Save the date for the 60th Annual Washington Fly-In & Congressional Dinner, which will be held May 8-10.

Events will include a Chiefs of Staff Reception May 8, U.S. Chamber Briefings, a Senate Delegation Forum and a House Delegation Forum May 9, the Congressional Dinner & Reception May 9, and a Leadership Breakfast May 10.

We would like to thank and recognize the following sponsors:

Aerojet Rocketdyne, AEP-SWEPCO, Electric Cooperatives of Arkansas, Nabholz Construction Services, Southwest Power Pool and Walmart.

To register or for sponsorship information, click https://files.acrobat.com/a/preview/adc9aa6c-a1a8-4147-b88d-be700dc5ea35

If your company or organization would like to help sponsor the Washington Fly-In & Congressional Dinner, please contact Bill Watson at bwatson@arkansasstatechamber.com or 501-802-1740.

By Randy Zook, State Chamber/AIA President & CEO

Arkansas Money & Politics – January 2019

Arkansas has committed itself to adopt a minimum wage that will substantially exceed the federal minimum wage. By January 1, 2021, Arkansas’ rate will be $11.00 per hour while the federal minimum will be $7.45, the rate in force in most states including all those that border us, except for Missouri. We will become a high-cost island when it comes to starting wages for many businesses.

What are the implications and likely results of this unprecedented and dramatic policy shift? Who will be affected and how? Let’s first consider the impact on employers, the people who will be required to pay this new added cost. The difference between today’s Arkansas minimum wage of $8.50/hour and the soon to be required $11.00/hour rate amounts to slightly more than $5,000/year per employee. That’s $2.50/hour times 2,080 hrs./year – the total work hours in a year for a full-time employee. Of course, any overtime hours will cost the employer even more: $16.50/hour.

So, with those basic facts, we can draw a couple of conclusions. One, the increased cost to employ low skill, low experience people will increase dramatically, over 29 percent, and in a short period. Business owners and managers will be forced to adjust to the new level, and their options are limited. They can reduce the number of employees, putting some workers on the street looking for a job. They can minimize employee’s work hours, forcing a reduction in their income. They can raise the prices they charge customers, perhaps losing some of their hard-earned business and damaging their financial prospects. Or they can invest in labor-saving technologies that eliminate the higher cost labor. Some of them will be forced to move to nearby, lower-cost states to operate. None of these are desirable outcomes, but businesses must adjust to changing rules despite the impact on valued employees and customers.

Now let’s consider this misguided policy from the employees’ viewpoint. Sounds terrific – a 29 percent raise for just doing what I’ve always done. What’s not to like in that deal? Plenty, if you play out some of the effects described above. The fact is minimum wage has never been intended to be a career, family supporting wage. It’s “the first job wage,” to gain some experience and learn how to work. It’s the “show us you are worth more” wage. Once those basic skills and experience are acquired, an employee can expect to earn increases to reflect his or her ability to contribute and create value for customers. If those raises, in reasonable amounts and over reasonable periods, are not forthcoming, an employee may need to move on to a better-paying opportunity or gain some further education and training to become more employable and more valuable.

The fact is, the minimum wage today only applies to a small percentage of employment relationships, less than ten percent. What’s been missing in the discussions is the reality of who will be impacted – young people just starting their working careers, low-skill employees who have not yet acquired the skills and experience to command higher wages or perhaps people employed by charitable organizations, small businesses with razor-thin profit margins employing only a few people or city/county government services as examples.

We are hearing from businesses across the state that all the above options are being considered and planned. Daycare operators, restaurant operators, city/county governments, schools and many just-starting businesses see this increase in their costs as a budget-busting existential threat that will harm their businesses and in turn our state’s growing economy. Arkansas has thousands of jobs available, most of which pay well above minimum wage even at the start of employment. These higher-paying jobs, many of which offer true career opportunities, require some training or expertise, but we don’t have enough people prepared to fill them.

Our real opportunity for economic growth lies in showing more people the way to these better jobs through career training programs, apprenticeships and work flexibility habits that can turn into value-adding, rewarding work experiences. The minimum wage false promise will do little if anything to advance those opportunities.

Trish Villines, MPA has been named Executive Director of the Arkansas Institute for Performance Excellence (AIPE), an affiliated organization of the Arkansas State Chamber of Commerce/Associated Industries of Arkansas which administers the Governor’s Quality Award Program.

Villines replaces longtime AIPE Executive Director Sue Weatter who recently retired.

Villines previously served as the Title III Grant Director at North Arkansas College in Harrison, where she was responsible for managing special projects, board relations, government relations, special grant writing, and strategic planning at the request of the College president. She also worked closely with the development of a local Industrial Alliance facilitated by North Arkansas College, which brought together 10 area manufacturers and public and private partners.

Villines has also been an Arkansas Baldrige Examiner since 2013 and in 2015 served as North Arkansas College’s committee co-chair for the State-level Baldridge Application writing team, which earned the Governor’s Quality Award for the College that year. She has since served the AIPE as a trainer for applicants and examiners in relation to the Baldrige Criteria for Performance Excellence and in 2018 served as a national Baldrige Examiner representing the State Chamber and AIPE.

Villines earned a bachelor of arts degree in journalism from the University of Arkansas and a masters of public administration degree from Arkansas State University.

By Tina Dale, Talk Business & Politics

Fort Smith business leaders heard Friday morning (Dec. 7) that the four Ts —- teachers, taxes, transportation and transformation — will be the main focus when the Arkansas General Assembly begins its new session in January, according to Randy Zook, president and CEO of the Arkansas State Chamber of Commerce and the Associated Industries of Arkansas.

Zook was the guest speaker at the Fort Smith Chamber of Commerce First Friday breakfast at the University of Arkansas at Fort Smith.

“As far as the economy goes, things are very healthy,” Zook told the gathering. “We have 3.5% unemployment statewide. … That’s the good news. It’s going to be a successful session.”

On the flip side, Arkansas’ workforce is declining with a steady number of people retiring, Zook said.

In order to replenish that workforce, Arkansas needs to recruit more people to the state by making it more compelling and attractive to business and workers, he added.

“Teachers’ pay is a lay-down. It’s just something we’ve got to do. (Gov. Asa Hutchinson’s) goal is to raise the minimum starting salary for K-12 teachers in Arkansas to $36,000 a year. It’s at about ($31,000) now. It’s a pretty dramatic increase. It will give us the highest starting pay for teachers in the touch-state region. That’s a big deal. It’s expensive obviously, but it’s going to be phased in over several years,” Zook said.

Taxes are more challenging, according to Zook, who said that when the state starts to reduce taxes it can have a short-term effect of reducing revenue in an already tight budget.

“His (the governor’s) goal is to reduce the highest marginal tax rate from the current 6.9% down to something with a five, hopefully, at least 5.9, but again over several years,” Zook said. “We are a high tax state at this point. We have the highest marginal tax rate on income tax in the touch-state region. So we are out of step. We are not competitive.”

Zook then moved on to transportation and highway funding, noting that while no one wants to see higher taxes at the gas pumps, something has to happen in order to pay for the 16,000 miles of state highways in Arkansas.

“We have one of the largest highway systems in the country. We have more state highway mileage than the State of California does,” Zook said. “Here we are, the State of Arkansas, with only 3 million people trying to maintain and support more than 16,000 miles of state highways. It’s bloody costly.”

Zook said the highway department is expected to ask for $475 million of additional highway money in order to take care of the state’s highway needs.

“Here’s the catch: Every time the highway department get 70 cents from taxes by law, the cities get 15 cents and the counties get 15 cents. So to get the highway department $475 million dollars, we’re going to have to raise something crowding $600 million in additional taxes,” Zook said.

The final step in the “four T’s” Zook discussed Friday was transformation, which will be a reorganization of state government.

The governor has 42 direct reports from state agencies and boards that answer to him. He wants to shrink that number to 15 direct reports.

“If he were to spend just one hour a week with each one, that’s a full-time job,” Zook said. “That’s just ridiculous.”

Zook said the idea would be to carve those direct reports to the governor down to about 15 with a lot of agencies being “shuffled around.”

“There are enormous opportunities to reduce operation costs on many of these state agencies,” he said. “It’s time. It’s overdue. He’s got a great team helping him put that together. It’s going to take a lot of legislation, as you can imagine, to change.”

The 92nd Arkansas General Assembly begins on Monday, January 14, 2019.