What Does Government Transformation Mean for Arkansas Taxpayers?

While Arkansas taxpayers' attention in the 2019 session focused on enactment of tax reform legislation, another major change adopted by the legislature was comprehensive, statewide governmental transformation, in the form of the Transformation and Efficiencies Act of 2019 (Act 910).  This reorganized the myriad state agencies into 15 cabinet-level agencies, each headed by a secretary.  The reorganization was effective July 1, 2019, but—like any merger—the implementation will take months or even years for the complete impact to be felt: One of the selling points of the legislation was that no one would immediately be made redundant, but, over time, the administration will try to wring out efficiencies through consolidation and shared services.  The transformation centralizes tax administration at the Department of Finance and Administration (DFA) and centralizes economic development at the new Department of Commerce.

DFA Picks Up Property Tax

For DFA, not much is changing except for adding two tax-related agencies, the Assessment Coordination Department (ACD) and Arkansas Tobacco Control (ATC).  DFA will continue to be the state's tax and budget agency.  The head of DFA, Larry Walther, is now a Secretary.

ACD continues to be led be Director Bear Chaney and his team.  Only now, instead of reporting to the governor, they report up within DFA.  As such, DFA senior leadership may become involved in significant property tax policy issues (of which there seem to be quite a few at the moment—mineral interests, dark stores, charitable exemptions, etc.).  DFA's involvement is likely to give property tax policy issues a different flavor from what we have seen historically.

The consolidation of ATC also seems natural given the fiscal importance of tobacco taxes and fees; DFA already encompasses Alcoholic Beverage Control and the Racing Commission.  Perhaps the addition of ATC will improve coordinated enforcement of the state's tobacco taxes, fees, and regulations.

Increased Economic Development Project and Policy Coordination from the Department of Commerce

On the economic development side we see more fundamental changes, with the new Department of Commerce becoming a one-stop-shop for economic development, and potentially also a source of pro-growth policy ideas—perhaps including tax policy.  The Arkansas Economic Development Commission (AEDC) is now part of the Department of Commerce, and its Executive Director, Mike Preston, is the new Secretary of Commerce.  Within his office he has assembled a strong executive leadership team including Nathan Smith, an economist with expertise in tax policy.  Perhaps we will see the Department of Commerce become involved in efforts to further reform the Arkansas tax system.

The new Department of Commerce also includes the Arkansas Development Finance Authority (ADFA) and the Office of Skills Development (OSD).  (Indeed, the new head of ADFA is Bryan Scoggins, an experienced hand from AEDC.)  This integration should facilitate the state's ability to take a concerted approach to business inducements that may involve ADFA financing assistance or OSD workforce training assistance.  The addition of the Division of Workforce Services (DWS) should also aid in the long-term development of Arkansas's workforce, which is generally considered to a priority for economic development.

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