Beebe proposes reduction in grocery tax

LITTLE ROCK, Ark. (AP) - Gov. Mike Beebe is proposing a reduction in the state's grocery tax that would be triggered if the state's budget obligations in several key areas decline over a six-month period.

Finance officials on Thursday said Beebe is calling for reducing the state's grocery tax from 1.5 percent to 1/8th percent. The cut would eliminate all but a portion of the sales tax that was approved by voters as part of a constitutional amendment.

The tax cut would be triggered if deductions in several key areas decline by at least $35 million for six consecutive months. The deductions include the state's desegregation obligations and payments for certain bonds.

The tax cut was part of a $4.9 billion general revenue budget proposal for next year that Beebe's administration detailed to lawmakers.

Beebe's budget proposal calls for increasing state spending by $180 million. The state Department of Human Services, which manages the state's Medicaid program, would get the largest share of the budget increase with Beebe proposing $98 million in additional funding for the agency.

DHS has detailed a series of cuts it will have to make in the state's Medicaid program, including removing thousands of seniors from nursing home care, to plug a $138 million shortfall the program faces even with the additional money.

Beebe proposed increasing money for public schools by $49 million. The governor also called for setting aside $10 million for a "rainy day fund" that the state can tap in financial emergencies.

Beebe's budget proposal was released a little over a week after Republicans took control of the state Legislature for the first time since Reconstruction. The Democratic governor was elected in 2006 on a pledge to phase out the state's sales tax on groceries, which has been reduced from 6 percent since he took office.

Republicans have said their priority in tax cuts is cutting the state's income tax.