Beebe Hints at Cigarette Tax; Lawmakers Want Quasi-independent Group Over Lottery

The leaders of the Arkansas Senate and House of Representatives said Tuesday that setting up the new state lottery and deciding how to distribute the scholarship money it generates will be the hardest part of the legislative session that will begin next week.

Gov. Mike Beebe, who took no position on the lottery amendment until the November day Arkansas voters approved it, said his legislative priorities remain a balanced budget, education funding and his proposal to slice another 1 percent from the state sales tax on groceries.

But Beebe hinted, however, that his State of the State speech next Tuesday would include a proposed increase in the tax on cigarettes to pay for a statewide trauma system and other needs.

Beebe, Rep. Robbie Wills, D-Conway, who will be Speaker of the House in the upcoming session, and Sen. Bob Johnson, D-Bigelow, the incoming President Pro Tem of the Senate, spoke to journalists at a mid-day session sponsored by the Arkansas Associated Press Managing Editors Association, the Arkansas Associated Press Broadcasters Association and the Arkansas Pro Chapter of the Society of Professional Journalists.

Johnson said he would not succumb to an "arbitrary timeline" for setting up the lottery. But Wills said he believed that legislators were "99 percent there" on the idea of setting up a quasi-independent commission with "strong legislative oversight" that would operate the lottery free from political meddling.

"Models that seem to produce the best results are run like businesses, not like bureaucracies," Wills said.

Separately, Johnson and Beebe indicated their agreement with a nongovernmental structure, although specifics have been in short supply.

How to distribute the lottery proceeds, which can only be used for scholarships, remains thorny. Johnson said it was "a very important caveat" that the scholarship dollars follow the student rather than being divided up among institutions of higher education to distribute. He also said he wanted to see scholarship dollars made available to students in two-year colleges and those who are studying for trades such as plumber and electrician.

Beebe said he wanted to see a streamlined process for state scholarships - possibly a single application from which state employees could then determine exactly which scholarships a particular student qualified for.

Jim Purcell, director of the state Department of Higher Education, has proposed a much stricter limit in the amount of tuition revenue that state colleges can devote to scholarships - specifically reducing the cap from 30 percent to 15 percent. But Beebe said Monday he wasn't sure that Purcell had arrived at "the right number," saying that 15 percent might be too drastic a cut.

Trauma System

Wills said that setting up a statewide trauma system - which he regretted being unable to do in the 2007 session - remained a high priority for 2009.

"The need is still there, if not greater," he said.

The idea of funding the trauma system with a significant increase in the state tax on cigarettes appears to be gaining traction. An additional tax of 50 cents per pack would generate $71 million to $73 million per year, Beebe said, far more than enough for the trauma system, which would require about $28 million a year to start.

And that figure assumes that there will be some reduction in cigarette sales as a direct result of the higher price.

Increasing the cigarette tax would require a 75 percent supermajority vote of both houses of the General Assembly. While Johnson pointed out the problem of funding an increasing obligation with a decreasing source of revenue, he also said that tobacco industry lobbyists might consider a legislative solution to be a lesser evil than an initiated act.

(The threat of an initiated act to increase the state's severance tax on natural gas helped the industry and the Legislature arrive at a compromise in last year's special legislative session.)

Other Items

* Wills and Johnson said they were going to be cautious about cutting another penny from the state sales tax on groceries during the current recession. But Beebe, who championed the 3 percent reduction that legislators approved in 2007, said he believed state revenues would remain strong enough to allow him to continue with his campaign promise.

While manufacturers are already lobbying for further reduction in the sales tax paid on energy used in the manufacturing process, Beebe said it that was not as high a priority for him as reducing the grocery tax.

* Beebe said he hoped to receive another $50 million for the "quick action closing fund" that he has used with success to attract new industry to the state. In fact, he said, he'd like to have even more, although he doubted more than that would be available.

"I don't like incentives to get jobs, but that's the life we lead and the world we live it in," he said.


During the discussion of economic development incentives, he revealed for the first time that Nice-Pak Products Inc. of Orangeburg, N.Y., had scratched Jonesboro from its list of possible expansion locations before owner and CEO Robert Julius attended a fundraiser with Beebe and Wal-Mart CEO Lee Scott last year.

That contact, he said, led Nice-Pak to reconsider Jonesboro and to announce in October that it would invest $40 million in a plant that will employ 300 in Jonesboro.