Beebe says tax cut needed despite tight budget

LITTLE ROCK Gov. Mike Beebe said Thursday that he's pushing forward with his proposal to cut the grocery tax to keep his word to voters, despite the state's tight budget. But he said he doesn't think voters would have punished him if he went the other direction.

"I could have gotten out and said 'in these tough economic times, we've just got to hold off,'" Beebe said in an interview with The Associated Press. "I think almost all Arkansans would have understood it. They understand it now. People are smart. They know what's happening. But I still think we've got a responsible way to be able to keep the faith and let them know I want to continue down the road we're heading down."

Mike Wintroath  

Arkansas Gov. Mike Beebe, left, speaks to a reporter, Thursday, Dec. 18, 2008 in his office at the Capitol in Little Rock, Ark., as Beebe's chief of staff, Morril Harriman, right, listens in. (AP Photo/Mike Wintroath)

Beebe has proposed cutting the grocery tax by another penny next year even as the nation is in a recession and state agencies fight tight budgets. The tax cut would reduce Arkansas state revenues by $30 million.

Beebe also said he would like between $120 million and $130 million over the next two years for a "rainy day fund" and another $50 million for a fund he controls to attract new businesses to the state and help existing ones expand.

During his campaign for governor in 2006, Beebe pledged to phase out the state's sales tax on groceries over time but said the cuts would depend on state revenues. Last year, lawmakers approved his proposal to cut the sales tax in half, from 6 cents to 3 cents.

"Why do we want to attempt to do this during a tough time? It's a message to the people that we want to try to do the things we said we were going to do," Beebe said. "We want to keep faith."

Beebe last month introduced a $4.4 billion balanced budget that includes the 1-cent cut in the state's sales tax on groceries, trimming that tax to 2 cents on the dollar. The budget also includes $145.9 million in unfunded appropriations.

Beebe denied that he was putting a campaign promise the grocery tax cut ahead of other state needs.

"Restoring faith in government it seems to me is just as important as anything else, as important as any single issue, other than meeting your essential services," Beebe said. "I think we're trying to do both."

Beebe has said he wants to use part of the state's projected $300 million surplus to help pay for some of the services that would otherwise go unfunded and also wants to use some of the surplus as a "rainy day fund" the state can tap in case of tough economic times.

Beebe did not say how much he would seek for the fund next year, but estimated he would need between $120 million and $130 million over the next two years. Voters last month approved a constitutional amendment requiring the state to budget annually in yearly legislative sessions.

The governor said he would likely ask lawmakers for another $50 million for his "Quick Action Closing Fund," which lawmakers approved last year. The fund has been used to grant incentives to new businesses and $2 million of the fund was offered to Cooper Tire Co. to keep its Texarkana plant open.

A day after sharp disagreements emerged between Beebe and Lt. Gov. Bill Halter over how to fund scholarships paid for by a state-run lottery, the governor said he didn't believe there would be competing bills over the measure. Halter had pushed for the lottery amendment, which was approved by voters last month, and on Wednesday he released a list of proposals he hopes legislators will consider in crafting legislation to set up the lottery.

Halter proposed creating a merit-based scholarship program that would be awarded to students based on their grades, and also called for using the state's projected $51.8 million balance of unused scholarship money to start the program before the first lottery ticket is sold.

Beebe said he would rather use the lottery money mostly to increase the eligibility and the award amounts for the state's need-based and merit-based scholarship programs. He's also proposed creating a new scholarship program to increase the number of graduates in needed areas, such as math and science.

"I doubt you'll see competing proposals," Beebe said. "I think what you'll see is the House and the Senate coalesce around principles of good scholarship policy after taking in all the input of people involved, hopefully including us."

Beebe also declined to say whether he would support efforts to fight an initiated act banning unmarried couples from becoming adoptive or foster parents. The American Civil Liberties Union has said it is considering suing over the act, which was approved by voters last month. Beebe had opposed the measure.

"We'll let the judicial branch worry about the judicial part of it," Beebe said. "In the meantime, we'll try to serve as many kids as we can."