LITTLE ROCK — As state legislators prepare to hold new hearings on a budget shortfall at the state Forestry Commission, the idea of raising taxes on the timber industry to boost the commission's finances is not exactly catching fire.
LITTLE ROCK — As state legislators prepare to hold new hearings on a budget shortfall at the state Forestry Commission, the idea of raising taxes on the timber industry to boost the commission’s finances is not exactly catching fire.
John Shannon, the commission’s director, has said he will lay off 36 employees, including more than a dozen firefighters, on Jan 13 because of a $4 million shortfall at the 298-person agency.
The agency’s funding is tied to the state severance tax on timber and the sale of state-owned timber products, both of which have been in decline as the timber industry feels the impact of the downturn in the housing market. Internal problems, including the practice of borrowing federal grant money to make payroll, have also come to light.
Last week, Shannon testified before the personnel subcommittee of the state Legislative Council that in 2010 he made plans to meet with timber industry leaders to discuss raising taxes, but he canceled the meeting at the request of Gov. Mike Beebe’s office. Some Republican legislators cried foul, accusing Beebe of avoiding uncomfortable subjects at a time when he was facing a re-election challenge from Republican Jim Keet.
Beebe has said he did not know at the time the severity of the agency’s financial problems. A Beebe spokesman said last week that the governor believed the meeting would not be productive because of strong public sentiment against new tax increases.
Now that the issue has been raised, at least indirectly, would the timber industry — or legislators — support a tax hike?
“I think it would take some fairly strong considerations and certainly take a lot of thought to go in that direction, because you’re asking the industry that’s already struggling to come up with additional funding through taxation,” said Max Braswell, executive vice president of the Arkansas Forestry Association.
Braswell said the industry is “interested in seeing the Forestry Commission right the ship” and would be willing to look at a number of options, but “taxing the industry that’s already shown itself to be in dire straits is, I don’t believe, the first option we would want to see.”
Larry Boccarossa, director of the Arkansas Timber Producers Association, said loggers are already being squeezed.
“Close to 30 percent of the logging force has been lost because of not having work out there because the demand’s been down, and the primary culprit has been housing construction. That’s the concern that we have here,” he said.
Any consideration of raising the severance tax would have to include a look at the taxes other states charge, Boccarossa said.
Arkansas currently charges timber producers a severance tax of 17.8 cents per ton on pine and 12.5 cents per ton on all other timber.
Neighboring Mississippi charges 75 cents per ton on hardwood and 12 cents per ton on pine and other soft woods.
In Louisiana, the tax is 92 cents per ton on pine sawtimber; 74 cents on hardwood, pine chip-and-saw other sawtimber; 35 cents on pine pulpwood; and 26 cents on other hardwood and pulpwood.
Missouri, Oklahoma, Tennessee and Texas have no timber severance tax.
The House and Senate committees on agriculture, forestry and economic development are scheduled to meet Jan. 4 to begin looking at ways to address the Forestry Commission’s shortfall. Co-chairman Sen. Gene Jeffress, D-Louann, said that as far as he is concerned, “anything’s on the table.”
But Jeffress said he is interested in looking at the funding formula for the commission.
“I’m not sure where we need to go, but I think that maybe the state otherwise needs to kick in some things as well, besides just relying mainly on (the timber industry).”
Sen. Missy Irvin, R-Mountain View, one of the legislators who questioned Shannon during a hearing of the state Legislative Council’s personnel subcommittee last week, said she would not support a tax increase on the timber industry because it would cost jobs. She said she is interested in looking at the way the Forestry Commission has been run.
“Where are we curbing our expenses? What kinds of decisions are being made about the expenditures and how you spend money? That is what we have to have a discussion about, and how those decisions are being made,” she said.
Rep. Bryan King, R-Green Forest, co-chairman of the personnel subcommittee, said he does not see how he could support a tax increase in the current economic environment, but he said Beebe should not have quashed the meeting where the idea could have been discussed last year.
If the meeting had taken place, the Forestry Commission’s dire financial straits would have become public well before layoffs became necessary, he said.
“I probably would have had the same opinion I do now, but you know what? I never got the chance because the governor axed that presentation from actually happening, and unfortunately 36 people are losing their jobs because of it — but the governor did win the election,” he said.
King said he believes Beebe knew full well the condition of the agency’s finances and did not want the issue discussed.
“All of a sudden an agency with almost 300 employees goes bankrupt and he doesn’t know anything about it? No way,” he said.
Beebe said Tuesday, “If I had known sooner that shortfalls at the Arkansas Forestry Commission had reached the point that the agency could no longer operate within its means, we would have taken action sooner. The issue would have been addressed during the regular budget process of this year’s legislative session.”
Beebe spokesman Matt DeCample said that “we didn’t know that things had gotten to this level at the Forestry Commission until a few months ago, and when we did, we put a stop to … overspending.”
The Beebe administration has provided funds to postpone the layoffs until January. The layoffs would have taken place before Christmas without the administration’s assistance, according to Shannon.