LITTLE ROCK — A former finance chief for the cash-strapped state Forestry Commission said Tuesday the director knew of the agency's money problems for years and suggested Gov. Mike Beebe ordered officials to keep quiet until after the 2010 election.

LITTLE ROCK — A former finance chief for the cash-strapped state Forestry Commission said Tuesday the director knew of the agency’s money problems for years and suggested Gov. Mike Beebe ordered officials to keep quiet until after the 2010 election.

A spokesman for the governor called the assertion “absolutely not true.”

Robert Araiza, the commission’s former chief financial officer, testified Tuesday at a hearing before the Legislative Council’s personnel subcommittee, which is looking into the agency’s plans to lay off 36 employees — including more than a dozen firefighters — on Jan. 13 because of a $4 million budget shortfall.

The agency’s director, John Shannon, has said he did not know until recently that the agency’s finances were in such dire straits because Araiza had not told him. Araiza told the personnel subcommittee Tuesday that he had been warning Shannon and the commissioners for four years about the agency’s financial problems, and he provided the subcommittee with copies of emails in which he had raised those concerns.

“The more I brought it to their attention, the more it fell on deaf ears,” said Araiza, who left the Forestry Commission in October for another state job.

Araiza also said the agency’s financial problems were to have been the subject of a canceled 2010 meeting between Shannon and timber industry leaders.

“The day before that meeting, everything was ready to go. Mr. Shannon called us together and explained to us that the meeting had been canceled by the governor’s office because they didn’t want any discussions being held regarding the … shortfall until after the election,” Araiza testified.

“That is absolutely not true,” Beebe spokesman Matt DeCample said Tuesday. “If we had known that the commission’s financial struggles had reached the severity they’ve reached, we would have addressed it during (this year’s) legislative session.

“We knew that the timber industry was struggling. We’ve had a lot of state agencies struggling, but they’ve been able to make do. 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 the overspending.”

DeCample acknowledged Shannon scheduled a meeting with timber officials in the summer of 2010 but said it was to begin discussions about a possible increase in the severance tax on timber to offset the commission’s revenue losses due to a timber industry downturn.

“The governor felt at that time there was a strong sentiment against new tax increases in Arkansas and that such a meeting would not be productive,” DeCample said.

Shannon offered the same explanation in his testimony Tuesday, telling legislators that a person from the governor’s office called him and said the governor did not want any talk about raising taxes, so he canceled the meeting.

Araiza also testified that Shannon instructed commission employees not to talk to legislators about the agency’s financial problems, despite a state law that protects state employees’ right to contact legislators.

Shannon insisted that he does not forbid employees to talk to legislators.

“That’s the opposite of my approach,” he said.

Legislators asked Shannon about a Nov. 18, 2009, email he sent to agency employees in which he said, “For many reasons, public officials should hear from only one AFC representative. That person is me … You and members of your staff should not testify or promote public policy to elected officials or their staff members in Little Rock or Washington.”

Shannon said he sent the email at a time when the agency was receiving numerous questions from the news media.

“When it comes to dealing with the press, I need to speak for the Forestry Commission,” he said.

Shannon said mistakes were made in handling the agency’s finances and said that because he is the director, “the blame is mine.” But he also said he did not know until last month that the financial problems were serious enough to require layoffs.

He said the commission had been borrowing from federal grants to meet payroll, but state finance officials told him on Nov. 17 that the grants were not supposed to be used for that purpose.

“Mr. Araiza had assured me, ‘That’s allowable. We just need to make sure we pay it back,’” Shannon said.

“I also learned on Nov. 17 that Mr. Araiza made a mistake — and it’s just a mistake, nothing more than a mistake — on the certification of our federal income, income that we really get to use internally. The mistake was over $3 million,” he said.

Shannon said he has hired a certified public accountant — Fred Wiedower, who now works for the Department of Workforce Services but will join the Forestry Commission on Jan. 9 — and promised “a new level of scrutiny” of the agency’s finances.

Rep. Bryan King, R-Green Forest, co-chairman of the subcommittee, told reporters after the hearing that a lack of leadership from the governor contributed to the problems that led to the layoffs.

“He can talk about, that he didn’t want any discussion of raising taxes. That sounds like a lawyer defending a bad position and not a leader,” King said.

Beebe said Tuesday in a written statement, “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.

“There is no doubt that the struggles of the timber industry led to these unfortunate layoffs, and I am willing to meet with legislators who have proposals to create additional revenue for the Forestry Commission.”

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 budget shortfall.