Proposed revenue cuts could jeopardize state’s ARPA funds

Arkansas lawmakers have long known that cutting taxes could jeopardize federal Covid-relief funds received as part of the American Recovery Plan Act (ARPA), but the Arkansas Department of Finance and Administration says the penalty could be greater than it previously estimated.

The department originally projected a potential liability of about $100 million, but in a recent memo, the department said the potential liability could be as high as $853.8 million.

When Congress passed ARPA, it said that states couldn’t use their share of the $195 billion in relief funds to offset revenue cuts. Twelve states, including Arkansas, are working to invalidate that provision.

In its memo, the Department of Finance and Administration noted that Arkansas’s recent economic record, together with its recent budget surpluses and projected surpluses, mean that Arkansas shouldn’t be in violation of ARPA should lawmakers move forward with revenue cuts.

Though he hasn’t issued a formal call, Governor Asa Hutchinson has said he plans to call lawmakers into a special session to begin on Tuesday, August 9.