An Arkansas legislative panel on Tuesday endorsed Gov. Sarah Huckabee Sanders' request for nearly $11 million in one-time state funds to help school districts pay for their rising property insurance costs.
The Legislative Council's Performance Evaluation and Expenditure Review Committee recommended that the Legislative Council, which meets Friday, approve the state Department of Insurance's three requests seeking about $10.8 million in state-restricted reserve funds.
Sanders announced last week that the state would cover 30% of the cost of the increased premiums for the public schools' property insurance and laid the blame on insurance companies for the large increase in premiums, saying the companies are trying to take advantage of already financially strapped public schools.
Education officials have said an increase in severe weather, both in Arkansas and nationally, is the reason insurance companies have raised premiums.
In a letter dated July 11 to state Department of Finance and Administration Secretary Larry Walther, State Insurance Commissioner Alan McClain said the rising school property insurance premiums are due to "a convergence of factors -- poor claims experience, difficult conditions in the insurance marketplace and a negative outlook from weather models."
The state Department of Insurance requested a transfer of $6.3 million from the state's restricted reserve fund to partially offset the increased property insurance premiums for 170 school districts participating in the insurance program managed by the Arkansas School Boards Association. The program faces increased fiscal year 2024 insurance premiums of about $21 million, or 114%, McClain said. Fiscal year 2024 started July 1.
The Department of Insurance also requested a transfer of $4.4 million from the state's restricted reserve fund to partially offset the increased property insurance premiums for the 68 school districts participating in the Arkansas Public School Insurance Trust managed by the Department of Insurance. McClain said the property insurance premiums billed to these school districts will increase by about $15 million, or 154%, in fiscal year 2024.
The Department of Insurance also requested a transfer of $117,928.08 from the state's restricted reserve fund to partially offset the increased property insurance premiums for the Bentonville School District that procures insurance directly through the open market. The school district has increased insurance premiums of about $393,000, or 50%, in fiscal year 2024, McClain said.
House Speaker Matthew Shepherd, R-El Dorado, said state Department of Education officials alerted legislative leaders when they started to see significant increases in school property insurance premiums.
That resulted in a series of meetings between legislative leaders, the governor's office, the Arkansas School Boards Association and the state Department of Education about those increases and "what are some possible steps we could take to hopefully mitigate some of those increases in the short term, but probably more importantly look to what we can do to improve the situation in the long term," he said.
State officials settled on the state providing 30% of the cost of increased public school insurance premiums, Shepherd said.
Last month, the Legislative Council's executive subcommittee authorized the drafting of a request for proposals to seek a consultant to look at what is going on in the school insurance field, he said. The executive subcommittee is scheduled to review the proposed request for proposals Thursday.
"We are looking to provide some assistance for the increases, but then also to bring a consultant to look at the whole state of insurance as it relates to school insurance to see" whether there need to be structural changes and other recommendations, Shepherd said.
Rep. Jeff Wardlaw, R-Hermitage, who is a Legislative Council co-chairman, said the state's colleges and universities and the state agencies also are being hit by rising property insurance premiums.
"Higher ed has been screaming pretty loud for the last week and a half," he said.
Shepherd said "in virtually every aspect of property insurance you are seeing very significant increases" in states surrounding Arkansas.
In other action, the Performance Evaluation and Expenditure Review Committee also recommended that the Legislative Council on Friday approve other requests for restricted reserve funds, including:
The University of Arkansas for Medical Science's request for $100 million to assist the school in its campaign to obtain National Cancer Institute designation.
UAMS will use these funds to reimburse personnel, operations and capital outlay costs associated with the Winthrop P. Rockefeller Cancer Institute's pursuit of National Cancer Institute designation, Amanda George, vice chancellor for finance at UAMS, said in a letter to Walther.
The state Department of Education's request for $15 million for the Arkansas Children's Educational Freedom Account program, or school voucher program. The program empowers parents to choose a school based on students' individual needs, Greg Rogers, the department's chief fiscal officer, said in a letter to Walther.
The funding will allow the department to start accounts for the students starting the program in the 2023-2024 school year, he said. State general revenue funds are dispersed at the end of each month based on revenues received by the state, he said, and the department will be unable to make first-quarter payments prior to the start of the school year without the release of the restricted reserve funds.
In the coming school year, the voucher will be worth $6,672, or about 90%, of what public schools receive from the state in per-pupil funding from the previous school year. About 3,400 students have applied for an Educational Freedom Account, with 2,000 having their applications accepted so far, according to the Department of Education, and if every student accepted into the program uses their voucher funds, the program will cost the state $13 million in the first year.
The state Department of Finance and Administration's request for $12 million for law enforcement stipend grants to state agencies and colleges and universities based on guidance approved by the Arkansas Legislative Council.
The state Department of Finance and Administration's request for $2.5 million for drug task forces.
The University of Arkansas at Pine Bluff's request for $2 million in state funds to match federal land grant funds.
"With these funds, UAPB is able to assist agriculture needs of Arkansans across the state, giving special attention to the aquaculture industry and to small and minority farmers," UAPB Chancellor Laurence Alexander wrote in a letter to Walther.
The state Department of Parks, Heritage and Tourism's request for $1 million to be used as matching funds for a grant through the U.S. Economic Development Administration.
The state Department of Finance and Administrative's request for $1 million for grants to provide to pregnancy-help organizations.
The state Department of Finance and Administration's request for $120,000, divided equally by the state's eight economic development districts.