State Budget Practice Report Cards and Budget Resource Guide

Arkansas raised its budget transparency grade to an average of C for fiscal 2017 through 2019, losing its position as the only state to receive a D average in the category for 2016–18. The move reflected the state’s adoption of tax expenditure reports in 2018 and 2019. Seven other states also received Cs for transparency in the latest three-year period. 

Arkansas lost ground in the budget maneuvers category, however, dropping to an average of B from an A in the previous period. The decline reflected a transfer in 2019 of $21.9 million from the rainy day fund to the Arkansas Department of Transportation so the agency would have sufficient matching funds to obtain $200 million in federal highway money. Using rainy day fund assets outside a fiscal crisis or natural disaster may present future challenges for the state as it lacks policies for replacing withdrawals—one of the best practices cited in the recent Volcker Alliance working paper, Rainy Day Fund Strategies: A Call to Action. This lack of a rule for replenishing the rainy day fund contributed to Arkansas’s receiving a C average in the reserve funds category. The state also lacks policies that link rainy day fund goals to historical revenue volatility.

In legacy costs, which include public worker pensions and other postemployment benefits (OPEB), principally health care, the state earned an average of C. Its pension plans were 81 percent funded as of 2018, about 11 percentage points above the total for all states. But Arkansas has set aside no funding for future OPEB obligations, instead meeting them on a pay-as-you-go basis. 

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To emphasize the need for clear and comprehensible budgets to inform citizens, promote responsible policymaking, and improve fiscal stability, the Volcker Alliance in 2016 began a study of budgetary and financial reporting practices of all fifty states. The Volcker Alliance’s mission is to improve the effectiveness of the administration of government at all levels. Making state budgeting more transparent and accountable is an important part of that goal.

The report cards presented here are taken from the 2020 Volcker Alliance report, Truth and Integrity in State Budgeting: The Balancing Act, which proposes a set of best practices for policymakers. For those wishing to gain greater insight into state fiscal issues, the accompanying budget resource guide is derived from the Alliance publication State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses (2016). 

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