Little Rock, AR – Arkansas lawmakers are pushing SB421, one of a series of bills filed this session to issue more bonds (aka borrow more money; aka raise taxes). This bill is so vague we will have to “pass it just to [try and] read it!” We have it on good authority that it is such a sprawling bill that not even multiple attorneys paid to read bills, care to offer its intent. Let’s just say it is a taxpayer’s nightmare! With Arkansas being the only state in the union to default on bonds since Reconstruction, we have to ask, are those the ghosts of Arkansas’s 1933 bond default whispering warnings? Add to that the fallout from the passage of Issue No. 3, which removed the 5% bond cap on Arkansas’s ability to issue bonds, and the stakes get even uglier:
- That measure lets the legislature pile on unlimited debt to lure big businesses with incentives, no voter approval needed.
- As a state taxpayer, you’re on the hook for any defaulted bond payments plus interest, no questions asked.
- Issue 3 was passed in 2016; it was proposed in 2015 by ex-Sen Jon Wood, his last General Assembly before being faced with criminal charges and now serving more than 18-years in federal prison for a long list of crimes, including taking bribes and kickbacks. At first blush, the vagueness of this bill causes one to pause and remember our recent history when too much money was available with too little oversight from voters.
Now, Sen. Bart Hester’s very broad, vague bill looks like another chapter to add to our reckless past. During Tuesday’s Senate Agriculture Committee meeting, Sen. Hickey (R-Texarkana) pressed Sen. Hester (R-Cave Springs), the sponsor of SB421, on the bill’s financial impact. Hester confirmed funding would rise from $300 million to $500 million. Hickey warned that any debts the state had to pay for the defaulted debtor would directly reduce the General Revenue Fund (as the State is on the hook from General Revenue to pay all amounts not repaid by those granted loans by the Commissioners.)
Looking at the specific language of the bill, SB421’s irrigation provisions might sound like progress, but they could easily channel low-cost water systems to a select few—like the proposed Franklin County prison project. The pollution language? It’s vague enough to allow state agencies to implement a moratorium on watersheds, perhaps like the Buffalo National River watershed.
Under the bill, nonprofits are defined as “local entities,” meaning bond money (thanks to Issue No. 3’s unlimited tap) could flow straight to them. (That seems like a familiar theme for anyone keeping up with Elon’s work with DOGE.) Picture a nonprofit popping up to fund an irrigation deal for connected landowners or a proposed prison project or even a Buffalo River “preservation” project — SB421’s vague (or carefully crafted) wording practically invites it.
Wetlands are on the project list too—duck ponds for hunters masquerading as conservation, anyone? And Hester has added a twist: these projects can charge rent and fees, turning water services into a cash grab for the “winners”. One wonders whether Franklin County prison backers are salivating.
“Flood control” includes “adjustments in land use”—government-speak that should make property owners squirm. Pair that with a loose “project” definition covering recreational use, and you’ve got handouts in camouflage. Arkansas’s 1933 default, when a cash-strapped state couldn’t pay its highway bonds, looms as a grim precedent—overreach then, overreach now.
Remember, 2016’s passage of Issue No. 3’s — a blank check — only amplifies the risk: unlimited bonds, just debt dumped on taxpayers. With lawmakers itching to spend big before even muttering about real tax relief, SB421 isn’t a fix—it’s a throwback to the 1930s default, turbocharged by a system that’s already rigged to bury you in IOUs. Demand transparency, or brace for the bill.
Here are two hard lessons from the past and how Arkansans responded:
- Arkansas Defaulted on its bonds. In 1929 Arkansas was near the bottom in per capita wealth but first in per capita indebtedness. Then the Depression hit and from 1933 to 1935 Arkansas defaulted on its bonds.[i] The state struggled for years to work its way out of the mess. “In 1934 the legislature responded to its financial struggles by passing two state constitutional amendments. The first put limits on spending and barred increases of tax rates without voter approval, or, in emergencies, approval by three quarters of the legislators. The second barred the state issuing of new money bonds without voter approval.”[ii]
Over the years, politicians have chipped away at the restriction on issuing bonds. Issue No. 3 destroyed the protection by allowing the legislature to pledge an unlimited amount of your money for bonds to give to big business.
- Oppressive taxes for local bond issues. When our Arkansas Constitution was being written “the people of the state at large and of many of the counties and municipalities were burdened with oppressive exactions of taxation laid for the purpose of paying bond issues and guaranties of bond issues, of public and quasi public corporations, granted ostensibly in aid of railroad, and levee building and other such projects, but which projects in reality were never consummated and from which the people themselves received no benefit whatever.”[iii]
In response, the drafters of our Arkansas Constitution of 1874, sought to protect the people by including this restriction: “No county, city, town, or other municipal corporation shall become a stockholder in any company, association or corporation; or obtain or appropriate money for, or loan its credit to, any corporation, association, institution or individual.“[iv]
Issue No. 3 destroyed this protection by allowing local governments to:
- Appropriate money for corporations and even individuals to finance economic development projects, and
- Give money to the Chamber of Commerce and even to individuals to do economic development.
“Those who don’t know history are doomed to repeat it.” ― Edmund Burke
Contact your Legislator and tell them to vote “NO” on SB421! History teaches Arkansas cannot afford to borrow its way to prosperity.
