Skip to main content
All Posts By

Edwin Flores

Corporate Welfare in Arkansas

Corporate Welfare in Arkansas – Governor’s Quick Action Closing Fund


The hard working people in small businesses around the state should be outraged. They are creating value, then having that value taxed by the state. Then the state turns around and gives those tax dollars to another private company, sometimes their competitors.  This not only redistributes the wealth of the small business owner but often re-distributes their employees as well.  Not only do these companies get taxpayer money by the hundred-of-thousands, and even millions, but several of these businesses are large, politically connected companies.   The small businesses of Arkansas who want to be left alone by government are at the losing end on both sides.

How is this done, you ask?  The Arkansas General Assembly established the Quick Action Closing Fund (“QAF”) through Act 510 of 2007. The bill passed unanimously in the Senate, and had only four “no” votes in the House (all republicans). Bruce Maloch (D-HD4) and Jim Hill (D-SD20) sponsored the bill.

The discretionary fund provides tax revenue to private businesses.  Act 1147 of 2015 appropriated $20 million to the fund for the upcoming fiscal year. The Governor has discretion on when and how the funds are used. Recently, Governor Hutchinson awarded American Taekwondo Association $950,000 from the fund to build a headquarters in Little Rock. Ben E. Keith received over $2.27 million from QAF recently as well. Below is a table listing the projects from the QAF for FY13 and FY14.

The table shows that the state of Arkansas has literally been paying for private companies’ rent, parking, bills, salaries, renovations, and equipment among other things.

This slush fund presents Corporate Welfare at its worst.  Rather than having a free market to decide which companies thrive and survive, the government, and in fact the Governor himself, is hand picking who gets taxpayer money to pay their bills and entice the best employees from Arkansas’ limited work force.  Negative sentiment towards abuse of welfare for individuals has grown greatly in the last few years, but many remain unaware of the Corporate Welfare practices in the state.

QAF is characterized as “economic development” that keeps jobs here rather than going to some other state or country. The program’s intent is to save jobs that may otherwise be lost because of budget cuts or because a company is considering moving operations to a more business-friendly area.  With the current manufacturers in the state unable to find a sufficient number of dependable works as it is, one must wonder about the need for this policy.

Some takeaways of the corporate welfare Quick Action Fund include:

  • $742,000 to ConAgra Foods for “parking/road” in 2013
  • $750,000 to Arkansas Research Alliance for “research salaries” in 2013
  • $5,000,000 to Blue Oak Resources through the AR Venture Capital Fund for “investment” in 2013
  • $1,000,000 to NanoMech, Inc. for “payment to Waco Title Company” in 2013
  • $687,000 to nGage Labs for purposes including “rent” in 2014
  • $478,182 to Umarex USA for “building expansion and parking” in 2013
  • $599,000 to NUVZN Technologies for “rent reimbursement” in 2014
  • $1,600,000 to Inuvo for “relocation and equipment” in 2013
  • $865,000 to Dassault Falcon for “road and engineering” in 2013
  • $1,800,000 to Windstream for “capital improvements” in 2013
  • $$634,000 to Custom Aircraft Cabinets for “building renovation” in 2012

If these renovations, equipment, and rent payments were truly needed and wanted, then the market would be calling for them. With Government making choices for consumers on what businesses will succeed, they decide a specific business’ product/service over others. Left up to individuals in a free market place, this business or a specific area of a business may fail. Allowing otherwise failing businesses to continue through taxpayer handouts fosters the continuation of something the market has otherwise rejected. Continuing of rejected products/services guarantees inferior choices to consumers because it is not allowing the rejected choices to leave the market and make room for innovation for better choices for consumers.

A far better way to spend this money would be to reform the tax code to give the $20 million back to the businesses that actually paid in the taxes. These true producers are creating value. To allow those small businesses in our state which are already producing and creating value to keep more of their money for research and development seems like a no-brainer for investment and true “economic development” for Arkansas. Yet each year we tax businesses then redirect a portion of that money to other businesses for their own operations through QAF.

In the recent past, QAF recipients have had to return a portion of their funds because they closed their operations. Hewlett Packard in Conway and Nordex near Jonesboro were both recipients of QAF money. Both companies closed and/or cut jobs soon after receiving the money. This effectively made those payments interest free loans to failing businesses. All paid for by taxpayers.  And as the list below reflects, some companies come for more than one serving.

If Arkansas were truly a “jobs magnet”, then there would be no need for extra forces to draw businesses here. The jobs would come because of economic opportunity, a strong work force, and the tax and business friendly environment needed to foster economic development. Getting government out of the way, and out of the pockets of small businesses would allow them to grow and thrive, adding jobs and value to the community in which they are located.

Let consumer choices decide the winners and losers. Stop letting Government choose the winners and losers with other people’s money.


Total spent since 2007 – $132,502,000

Total jobs “created/retained” since 2007 – 12,372

Cost “per job” – $10,709.83


                                               87th Session – July 1, 2013 – June 30, 2014

Company Name Purpose Amount Cumulative Payments
Thermold Magazines New product creation $ 238,748.00
  travel associated with new product development $ 10,025.08
  New product development (molds) $ 251,226.92 $500,000.00
Monticello Economic Dev Comm Rail $ 30,290.00
  Rail $ 43,474.83
  Rail $ 117,026.62
  Rail $ 46,308.83
  Rail $ 58,420.43
  Rail $ 4,479.29 $300,000.00
Inuvo Equipment/fixtures $ 125,230.95 $125,230.95
Dassault Falcon Building construction and renovation $ 2,000,000.00 $2,000,000.00
L&R Distribution Asset purchases $ 137,539.55 $137,539.55
Winrock International Contract with Winrock for Innovate Arkansas $ 300,000.00 $300,000.00
Umarex USA Building expansion and parking $ 478,182.00 $478,182.00
ConAgra Foods Parking/road $ 742,000.00 $742,000.00
City of Little Rock (Dassault/Falcon) Road $ 121,075.83  
  Road $ 47,008.42  
  Road $ 238,957.99 $407,042.24
Arkansas Research Alliance Research salaries and expenditures for Arkansas    
  Research alliance $ 750,000.00 $750,000.00
City Title & Closing (Creative Things) acquisition of facility $ 435,000.00 $435,000.00
ADFA (AR Venture Capital Fund) Investment into Nanotech $ 1,000,000.00  
  Ark Challenge Project $ 150,000.00  
  Vivionne Bioscience/equip and investment $ 216,000.00  
  Home DX Project/investment $ 400,000.00  
  Refund to Expenditure – Vivionne $ (20,916.82)  
  Blue Oak Resources Project/investment $ 5,000,000.00  
  Refund to Expenditure – Blue Oak Resources $ (1,995,724.13) $4,749,359.05
Soul of the South Building remodel $ 168,404.00  
  building remodel $ 331,596.00 $500,000.00
nGage Labs rent/furnishings/software/training/recruitment $ 305,617.32  
  rent/furnishings/software/training/recruitment $ 144,955.64  
  rent/furnishings/software/training/recruitment $ 104,059.26  
  rent/furnishings/software/training/recruitment $ 85,227.33  
  rent/furnishings/software/training/recruitment $ 47,763.15 $687,622.70
Diamond Bear Brewing equipment $ 116,000.00 $116,000.00
NanoMech, Inc. Equipment $ 329,653.64  
  Payment to Waco Title Company $ 1,000,000.00  
  Facility improvement, development, equipment $ 146,471.76  
  Equipment $ 40,453.45  
  Equipment $ 24,495.20  
  Facility improvement $ 111,843.43  
  Facility improvement, development, equipment $ 320,541.49 $1,973,458.97
Umarex Building expansion/parking $ 203,069.00 $203,069.00
Porocel Industries Building construction and improvement $ 250,000.00 $250,000.00
GGNSC (Golden Living) Equipment and furnishings $ 13,350.10 $13,350.10
NUVZN Technolgies Mold construction $ 389,881.96  
  rent expense reimbursement $ 62,523.04  
  rent reimbursement, mold construction $ 536,285.05 $988,690.05
Grace of Jake Film rebate $ 13,260.50  
  film rebate $ 9,702.03 $22,962.53
Aspen Transportation Facility retrofit and equipment $ 65,597.46  
  Facility retrofit and equipment $ 5,684.35 $71,281.81
Orbea training/building renovations $ 100,000.00 $100,000.00
Remington Arms Construction (slab and blocks) $ 465,250.00 $465,250.00
Firestone Site improvements $ 119,608.47 $119,608.47
Refunds to Account refund   $(2,971,438.75)
  Cumulative Total $13,464,208.67



                           86th Session July 1 2012 – June 30, 2013

Company Name Purpose Amount Cumulative Payments
Goodwill Industries Building Renovation $ 439,346.00
Building Renovation $ 60,654.00 $500,000.00
Neckbone Production Film Rebate (MUD) $ 35,425.93 $35,425.93
Inuvo Relocation & Equipment $ 435,154.76
Relocation & Equipment $ 696,748.93
Relocation & Equipment $ 325,918.43
Relocation & Equipment $ 166,946.93 $1,624,769.05
Molex Equipment $ 287,196.00 $287,196.00
City of Jonesboro (Nordex) Engineering (Rail) $ 3,780.00
Road $ 16,828.77
Road $ 293,979.94
Road $ 69,440.39 $384,029.10
Dassault Falcon Road & Engineering $ 865,706.06 $865,706.06
Dairy Stabilization Program Dairy Stabilization Payment for June $ 252,284.64 $252,284.64
NextLife Asset Recovery LLC Equipment $ 226,338.23 $226,338.23
L&R Distribution Asset Purchases $ 43,552.50 $43,552.50
Windstream Capital Improvements $ 1,864,334.60 $1,864,334.60
ADFA ARK Challenge $ 150,000.00
Agricultural Food Systems $ 15,000.00 $165.000.00
Vivione Biosciences, LLC Laboratory Support Equipment $ 7,500.00
Market Research $ 6,525.00
Laboratory Support Equipment $ 20,000.00
Laboratory Support Equipment $ 17,326.16
Laboratory Support Equipment $ 2,402.10
Laboratory Support Equipment $ 7,745.11
Laboratory Support Equipment $ 6,369.02
Laboratory Support Equipment $ 2,748.81
Laboratory Support Equipment $ 27,489.55
Laboratory Support Equipment $ 3,336.45 $101,442.20
NanoMech, Inc Equipment $ 828,660.11
Equipment $ 276,889.43
Equipment $ 518,761.21 $1,624,310.75
DeltaCB, LLC Wastewater Infrastructure $ 500,000.00
Wastewater Infrastructure $ 145,000.00 $645,000.00
JM Associates Film Rebate (Mighty Mississippi) $ 30,282.50 $30,282.50
GGNSC (Golden Living) Equipment & Renovation $ 249,423.55
Equipment & Renovation $ 313,583.80 $563,007.35
First Orion Office Renovation $ 30,430.84
Renovation & Equipment $ 94,680.65
Office & IT Equipment $ 26,532.28
Office & IT Equipment $ 24,289.42
Office & IT Equipment $ 23,472.42
Office & IT Equipment $ 4,176.31 $203,581.92
Awesome Products (AOI) Parking Lot/Truck Staging $ 240,000.00 $240,000.00
Custom Aircraft Cabinets Building Renovation $ 96,000.00
Building Renovation & Equipment $ 365,457.00
Building Renovation $ 173,006.00 $634,463.00
Firestone Site Improvements $ 1,130,391.53 $1,130,391.53
Refunds to Account refund $(154,371.36)
Cumulative Total $11,266,744.00

The Fall & Rise of Legislative Pork in Arkansas

Reprinted from Conduit for Action; By: David Ferguson

This is the second in a series of articles on General Improvement Funds

GIF PigThe General Improvement Fund (GIF) used to be used for improvements to state facilities, state parks and other state projects.  As an example of the type of state projects that were included, here is a link to Act 1030 of 1987, which distributed GIF. As you can see as far afield as the legislation went was to provide money to the Livestock and Poultry Commission for District Livestock Shows, but there is extensive legislation concerning state promotion of livestock through the shows.

The types of projects included in GIF became broader over the years.  The types of projects allowed exploded during the years Republican Mike Huckabee was governor, but it was not Huckabee’s doing. Much of the expansion came about because the overwhelmingly Democratic controlled legislature flexed its muscles in defiance to a Republican governor.  Adding more kinds of GIF projects was just one byproduct of the struggle to determine whether the Republican governor or the Democratic legislature would be king of the hill.

By 2005, the raid on state funds for GIF pork had gone crazy! The GIF distribution bill grew to 113 pages! Page after page made awards to not just state facilities and parks, but also to cities, counties, fire departments, and lots of private entities.  There were parks, museums, sports complexes, senior citizens centers, scholarships and out right support of private entities. Much of the money given to private and nonprofit organizations could be used however the entity saw fit. Some organizations got more than one GIF award because the awards came from different legislators who filed separate legislation.

I spent hours reading through the list of entities were authorized to receive money under the 2005 law and found no good way to summarize the projects.  A summary of the projects would have been much too long for this article.  I decided to list just a few random examples of awards of non-governmental awards, other than senior citizens centers and the many subscription fire departments.

Below is an example of twenty five projects listed in Act 2315 of 2005.  This is not a top 25 list.  I just picked 25 and quit reading the 113 page act.

  1. Arkansas American Red Cross $90,701
  2. Arkansas Baptist College $70,000
  3. Ballman Parent Teacher Association $2,500
  4. Boys and Girls Club of Pine Bluff Inc. $100,000
  5. Butterfly Community Ministries for North Little Rock Our Club $60,000
  6. Elmwood Cemetery Association, Inc. $25,000
  7. England Acres Neighborhood Association $100,000
  8. First Tee Golf Program for scholarships $50,000
  9. Free Will Baptist Family Ministries $25,000
  10. Habitat for Humanity of Jefferson County $5,000
  11. Hot Springs Village Property Owners Association $80,000
  12. Human-Elevation-Love Project $3,000
  13. Inner City Futurenet Incorporated $30,000
  14. Legion Hut in Lepanto $10,000
  15. North Little Rock Heflin YMCA $35,000
  16. Ozark Guidance for a Psychiatric Care Unit in Washington County $454,000
  17. Philander Smith College $30,000
  18. Runyan Acres Property Owners Association $20,000
  19. Sherwood Rotary Club (Veteran’s Memorial) $20,000
  20. Small Business Association $10,000
  21. Sylvan Hills Optimist Club $5,000
  22. United Family Services, Inc. $50,701
  23. Veterans of Foreign Wars (VFW) in Jefferson County $10,000
  24. Westside Business Men and Women’s Association $5,000
  25. White County United Way $40,000

There was much more legislation involved other than just the 113 page GIF distribution bill. There was also a separate appropriation bill for most of the projects in the list.  Separate bills were filed because Article 5, Section 30 of the Arkansas Constitution requires appropriation bills to be limited to a single subject.  Because some legislator would fail to get legislation filed in time, there was also a bill that would list multiple projects. Among legislators it was known as the “Christmas Tree Bill.”

Wilson v Weiss DFA

There was so much pork being spread around by 2005 that attorney and former state Representative Mike Wilson of Jacksonville had enough. Wilson filed a lawsuit challenging the constitutionality of a number of acts awarding General Improvement Funds. He challenged several claiming the acts violated:

  1. Amendment 14 of the Arkansas Constitution, which prohibits “local or special legislation”; and
  2. Article 5, Section 29, of the Arkansas Constitution, which requires appropriation bills to state a “distinct purpose”. Many of the appropriation acts merely stated that the funds were being appropriated “for state assistance to” the entity.

In Wilson v. Weiss DFA the Arkansas Supreme Court struck down several GIF awards as unconstitutional. Some observers thought the court decision meant the end of legislative pork. But the legislature was not inclined to give up.  As soon as the Supreme Court rendered its decision, legislators went to work devising a plan to get around the decision.

Scheme to continue GIF funding to local projects and groups

There was much discussion among legislators about the possibility of setting up a commission to make the same awards as grants, and the commission would be controlled by legislative appointments. This idea was eventually dropped, in part because it would focus too much attention on the legislature.

Eventually, they arrived at a plan that would keep the pork but make it harder for the public to track it. The GIF would be funneled through state agencies and GIF grants would then be awarded. The legislators would keep control of the grants by using informal communications with agencies. An unofficial behind the scenes list was kept on each project a legislator wanted to fund out of “his or her” share of GIF. The amount that would be appropriated to an agency was based on the unofficial list. Using this scheme, the appropriation bills avoided naming the particular recipients, which was thought to help avoid a constitutional challenge.

Under this scheme the GIF distribution bill no longer had to be 113 pages, but it is still lengthy because grants to colleges and state facilities are still listed separately. The latest distribution act is Act 1147of 2015.

A few bumps in the road

The scheme to keep funding local projects had an Achilles’ heel. The scheme depended on good backchannel communication between the legislature and state agencies.  There were glitches in communication at first.

Where is my publicity? The first complaint that arose among legislators was that some agencies didn’t give the legislator credit for the grant.  At least one agency sent out grant checks by the mail, which denied legislators the opportunity to make a big show of the award.  Agencies quickly found out that a good awards presentation with the legislator present for a photo opportunity was what was usually expected when it came to local grants.

Grants to colleges were not so much of a publicity problem because the legislator could still have his or her name on the act making the grant to the college.

But it is my money! In 2007, Senator Gene Jeffress send $100,000 to the state Athletic Commission for grants to Boys and Girls Clubs.  Not having any direction on how to divide the money, the commission announced that the fair thing to do was to give each Boys and Girls Club a GIF grant.  The commission’s decision revealed the lack of communication to the public and exposed the new system for what it was. Senator Gene Jeffress went to the next meeting and objected saying it was his money and that he intended for the entire $100,000 to be divided between just two clubs in his district.

“I did not seek $3,000 for each one,” he said. “I sought $75,000 and $25,000.” Do you think I would have sent $100,000 this way if I didn’t expect to get it back?” he asked. “I’m sorry, but I don’t represent Corning or West Helena. I got the money for the districts I represent.[i]

After the meeting, Jeffress said the Supreme Court decision was the reason the legislation didn’t mention specific clubs. “It was just the way it had to be written,” he said.[ii].

His public statement was an embarrassment to many legislators because they were trying to keep the funding local projects under the radar.  It was also too late.  The Athletic Commission was in a bind.  It could make the Senator mad or make the public and other clubs mad by reversing course and doing what the senator asked. With the public scrutiny the commission chose to keep its promise to divide the money among all clubs.

Local criticism of grants. After the 2008 article on the Boys and Girls club grants, GIF got little negative press because the big media normally didn’t notice the small grants being done though agencies.  A couple of exceptions began as local criticism of a GIF project and became statewide news. Two example are:

  1. A grant for a fireworks show that was criticized by a county judge who needed money for other projects; [iii] and
  2. A grant for a fully handicapped accessible playground which quorum court members criticized because they did not have money to maintain a park and didn’t even have a parks department. .[iv]

Letter of legislator support needed.

Many local GIF grants are funneled through the Department of Finance and Administration and then to one of the eight Planning and Development Districts covering the state.  The Planning and Development Districts then award grants to local projects.  How much money goes to a Planning and Development District is determined by how much each of a legislator’s “share” of GIF the legislator wants to funnel through the district.

The board of a Planning and Development District is made up of mayors and county judges. Although Arkansas Code 14-166-205 says the decision on allocating the funds “shall be solely within the discretion and control” of the board, the system doesn’t work that way. In 2013 the Arkansas Democrat Gazette exposed the fact that:

For five of the eight planning districts, a letter of support from a legislator is either required or strongly recommended and is considered in the grant evaluation process.[v]

Does that mean that the other three Planning and Development Districts make grants the way they wish instead of the way the legislator wants it to be spent? Do you think a legislator who knows how he wants the money to be spent would keep sending his “share” to a board that won’t listen?  It is more likely that the lack of a requirement for a letter of recommendation merely means there is no need for a paper trail in that district.

Good press at home

While the legislature tries to fly under the radar of statewide media, local press is still sought and is a big deal. Local newspapers are happy to provide their legislator publicity for bringing home the bacon to help the community. Many legislators are quick to let the public know that the grant was a result of the legislator’s willingness to share “his” GIF money (See examples in the CFA article: General Improvement Fund – A Reelection Tool )

The future of legislative GIF for local projects

Will the legislature act?  Not likely! Not every legislator likes the way the legislature uses GIF to fund a buffet of local projects across the state. But, don’t expect them to be brave enough to stand in opposition to the scheme. First, most of their colleagues love GIF as a way to help get reelected, and a legislator is not likely to alienate colleagues over GIF.  Second, if a legislator took the bold stand of saying I will not accept local GIF moneys, local groups would see funds going into other districts and rise up in opposition to the legislator’s reelection. Third, some entities have received GIF money for so long that they see it as their money and right.

If no one in the legislature has the guts to stop the raid on taxpayers’ dollars, how can it be stopped?  It may take another embarrassing lawsuit.

Mike Wilson speaks out on the new scheme.  Mike Wilson who filed the lawsuit over 2005 projects, has not been happy or impressed with the legislature’s scheme and has called it an attempt to bypass the court decision.

Concerning funding of a park in Saline County, he is quoted as saying:

“A single member of the Legislature does not have the privilege of directing where public money goes,” Wilson said by phone. “That’s a perfect demonstration of what the writers of the constitution said was unlawful. It’s an attempt to get around the constitutional provision of local or special acts. And it’s clear that’s what that is.[vi]

Concerning a grant of $5,000 for a fireworks show in Benton:

“I don’t believe that there is a state fireworks program that I haven’t heard of,” Wilson said. “Why is it that other firework-needy places don’t have access?”[vii]

Wilson has also called the scheme:

a corrosive example of pigging out at the public trough”.[viii]

Another lawsuit?  Sadly it may take another lawsuit to curb the legislative GIF practice.  With the legislative scheme being so obvious it may be time to put the scheme under review again to determine once again whether the local pork system violates:

  • Amendment 14, which prohibits “local or special legislation” or
  • Article 5, Section 29 which requires appropriation law to state a “distinct purpose.”

In addition, I think it would be worthwhile to also consider challenges based on:

  • Article 4, Section 2, which requires a separation of powers. This provision should be examined because the scheme allows individual legislators to act as the de facto authority over the distribution of GIF grants in their districts. Although this is being done indirectly, it should be remembered that the court has stopped intrusion on the executive base based upon a pattern of results.  (See Chaffin v Game and Fish)
  • Article 5, Section 30, which requires appropriation bills to be limited to a single subject. With the operation of the scheme being obvious, would the court decide that awarding grants is the single subject, or would the court look at the operation of the scheme as a “legislative Christmas tree” of unrelated projects.

Bottom line

When a legislator talks about being fiscally conservative and maintaining a balanced budget – remember the legislative GIF feed trough is still open and being filled each session (with your money!)


[i] Funds secured for his district, senator asserts, Arkansas Democrat Gazette, Jan 30, 2008

[ii] Ibid.

[iii] Display funding called to question, Arkansas Democrat Gazette, July 4,2014

[iv] Legislator’s letter eased funds for wife’s park project, Arkansas Democrat Gazette, Sept 3, 2013

[v] State tap still open on local projects, Arkansas Democrat Gazette, October 13, 2013

[vi] Legislator’s letter eased funds for wife’s park project, Arkansas Democrat Gazette, September 20, 2013

[vii] Display funding called to question, Arkansas Democrat Gazette, July 4,2014

[viii] State tap still open on local projects, Arkansas Democrat Gazette, October 13, 2013

– See more at:

Arkansas DHS Director Misled Lawmakers On Obamacare Waiver

CFC Claims no Credit. This article is shared from and all credit is given to the authors,, and the Foundation for Government Accountability.

Original Link

By Jonathan IngramNic Horton and Josh Archambault

Arkansas bureaucrats are wasting millions of dollars providing Medicaid benefits to people no longer eligible for the state’s expansion of the program under Obamacare. But is that just the tip of the iceberg?

Last month, internal e-mails from the Arkansas Department of Human Services surfaced, revealing that the state had never bothered to verify that individuals enrolled in Obamacare’s Medicaid expansion were still eligible for benefits. According to data provided by state officials, this is costing taxpayers up to $20 million each and every month.

We previously questioned why the state hadn’t started the redetermination process yet – which should have begun months ago. After all, federal law requires states to verify Medicaid enrollees’ eligibility at least once per year.

As we reported at the time, state officials contended that they had received a temporary waiver from the Obama administration, allowing them extra time to perform the eligibility checks. But it turns out that no formal waiver ever existed. Worse yet, a recent follow-up letter from the Obama administration may generate more questions than answers.

No Waiver Existed

After news broke that the state wasn’t performing the required eligibility checks, a number of reporters and lawmakers reached out for a copy of that waiver. Such a waiver would be pretty important – without it, Arkansas would be violating federal law.

Obama’s Letter Provides More Questions Than Answers

Unfortunately, this letter provides more questions than answers. First, it says that the Obama administration is now providing Arkansas the authority to delay its eligibility redeterminations. Does that mean that Arkansas was operating without that authority prior to April 27th? It certainly seems that way.

The Department of Human Services also contends that this letter allows them to delay all redeterminations until September 2015. But that is not, in fact, what the letter says. The letter allows them to delay redeterminations due in 2014 “for 9 months.” While a redetermination due on December 31, 2014 would not be due until September 2015 under this letter, one originally due on January 1, 2014 was actually due back in October 2014. This means that all redeterminations originally scheduled between January and August of last year should already have been conducted.

But even more worrisome is that the letter limits the delay exclusively to “eligibility renewals scheduled for January 1, 2014 through December 31, 2014.” It provides zero authority to delay redeterminations that should have been scheduled in 2015. So why hasn’t the state conducted the mandatory redeterminations that were due in January, February, March and April?

The Redetermination Process Should Have Begun Months Ago

Regardless of whether or not Arkansas’ actions are approved by Obama, they should be worrisome to taxpayers everywhere. The state has yet to redetermine eligibility for a single Medicaid expansion enrollee. By now, the state should have re-checked eligibility for more than 170,000 enrollees. Another 70,000 should be due for verification later this year or early next year.

To make matters worse, the Department of Human Services expects that up to 40,000 enrollees are still receiving benefits even though they’re no longer eligible. If those estimates are correct, taxpayers could be on the hook for up to $20 million per month to provide Medicaid expansion benefits to people no longer eligible.

Worst of all, state officials have facilitated this fraud by asking for waivers and continuing to kick the can further down the road. Meanwhile, nearly 3,000 children and adults with developmental disabilities are sitting on Medicaid waiting lists. Some of them have been waiting eight years or more for their needed home- and community-based services. They continue to wait, while Arkansas bureaucrats provide Obamacare welfare to 40,000 able-bodied adults who aren’t even eligible.

Welcome to Obamacare.

Employment Environment

Employment Environment

Summary of CFC position regarding the most productive Employer/Employee relationship for the good of the Arkansas citizenry:

In General–Problems Defined:

An individual’s relationship with an employer has become more distant and adversarial over the past decades.

Entitlement mentality of the individual and the constraint of regulation has created an environment that causes the employer to adopt uniform processes and responses that do not, and cannot, make the individual actions of the employee the focus of growth and prosperity but rather lumps all into a group for an average relationship. This fosters mediocrity at all levels, including the individual.

Discrimination, abuse, and disparity are too often the first things considered from all perspectives. These perceptions are further enhanced by the response of business taking the safe and generic path to relationships with employees and correspondingly, the employee is enabled, and even encouraged to assume a wrong has been committed if they are not successful or continued as a productive part of the business relationship.

There are obvious differences in people that cannot be measured by any imposed system, and we should move to a relationship whereby the judgment of an employer/employee transaction is deemed reasonable if the people remain, in general, willingly employed. An employer will generally fail on their own within a free capitalist system if they consistently cause good people to be subjected to discrimination, danger, or abusive environments.

A–The two extreme general perception groups for the business to individual relationship are outlined as follows:


1.Business Focus Extreme:

Business is big, rich, socially blind, and mindlessly focused for profits.

The goal is to make as much money as possible for the owners.

Employees are a necessary evil who must be paid a little as possible.

Employees are used as interchangeable parts and are of minor importance as individuals.

Safety is a cost to be minimized.

Management will and does take advantage of an individual any time it can.

Jobs are a take it or leave it proposition

2.Employee Focus Extreme:

Jobs are an entitlement.

What, where, when, and how employment should be regulated by a third party

Employees are to be treated the same rather than equally (same pay for same job description.)

To be fired is a negotiated transaction wherein the reason for the separation is an equal responsibility.

Seniority plays a primary or large roll in job retention and compensation.

Government should monitor in detail, and punish any potential safety or discrimination infractions.

Burden should be on business to prove there is absolutely no abuse, discrimination, or danger encountered at all times.

B—An ideal and productive business environment, most beneficial to all sides, would consider the following as positive principals:

It is in the interest of business to create an environment where individuals not only wish to work, but can advance to their potential in that work.

It is the individual’s duty to advance when given opportunity, not the other way.

A job filled is a mutually beneficial arrangement that should be terminate-able by either party at any time if not beneficial.

Employees should be paid the higher of their general market rate or a value that will enhance the company viability and retain the employee services.

Safety is good for business. Injury is not only a cost to both parties, but an indicator of the poor value/job of the management.

Retaining employees is good for business. Retaining unproductive people is harmful for the company and all individuals within it. There are many factors that go into the decision to terminate an employee, it is unproductive to business and the ultimate benefits to the employee to be forced to consider the “larger group/description” an individual may be assigned/belong to when assessing an individual’s job value.

Neither party is obligated to the other except by formal written contracts.

Risk and reward should always be allowed to be an incentive when humans enter into financial relationships.

The same description or opportunity does not insure the same results.

Some are worth more compensation than others; some will accept less than others. This is an individual agreement between an individual and a business not directly relevant to any other or different arrangement.

Pay is an individual negotiation before the fact.

Continuing the relationship after the fact is an option for either party.

Equal pay for equal work is impossible to achieve in both the sense of value created by each and the effect of intangible activity on the rest of the people.

There are too many factors to equate one individual to another.

This should allow each individual to negotiate their best deal with the employer regardless of what deal any other individual may have.

Incentives exist for both parties to reach an acceptable private arrangement.

Therefore it is the intention of CFC to promote the return to and further establish true free market principles and move business in Arkansas toward the more general “public regulation by affirmative employee/consumer/community action” in place of the current “collective, government administration of penalty/requirement/and directed incentives.”

General Improvement Fund – A Reelection Tool

Reprinted from Conduit for Action; By: David Ferguson

GIF-The members of Arkansas General Assembly are given discretion over millions of dollars in General Improvement Funds (GIF). For the 2015-2016 fiscal year $20 million has been set aside for the whims of legislators.  Each legislator determines how “their share” is spent. Some designate their share to go to a college others have the funds sent to the Department of Finance and Administration to then be sent to one of the eight planning and development districts and then awarded as grants.

The public is not privy to exactly how the money is divided among legislators, but if the House and Senate each received $10 million, and then with each Senator getting an equal share and each Representative getting an equal share, then each Senator would have discretion over $285,714.28 and each Representative would have discretion over $100,000.

Why are state funds distributed upon the discretion of an individual legislator instead of through a formula or perhaps retained for other needs? $20 million helps incumbent legislators gain favor in their districts.

2014 Election

Republican Doug Driesel, who ran against incumbent Democrat Representative Scott Baltz in District 61, stopped by a rural fire department to campaign.  According to Driesel, several firefighters told him they liked what he stood for, but that they couldn’t vote for him because Baltz had gotten General Improvement Funds for their fire department.

Blaine Davis ran as the Republican candidate in the adjoining District 60, against incumbent Representative James Ratliff. Recently, I asked Davis if he had a similar experience with fire fighters in his race. Davis responded:

 “Absolutely.  Several that I’d known for literally forever told me they would have to support him or just groaned when I told them who I was running against.  He’s given thousands to every one of them [fire departments].  Heck, at the Strawberry Fire Department fundraiser all he [Ratliff] did was stand up and talk about how much he gave them.”

A GIF grant is not likely to be forgotten by the members of an organization receiving the grant. In addition, local governments and volunteer organizations are also likely to be a good source of campaign workers because these are people who are already active in their community.

Could GIF make the difference in a legislative race?  You bet! Consider how close Blaine Davis’ came to winning.  Davis only lost to the incumbent by 50 votes. There are a lot of fire firefighters in House District 60. If just 26 firefighters voted for the incumbent because of GIF funds, then GIF funds made the difference in the outcome in that race.

Gaining publicity and building voter gratitude.

Legislators doling out GIF grants is a big deal in many areas of the state. Local newspapers, especially in rural areas, love to report that their Representative or Senator got GIF for local communities and organizations.  Legislators are quick to get in the photograph when as poster size check is handed out.  Click on name for an examples of the publicity legislators get from “their GIF:

 Rep. Scott Baltz                      Rep James Ratliff           Sen. Stephanie Flowers

Rep. Sheilla Lampkin            Rep Jeff Wardlaw          Rep Douglas House


Some legislators send all or a portion of “their” GIF to colleges. It is good publicity too.  For example, the University of Arkansas made sure its supporters and alumni knew that thirteen legislators deserve recognition for sending GIF to the university for three projects in the combined amount of $3 million. See article: University receives increase in state funding monies from General Improvement Fund

Many people see these articles and think “Our legislator is working hard and knows how to bring home the bacon.”  No effort was actually needed. Legislative GIF is just a slush fund created to give every legislator a share, whether the legislator uses it for a good purpose or not.

If the local newspaper fails to report the story or an organization’s newsletter fails to publicize it, what does a legislator do?  The answer is easy – toot your own horn on social media.  That is what Rep. Ratliff did when he did not get the publicity he hoped for.  Here are a couple of examples from James Ratliff’s Facebook account:

June 4, 2014: “Had a busy day. Started by going to the women’s battered shelter in Highland this morning awarding them a grant of $1000 for fixing their plumbing.”

April 12, 2015: “The fire chief Stan Mayland thanked myself (Rep James Ratliff) for the grants that bought all new turnouts and equipment for all the firemen in Strawberry.”

It seem a bit odd for a Representative to need to put his own name in parentheses on his own Facebook account.


Are there reasons for giving legislators discretionary funds (other than election purposes)? Are there legitimate reasons to give legislators discretionary funds?  No, there is not. Excuses cited in the past include:

1. Legislative discretion over the money is needed in order to get money for projects in rural areas. Wrong. Sorry but if getting funds to rural areas is the goal there would be a lot easier and cheaper ways of doing it. First, it is not just rural legislators who have say over GIF funds. Second, no legislator is required to use the funds for a rural project or even within his or her own district.

2. Legislative discretion is needed because a legislator knows better than anyone which local project should get a GIF. Wrong again. Legislators sometime do not know the greatest needs in their district and even if they do they have no obligation to use GIF for the most needed projects. In exercising discretion over the money, the legislator’s goals sometimes conflict with the priorities and needs of municipal and county officials.In 2013, Senator Jeremy Hutchinson directed GIF money to a firework show.  I happen to like firework shows, but local governments didn’t fund the firework show because of a lack of funds for more important projects.“Saline County Judge Lanny Fite said he has a list of projects that need funding like repaving parking lots or buying new lighting. ”“I did not like the way it was being used, plain and simple,” Fite said. “Money is very tight; we don’t have a sales tax. This money is always good to help us do projects that the county cannot afford.” [i]Also in 2013, then Representative Andy Mayberry and some legislative friends sent $120,000 in GIF to fund a playground that is fully accessible to disabled children.  That is certainly a worthy cause! But it also seems to be an instance in which a state Representative single handily pushed a project onto the county despite the quorum court not having money to maintain a park or replace equipment in the future.  It was noted by a quorum court member that the county didn’t even have a parks department. Julie Mayberry, Rep. Andy Mayberry’s wife and now a state Representative, responded to criticism by the quorum court in 2013 by suggesting that the quorum court create a parks department.[ii]Could we handle needs without giving legislators an expensive reelection tool?

On the other hand, maybe we would miss those newspaper photos of legislators handing out poster sized checks and their Facebook self promotions. The state also has turn back formulas for sending state support to municipalities and counties.

Also consider that a significant portion of legislative GIF goes to fire departments.  Again, there is a funding formula for support of fire departments.  In addition, a fire department with a significant need could be overlooked merely because it is in a legislative district where the legislator prefers to give his GIF allotment to a college or perhaps want to use it for a fireworks show.

Consider that a significant portion of legislative GIF goes to colleges. We already have a funding formula for the colleges. The Department of Higher Education should have a good understanding of needs of Arkansas colleges.  And, under the current system there is no guarantee that the most important need will be addressed because a legislator with a college in his or her district could choose to spend his or her share on other types of projects.

Do we really have to give a legislator a “please-reelect me fund” in order to fund worthy projects.


[i] Display funding called to question, Arkansas Democrat Gazette, July 4,2014

[ii] Legislator’s letter eased funds for wife’s park project, Arkansas Democrat Gazette, Sept 3, 2013


Why Are So Many Employers Unable to Fill Jobs?

This article is from Stephen Moore of The Heritage Foundation. CFC takes no credit or authorship of the article. It can be found here.


The great conundrum of the U.S. economy today is that we have record numbers of working age people out of the labor force at the same time we have businesses desperately trying to find workers.

As an example, the American Transportation Research Institute estimates there are 30,000-35,000 trucker jobs that could be filled tomorrow if workers would take these jobs- a shortage that could rise to 240,000 by 2022.

While the jobs market overall remains weak, demand is high in certain sectors.

For skilled and reliable mechanics, welders, engineers, electricians, plumbers, computer technicians, and nurses, jobs are plentiful; one can often find a job in 48 hours.

As Bob Funk, the president of Express Services, which matches almost half a million temporary workers with employers each year, said, “If you have a useful skill, we can find you a job. But too many are graduating from high school and college without any skills at all.”

The lesson, to play off of the famous Waylon Jennings song: Momma don’t let your babies grow up to be philosophy majors.

Three years ago the chronic disease of the economy was a shortage of jobs. This shortage persists in many sectors. But two other shortages are now being felt—the shortage of trained employees and of low-skilled employees willing to work.

Patrick Doyle, the president of Domino’s Pizza, says that the franchises around the country are having a hard time filling delivery and clerical positions. “It’s a very tight labor market out there now.”

This shortage has an upside for workers because it allows them to bid up wages. When Wal-Mart announced last month that wages for many starter workers would rise to $9 an hour, well above the federal legal minimum, they weren’t being humanitarians. They were responding to a tightening labor market.

The idea that blue-collar jobs aren’t a pathway to the middle class and higher is antiquated and wrong. Factory work today is often highly sophisticated and knowledge-based with workers using intricate scientific equipment.

After several years honing their skills, welders, mechanics, carpenters, and technicians can, earn upwards of $50,000 a year—which in most years still places a household with two such income earners in the top 25 percent for income. It’s true these aren’t glitzy or cushy jobs, but they do pay a good salary.

So why aren’t workers filling these available jobs—or getting the skills necessary to fill them. I would posit these impediments to putting more Americans back to work:

1) Government discourages work.

Welfare consists of dozens of different and overlapping federal and state income support programs. A recent Census Bureau study found more than 100 million Americans collecting a government check or benefit each month.

The spike in families on food stamps, SSI, disability, public housing, and early Social Security remains very high even five years into this recovery. This should come as no surprise given the vast majority of the federal government’s roughly 80 means-tested welfare programs don’t include any type of work requirement.

Economist Peter Ferrara argues in his new book, “Power to the People,” that if “we simply required work for all able-bodied welfare recipients, the number on public assistance would fall dramatically. This is what happened after the work for welfare requirements in 1996.”

2) Our public school systems often fail to teach kids basic skills.

Whatever happened to shop classes? We have schools that now concentrate more on ethnic studies and tolerance training than teaching kids how to use a lathe or a graphic design tool.

Charter schools can help remedy this. Universities are even more negligent. Kids graduate from four-year colleges with little vocation training and with debt averaging more than $25,000—although this number now commonly exceeds $100,000 at some universities.

A liberal arts education is valuable, but it should come paired with some practical skills.

3) Negative attitudes toward blue-collar work.

I’ve talked to parents who say they are disappointed if their kids want to become a craftsman—instead of going to college. This attitude discourages kids from learning how to make things, which contributes to sector-specific worker shortages. Meanwhile, too many people who want to go into the talking professions: lawyers, media, clergy, professors, and so on.

4) A cultural bias against young adults working.

The labor force participation rate is falling fastest among workers under 30.

Any time a state tries to change laws to make it easier for teenagers to earn money, the left throws a tantrum about repealing child labor laws. The move to raise minimum wages in states and at the federal level could hardly be more destructive to young people.

My own research finds that the higher the minimum wage in a state, the lower the labor force participation rate among teenagers.

Anecdotally, I’ve always been struck by how many successful people I have met who grew up on farms and started working—milking cows, building fences, cleaning out the barn—at the age of 10 or 11. They learn a work ethic at a young age and this pays big dividends in the future. Many studies document this to be true.

5) Higher education has become an excuse to delay entry into the workforce.

I always cringe when I talk to 22-year-olds who will graduate from college and who tell me their next step is to go to graduate school. Maybe by the time they are 26 or 27 they will start working. Here’s an idea: colleges could encourage kids to have one or two years of work experience before they enroll.

Here’s an even better idea: abolish federal student loans and replace the free government dollars with privately sponsored college work programs.

For instance, schools like College of the Ozarks require kids to work 15 hours a week to pay their tuition. It’s hardly a violation of human rights if a 21-year-old works to fund for their own education—and they will probably get more out of their classes if they do work.

Anything easily attained is lightly valued. This would drive down tuition costs too, because students would start demanding more financial accountability and less waste. After all, federal subsidies have increased college costs.

These may seem like old-fashioned and even outmoded ideas. But the decline in work among the young bodes ill for the future. Many European nations have removed the young from the workforce and the repercussion appears to be lower lifetime earnings.

A renewed focus on working would also help erode the entitlement mentality ingrained in so many millennials. Instead of more benefits and handouts, this generation needs to get a job.

A version of this was originally published in Forbes.

Crony Capitalism

Crony Capitalism In Arkansas – HB1410

The Issue

Crony Capitalism is a broad term to describe the mixing of private business and government. It is the working of politicians and government officials with specific businesses or industries to advance the interests of those businesses. Crony Capitalism is carried out by giving special tax breaks, permits, or grants to specific developers or areas. Politically, this is displayed by corporations underwriting contributions (in some manner) to politicians in return for specific legislation that will aid their interests. This goes beyond mere lobbying, and instead legislation is written with such particularity that government is in effect picking winners and losers.

Randol O’Toole of the Cato Institute describes Crony Capitalism in the context of Tax-Increment Financing (TIF) as “providing subsidies to developers who in turn provide . . . to politicians.” According to O’Toole, “TIF works by allowing cities to use the property . . . taxes collected from new developments to subsidize those same developments.” He states that by allowing TIF those subsidized new developments impose costs on schools, fire departments, and other services. This, he states, causes other taxpayers to incur those costs through increased taxes or a lower level of services provided to the area.

O’Toole further argues that TIF is unfair and goes against the Free-Market system by providing tax subsidies to favored developers, preventing others from true competition. Crony Capitalism is against Economic Freedom for Arkansas small businesses and individuals. It makes it harder for the “outsiders” to engage in business.

The Law

HB1410 is an amendment to Arkansas Code § 26-51-2407 and § 26-51-2412, sections of the Arkansas Central Business Improvement District Rehabilitation and Development Investment Tax Credit Act. Ark. Code Ann § 26-51-2403-12 (2015). This became Act 1166 of 2011 after it was passed as HB1118 in the 88th Arkansas General Session. Rep. Tracy Pennarts (D-HD65) and Sen. Jake Files (R-SD13) sponsored the legislation.

As background, it is important that one understands the impact of a tax credit.  State tax credits come straight off the top from money which would otherwise be collected by the state of Arkansas.  Unlike a tax deduction, a tax credit is similar to a subsidy given to the tax filer by the government.  Tax credits are subtracted not from taxable income but directly from a tax filer’s tax liability; they thus reduce taxes dollar for dollar. As a result, credits have the same value for everyone who can use them.

As currently written Act 1166 of 2011 provides State Income Tax Credits for qualified project expenditures. The current credit would be for 25% of qualified expenditures up to $500,000 for income-producing property, or $200,000 on non-income producing property. Ark. Code Ann § 26-51-2407. These credits would be issued on a first come, first serve basis with a total credit cap set at $1,000,000. Id at 2407(e)(2) . To be a qualified project, the property must:

  1. Be in a central business district;
  2. Have a full set of plans by a licensed architect;
  3. Meet all zoning and building codes;
  4. Be approved by the governing body of the business district; and
  5. Expenditures must be greater than $30,000. Id. at 2404(b).

If all the requirements for a qualified project are met, the governing body of the business district will then decide if they want that property to qualify. A governing body means “the board of commissioners of the central business improvement district.” Id. Currently, the tax credit only takes effect “if the Chief Fiscal Officer of the state certifies funding . . . is available in the General Improvement Fund.” Id at 2412(a)(1). The credit may be carried back for tax years that came before the approval of the credit, if the requirements were met during that earlier year. Id. at 2412(b).

The tax credit “may be transferred, sold, or assigned only one (1) time.” Id. at 2409(a)(3)(A). The tax credit may be carried over for 5 years if it is not fully used in one tax year. Id. at 2409(2). If the tax credit is granted to a passed through tax entity, the credit may be passed through to the partners, members, or owners. Id. at 2409(a)(4). Any assignee of a credit may use the credit to offset up to one hundred percent (100%) of the state income tax due from the assignee. Id. at 2409(b)(1).

Under the proposed Amendment in HB1410, the distinction between income-producing property, and non-income producing property would go away. Eligible expenditures for the tax credit would increase from $500,000 to $2,000,000. Also, the act would not require approval from the Chief Fiscal Officer, would raise the state annual total credit cap to $10,000,000 for all projects on a first come, first serve basis, and would allow the taxpayer to now receive additional tax credits for the same project.

The Players

HB1410 is sponsored by Warwick Sabin (D-HD33). Sabin is the Executive Director of the Arkansas Regional Innovation Hub, Inc (“AR Innovation Hub”). According to their website they are located in the “Argenta Arts District”. This Arts District is within the larger Argenta District, which includes the Argenta Downtown Council Business District. These districts are located just west of the Verizon Arena in North Little Rock, AR.  According to the AR Innovation Hub’s website, the following are Partners and Collaborators for the AR Innovation Hub:

  1. Arkansas Manufacturing Solutions
  2. Delta Regional Authority
  3. Tenenbaum Reclying Group Foundation
  4. Arkansas Scient & Technology Authority
  5. East Initiative
  6. Arkansas STEM Coalition
  7. Ben E. Keith Co. – Foodservice Distributors
  8. Kiva Zip
  9. Verizon
  10. Arkansas Fellowship
  11. Diamond Bear
  12. Plastic
  13. The City of North Little Rock
  14. DataPath
  15. Taggart Architects
  16. Hydco Construction
  17. Argenta Wealth Management
  18. Garver Engineering
  19. West Little Rock Rotary
  20. Glazers

According to the Secretary of State’s website the incorporator of the AR Innovation Hub is Donna Hardcastle, and directors include Harry Hamlin, John Gaudin, and Jamie Fugitt.

The Argenta Downtown Council may be considered the “governing body” of the Argenta Business District. The current directors of the Argenta Downtown Council include:

  1. Harry Hamlin (Chairman), Mitchell Williams Law Firm
  2. Holly Fish (Vice Chair), EGP, PLLC, Director of Client Services
  3. Chris Kent (Secretary)
  4. Kyle Pitts (Treasurer), Ifrah Financial Services
  5. James Alger, Delta Trust Invements, President
  6. Joseph Brajcki, Artist, Designer
  7. Phyllis Britton, Arkansas Times
  8. Gary Clements, Clements & Associates/Architecture, Inc.
  9. George Collins, Arkansas Garden Center
  10. Josh Davenport, Davenport Contracting
  11. Mike Davis, Police Chief, North Little Rock
  12. Louis France, Reno’s Argenta Café
  13. John Gaudin, Argenta Wealth Management
  14. Fletcher Hanson, Newmark Grugg Arkansas
  15. Bob Hardin, Hardin and Grace, P.A.
  16. Charlie Hart
  17. John Crow, 107 Liquor, Owner
  18. Ashely Hight, NLR Chamber of Commerce, EVP
  19. Michelle Ketzscher
  20. Tom Marr, Department of Arkansas Heritage
  21. Russ Melton, Diamond Bear Brewing Co.
  22. Greg Nabholz, Newmark Grugg Arkansas
  23. Larry Pennington, Pennington Studio/Claytime Pottery
  24. Thomas R. Pownall, P.E., Thomas Engineering Company
  25. Kathleen Rea, Regeneration Fitness
  26. Christian Shuffield
  27. Bob Stroud, Foundation Pro, Owner

Ex Officio Members:

Mayor Joe Smith, Sandra Taylor Smith, Todd Larson, Harold Tenenbaum, Terry Hartwick, Summer Toyne, Marbeth Bowman.

According to the Secretary of State’s website, the registered agent for the council is Donna Hardcastle, who is also the incorporator of Sabin’s AR Innovation Hub. The contact email for the Argenta Downtown Council is

According to the Argenta Downtown Council website, over 70% of the property owners in the Argenta District voted to become the Argenta Downtown Central Business Improvement District No. 31 of North Little Rock, Arkansas. By electing this status, properties within the district would have initial qualification for the tax credits. They must then meet the other requirements to become a qualified project, with final approval decided by the Argenta Downtown Council Board of Directors.

Note a needed caveat.  This article is not to be interpreted that the persons, legislators, or entities mentioned are engaging in Crony Capitalism. Names are simply used to identify individuals and entities involved with the Argenta Business Improvement District and potential application of this law. The individuals mentioned on the Council would simply be those who would determine if a person might qualify for a tax credit in that district.

The Game

Under the setup that Rep. Sabin’s bill brings, there is a potential for Crony Capitalism to take place within the Argenta Business District. Sabin’s AR Innovation Hub includes board members (Harry Hamlin, Chair; John Gaudin) who are on the governing board that will have the final say on whether a property owner may qualify for a tax credit. Some of the “partners and collaborators” of the AR Innovation Hub include businesses within the Argenta Business District, including Sabin’s own non-profit AR Innovation Hub, or are located just beyond the district. Those entities would also have the inside track on the architecture, construction, engineering, and distribution work to be done at the properties. AR Innovation Partner “Taggart Architect” could gain more business because any qualifying project must have plans designed by a licensed architect.

A big advantage within this structure is that these tax credits are transferable and assignable. For example, a property owner (probably a business entity) may qualify for the tax credit. That credit may then be assigned to another person to offset up to 100% of that person’s income tax due. The credit is allowed to be carried over for 5 years. So, for up to 5 years a person who receives this tax credit may be paying $0 in state income tax, even on taxable income from beyond the intended improvement district.

According to the Secretary of State website, John Gaudin is associated with at least 10 “Argenta” entites. Remember, Gaudin is both on the board for Sabin’s AR Innovation Hub, and the Argenta Downtown Council. He could theoretically receive tax credits on each of these 10 entities, if they own property, then turn around and assign the credits to offset his individual state income taxes, or any other entities that are not even in the Argenta Business District.

In addition, Greg Nabholz, Harold Tenenbaum, and John Gaudin are all listed as directors on the Secretary of State’s website for the “Argenta Place Property Owners Association.” All three of these individuals are directors for the governing body (Tenenbaum is ex-officio) that has the say on whether a person qualifies for the tax credit. If they got enough votes together, they could hypothetically only ever approve their own entities for the tax credits. Then they may assign those tax credits to their other entities to avoid state income taxes.

These same scenarios could play out with various other individuals and entities. This structure is open to abuse and avoidance of state income taxes. The intended purpose of promoting development in this district could be used to avoid state income taxes for individuals and entities not even in the district.

Hypothetical Scenario

Company X decides to build a new café in the Argenta Business District. The expense of this will cost $900,000. The company will apply and be granted the tax credit described above for the amount of $225,000. Company X’s CEO has incurred state income tax due of $45,000. The board of Company X decides to assign the tax credit of $225,000 to the CEO, who then uses the credit to offset his state income tax due of $45,000 for each of the next five years.  The state of Arkansas has given $225,000 of its general tax revenue to the CEO of Company X… Crony Capitalism.

Five years have passed, and Company X decides to build four new properties in the Argenta Business District with total expenditures of $32 Million. The four properties are all in the name of four separate LLC’s the company has set up. So, each entity gets a $2 Million tax credit. One of the credits is used to offset the state income tax due. Another credit is sold for $3.4 Million to Company W. The third credit is given again to the Company X’s CEO for personal tax relief. The fourth and final $2 Million credit is given to a business in Southern Arkansas, to establish a “good working relationship.”  The state of Arkansas has given $8 Million of its general tax revenue to underwrite the personal agenda of Company X…… Crony Capitalism.

Company X now wants to build a new skyscraper in the Argenta Business District. Since the expense would be so high, he contacts his Senator, and he quickly adjusts the law to allow for a 75% expenditure use limit rather than 25% and increases the total cap to $100 Million. The law passes through the legislature and includes an emergency clause, to avoid the economic development that may be lost if the skyscraper is not built. Twenty-seven different entities have a property interest in this new skyscraper, and they all receive a $1 Million tax credit and all use them for different purposes.  The state of Arkansas has given $27 Million of its general tax revenue to the schemes of Company X…… Crony Capitalism.


This hypothetical scenario shows how quickly and dramatically Crony Capitalism can reap negative effects for Arkansans.  Certain entities and individuals benefit, while others may be left out of the process entirely. The tax credit program developed through HB1410 may undermine the economic development it is intended to foster. Rather than those funds staying in the local businesses and community, the tax credits may be sold or transferred to others throughout the state, and possibly the nation.   Rather than letting the free market dictate this development, crony capitalism is on the verge of being unleased in the Argenta Business District. An elected official’s friends and business partners could gain significant tax credits through HB1410.

HB1410 and current law go beyond just providing special considerations for certain businesses that are friendly with the bill sponsoring House member. This bill and law may allow entities and individuals outside the improvement district to receive tax credits to offset their state income taxes for up to five years while piling up other credits on the same project.  If they structure their assignment of the credits correctly, they could potentially sustain that with new credits assigned from a new qualifying project every year, creating a new five year window to carry forward the credit.

Conduit for Commerce believes in free markets because they are better for business and individuals. In a free market, if the value is there to sustain these new businesses then the new businesses will be built. A free market allowing all to compete for new development is fair.


Randy O’Toole, “Crony Capitalism and Social Engineering: The Case against Tax-Increment Financing”, Policy Analysis (Cato Institute), May 18, 2011, .

Arkansas Secretary of State Business Entity Search

Arkansas General Assembly Website

Ark. Code Ann § 26-51-2403-12 (2015).

Argenta Downtown Council Website

Arkansas Innovation Hub, Inc. Website

Tort Reform – Losers Pay

January 9, 2015

Tort Reform “Losers Pay”

In 2010 Towers Watson estimated that tort litigation cost Americans more than $250 billion, or the equivalent to 2.2% of GDP. [i] Attorney fees are the largest expense in litigation with the exception of some adverse judgments. In one example, Peasrson v. Chung, a dry cleaner owner was sued for $54 million, when a pair of pants was lost, for inconvenience, mental anguish and attorney fees—although ultimately victorious, the dry cleaner owners were left with an estimated $100,000 in attorney fees.[ii]

 Most western countries follow what is known as the “English” or “loser pays” rule, which essentially shifts the cost of attorney fees of the victorious party to the loser, thus reducing frivolous litigation that harms innocent business owners and drains the economy. Alternatively, the majority approach in the United States is the “American rule,” which requires parties to pay for their respective attorney fees—regardless of the outcome.  However, in an effort to curtail the negative consequences of the American rule, a number of states have decided to pursue tort reform including the English rule or some variation thereof.

One prominent example of a state that has recently enacted a variation of a loser pays law is Texas. In 2011, Texas enacted H.B. No. 274 which (1) directs the Supreme Court of Texas to develop a system for dismissing claims at an early stage and award costs, and (2) modifies what is known as an “offer of judgment.” An offer of judgment requires a plaintiff to pay certain court costs when they reject a prior settlement offered by a defendant, and a trial ultimately results in a verdict that is substantially less favorable than the original settlement offer.[iii]

Supporters of the law say, among other things, that the bill will “implement solid, fair and necessary reforms to the Texas Civil justice system to lower the costs of litigation. . . and level the playing field between plaintiffs and defendants by repealing certain limits on the recovery of costs.” [iv]

The Texas Trial Lawyers Association, Texas AFL-CIO, and others were opposed to H.B. No. 274, viewing it as needless and detrimental to individual litigants due to the fact that plaintiffs’ attorneys work on a contingency basis and “have a strong incentive to take only cases they feel have merit in order to maximize their chances of winning the case and receiving their commission.”[v]Moreover, critics believe that loser pays will primarily harm those in the middle class because they have modest assets to lose if the winning party seeks attorney fees and court costs, as those with limited incomes do not have little assets worth pursuing.

Alaska state law allows for a winning party to seek a portion of their attorneys’ fee ranging from 1 to 30 percent. Alaska’s court rules sets out the percentage of attorney fees that may be awarded depending on whether the case was resolved with or without trial, contested or uncontested, and on the amount of the judgment.[vi] It is important to note that the law provides judges with 10 factors that may be used to depart from the schedule. At least one factor that a judge may consider to determine that a variation is warranted disfavors awarding fees to businesses who are sued by individual plaintiffs as it allows the judge to consider “the extent to which a given fee award may be so onerous to the non-prevailing party that it would deter similarly situated litigants from the voluntary use of the courts.” Similarly, a second factor counsels against awarding defense attorney fees to a business that has made the strategic decision to fight each case to discourage plaintiffs’ lawyers from frivolous litigation as the judge may consider “the extent to which the fees incurred by the prevailing party suggest that they had been influenced by considerations apart from the case at bar, such as a desire to discourage claims by others against the prevailing party. . . .” Finally, the law allows a judge to consider “other equitable factors deemed relevant,” allowing judges with significant discretion not to award fees on a case-by-case basis. [vii] In 1995, the Alaska Judicial Council published a study that ultimately concluded that the state’s loser pays statute “seldom plays a significant role in civil litigation,” that courts awarded fees in only about 10 percent of cases, and that 75 percent of the fees awarded were for less than $5,000.  [viii]

To avoid the failure of Alaska’s loser pays law, legislatures in Arkansas legislatures should support legislation that requires those who bring frivolous lawsuits to pay the attorneys’ fees and expenses of those who must defend against such lawsuits. Frivolous lawsuits are defined as “lawsuits that have no legal basis, often filed to harass or extort money from the defendant.”[ix] Currently, Arkansas Rule of Civil Procedure 11 requires an attorney or party to a lawsuit to sign every pleading or motion to certify that to the best of their knowledge, information, and belief that the document is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation. [x]  If the motion, pleading, or other paper is signed in violation of Rule 11, then the court, upon motion or upon its own initiative, “shall impose upon the person who signed it, a represented party, or both, an appropriate sanction, which may include an order to pay the other party or parties the amount of reasonable expenses incurred because of the filing of the pleading motion, or other paper, including reasonable attorney’s fees.” However, “a motion for sanctions under the Rule shall be made separately from other motions and shall describe the specific conduct alleged, and may only be filed within 21 days after the service of the motion,”—unless it is withdrawn or corrected. In essence, the current law allows the party bringing the frivolous claim to walk away with no penalty as long as they walk away within 21 days after a motion to dismiss has been made.  To reduce frivolous claims, legislators should eliminate the 21-day safe harbor period and provide for mandatory sanctions if a judge determines a case to be frivolous.

Opponents of tort reforms will likely contend that the underlying purpose of proposed changes to existing law is to shield business from having to pay just compensation to consumers, patients, and clients for damages incurred from fraud, negligence, medical malpractice, and other legitimate tort claims. It is paramount to keep in mind that tort litigation drains billions of dollars from the economy each year and that innocent business owners are often stuck with unrecoverable losses defending frivolous claims. Capping damages, reducing safe harbor periods, and mandating sanctions for frivolous claims are a step in the right direction for Arkansas and will help level the playing field for small business owners and strengthen the economy.



[i] “2011 Update on U.S. Tort Costs Trends – BP Oil Spill Costs – Towers Watson.” Towers Watson. N.p., Jan. 2012. Web. 05 Jan. 2015.


[ii] Cauvin, Henri E. “Court Rules for Cleaners In $54 Million Pants Suit.” Washington Post. The Washington Post, 26 June 2007. Web. 05 Jan. 2015.


[iii] Schwartz Z, Victor E., and Cary Silverman. “American Legislative Exchange Council – Limited Government · Free Markets · Federalism.” ALEC American Legislative Exchange Council. N.p., Mar. 2012. Web. 06 Jan. 2015.

[iv] Texas Bill Analysis, H.B. 274, May 7, 2011.


[v] Rodriguez, Robert C. “Texas Expands Loser Pays Rule.” Texas Expands Loser Pays Rule. American Bar Association, 8 Aug. 2011. Web. 06 Jan. 2015.


[vi]  AK R RCP Rule 82.


[vii]  See State v. Native Village of Nunapitchuk, 156 P.3d 389, 405 (Alaska 2007.)


[viii]  Alaska Judicial Council, Alaska Judicial Council, Alaska’s English Rule: Attorney’s  Fee Shifting in Civil Cases (1995.)


[ix] Black’s Law Dictionary (9th ed. 2009.)


[x] Ark. R. Civ. P. 11


Performance Based Budgeting

Performance-Based Budgeting in State Agencies

Traditionally, state budgeting focused on incremental changes in detailed categories of expenditures. Performance-based budgeting (PBB) is a more recent approach which diverges from older budgeting techniques by concentrating on results as opposed to merely requests by agencies.1 In essence, a complete PBB system links the amount of appropriations received by state agencies to their success in achieving pre-determined goals. This process requires the state legislature and related agencies to identify specific, quantifiable goals or objectives to be achieved. Budget dollars are then allocated to agencies based upon the required resources to attain such goals, in what is formulated as a strategic plan.

PBB promotes legislators to rethink policies of the past and provides agencies the flexibility to make challenging decisions that are not easily reached under traditional budgeting systems. Benefits of this system include unification of government direction, increased information to public officials and constituents of agency performance, and a more effective budget decision process.2Over time, studies show that successful use of PBB can positively impact long-term fiscal health of states.2 Problems with the use of PBB consist of subjectivity in what goals are important, the vagueness in developing goals, what measures are to be used in evaluation, lack of direction as to dealing with ineffective agencies, and the costs of tracking and overseeing performance data of agencies.2 3

Arkansas’ budgeting process focuses primarily on requests made by state agencies and does not currently follow a result-oriented PBB system.4 Although budgets are reviewed by the legislature, budgeting decisions do not require strategic plans from the agencies, nor do they involve assessments of how well agencies achieved defined performance measures.4

While it is difficult to ascertain which states precisely follow comprehensive PBB systems, sources affirm that most states apply the system in some capacity. According to the Murphy Commission report, 14 states incorporated PBB into operations, and over 20 other states were considering using the system.4 In contrast, a study done around the same time by researchers at Georgia State University found that 47 states have some form of PBB methods in effect.5 Of this number, 31 states passed legislation requiring PBB use, and 16 states use PBB through non-legislative initiatives in place.5 Provided below is a chart organized by these researchers showing which of the states have implemented some form of performance-based budgeting, through which bills, and in what year. Arkansas is one of the three states that does not have any form of centralized performance-based budgeting initiatives, according to their study.5

A more recent study conducted in 2012 revealed that 40 states have performance budgeting legislation passed into law.2 Furthermore, the researchers recommended implementation to the states which do not use PBB (including Arkansas) because of the positive impact this system has on state liquidity, expenditures per capita, and long-term financial liability ratios.2

The success of these states prompted the federal government to adopt similar measures into the budgeting process for federal agencies. The Government Performance and Results Act (GPRA) of 1993 requires federal agencies to create a 5-year strategic plan of performance goals.4 These plans specify exactly how the agencies are to achieve measurable performance goals. Agencies then must report quantifiable results to the Office of Management and Budget, along with explanations if goals are not met.4 The OMB office is in charge of developing and conveying an overall federal performance report to Congress.4

Texas is recognized as one of the leading users of PBB, enacting the system after bills passed in 1991 and 1993 provided for tying agency budgets to performance goals.7 8 Agencies are required to create performance goals and a strategy for achieving the goals. A Legislative Budget Board is in charge of monitoring the performance of state agencies in achieving strategic goals and conveying metrics of performance to the legislature.6 The legislature uses the reports on agency performance when deciding upon the next year’s budget.3 6

Requisite to the success of PBB is an accurate, transparent accounting system that will provide legislators and budget oversight committees with information to assess the proper costs associated with state agency activities. For this reason, as discussed elsewhere, CFC recommends the implementation of activity-based accounting systems across all state agencies to accurately report the true expenditures of government activity.



1. “Performance Based Budgeting: Fact Sheet.” Performance Based Budgeting Fact Sheet. National Conference of State Legislators, n.d.

2. Lu, Yi and Katherine Willoughby. “Performance Budgeting in the States: An Assessment” IBM Center for. IBM Center for The Business of Government (2012): 71-75. <–%20An%20Assessment.pdf>

3. National Conference of State Legislators. “Legislative Performance Budgeting.” 6 Oct. 2008. <>.

4. Murphy Commission. 1996-1999. “Making Arkansas’ State Government Performance Driven and Accountable.” <>

5. Melkers, Julia, and Katherine Willoughby. “The State of the States: Performance-Based Budgeting Requirements in 47 out of 50.” Public Administration Review 58.1 (1998): 66-73.

6. Legislative Budget Board, n.d. <>.

7. H.R. 2009, 72nd Reg. Sess. (Tex. 1991)


8. S. 1332, 73rd Reg. Sess. (Tex. 1993).