Published Online: February 19, 1997


Ark. Schools Won't Have To Pay For $50 Million Accounting Gaffe

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Schools and colleges in Arkansas won't have to pay back some $50 million they mistakenly received through a "monumental" accounting error by the state's fiscal department.

In fact, they may come out ahead on the legislative deal crafted to recoup some of the money.

The miscalculation was discovered at the beginning of the month, after the chairman of the legislature's joint budget committee asked the fiscal department to review the amount of money flowing into the Educational Excellence Trust Fund, which is generated by a portion of the state sales tax.

About two-thirds of the $160 million-a-year fund goes to boosting teachers' salaries. Lesser amounts go to university scholarships, early-childhood programs, and adult education.

While the chairman, Rep. Edward F. Thicksten, had suspected that the fund was receiving too little revenue, the review found that, in fact, an error by the department resulted in the fund's receiving from $8 million to $10 million too much every year since 1991.

"It was a monumental error that a 5th grader shouldn't have made," Mr. Thicksten, a Democrat, said.

Following a 1991 half-cent increase in the sales tax that was earmarked for the fund, state officials started underestimating the state's base sales-tax rate, in turn shipping too much into the education fund.

Saved by Surpluses

Since the audit caught the error, legislators have quickly agreed that trying to recoup the money was a bad idea and unnecessary, given the growth in the Arkansas economy.

State officials have pointed out that putting the extra money into the fund did not harm other agencies because the state budget has been running a surplus. In addition, some of the money that mistakenly went into the fund was likely to have been allocated to education anyway, since almost 70 percent of the state's general revenue goes for that purpose.

So instead of cutting future payments from the fund, lawmakers have drafted a plan that would freeze the fund at its present level, $192.5 million, for the next two years. During those years, any revenue generated beyond that amount would go into the general fund, making up for some of the misdirected money. After that, Mr. Thicksten said, officials will consider removing the cap and letting the fund grow again.

The budget committee chairman said he had anticipated that the fund would grow by about $10 million in each of the next two years, so in a sense schools and universities could be said to lose that amount.

But he added that a series of budget actions this year could bear on the fund. "My plan doesn't run the risk of giving education less" from the fund, Rep. Thicksten said.

Educators Pleased

Kellar Noggle, the executive director of the Arkansas Association of Educational Administrators, said that when 150 superintendents met with him last week, they were more than relieved: "They were actually rather pleased the legislature did not choose to reduce the fund."

Tommy Venters, the executive director of the Arkansas School Boards Association, seconded that emotion. "The educators think we came out all right on this thing."

With the state in a mood to cut taxes, including perhaps the used-car tax and taxes on some services that feed the Educational Excellence Trust Fund, Mr. Venters said school officials are pleased at the prospect of getting the same amount as this year. "We'd rather take a sure thing than a gamble," he said.

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