Senate President Pro Tem Paul Bookout, D-Jonesboro, and Joint Budget Committee Co-Chairman Rep. Kathy Webb, D-Little Rock, have all said they are willing to consider tax cuts. 

"I think we have a strong Democratic agenda that we want to take care of our people and provide services at the lowest cost to people," said Rep. Johnnie Roebuck, D-Arkadelphia, the House majority leader. "I don’t see any one party dominating this legislative agenda." 

But Roebuck said she is troubled by the plethora of tax-cutting bills and the notion of putting everything on the table for possible spending cuts. 

"Are we going to cut prison spending?" she said. "Are we going to cut Medicaid? Are we going to cut social services for our citizens?"