Are our legislators following the law?

It appears many of our legislators are not following the law. A review of 2008, 2009, and 2010 expense reimbursement submissions obtained under the Freedom of Information Act suggests hundreds of cases where expenses were not documented, where IRS guidelines were apparently not followed, and even cases where no documentation whatever was provided other than a monthly bill to the state for “expenses.” And it appears some legislators have billed for their own secretarial services or as “political consultants” to the state.

How is compensation defined for the Arkansas State Legislature?

Amendment 70 of the Arkansas Constitution (approved overwhelmingly by the voters in 1992) sets legislators’ salaries and stipulates they will have no other income for their service in the General Assembly. A copy of that amendment is attached. The amendment says also that expenses and mileage must be documented and related to their official duties.
Arkansas Code 10-2-212 (a statute) governs expense reimbursements and specifies that reimbursable expenses must be:

• Submitted and signed by the legislator each month
• Incurred during that calendar month
• Ordinary and necessary
• Incurred in the performance of their duties
• Within the limitations of the Arkansas Constitution
• Within the limitations of the IRS guidelines
• Within the maximum dollar amount provided by law

But aren’t our legislators underpaid? Shouldn’t we give them expense money to make up for how little we are paying them?

savingsSeveral states pay citizens little or nothing to be part-time legislators. New Mexico pays legislators no salary. New Hampshire pays them $100 per year. Alabama pays their General Assembly $10 per day, but only when they are in session. When average state income is weighed, Arkansas legislators are ranked #12 in the nation in compensation.

Perhaps we want to raise their salaries, and that is a fair discussion to have. But we all can likely agree that abusing expense reimbursements is not the way to compensate for underpaying people.

Let’s have a debate on whether to pay our legislators more. But let’s not allow people—especially lawmakers—to ignore the law to make up for salaries they think are too low.

I hear that some legislators are using “LLC’s” to collect expenses. What is an LLC, and why would legislators set up or use one for expense reimbursements?

An LLC is a type of corporation. It stands for “limited liability corporation,” and it is a common practice for LLCs to be formed when businesses are set up. In this case, however, it appears some legislators may have set up LLCs to accept loosely defined “reimbursements for expenses.”

Since our state constitution forbids our General Assembly from having any income for their service beyond the salary stipulated, by using a corporation, funds are technically not going to the legislator, but to a corporation owned by the legislator or a member of his or her family.

By law, legislators are required to submit a monthly accounting of their actual expenses and be reimbursed accordingly. But by funneling money through a 3rd party corporation, the corporation is technically allowed to have income using these funds. More, many legislators have simply filed for expense income under a “DBA” or “doing business as,” which may not necessarily be a corporation or legitimate 3rd party at all. In these cases, the legislator is attempting to contract with himself or herself for “secretarial services” or “consulting services,” and is receiving an income for these services as a result. All of these situations appear to be income-padding and are likely unconstitutional and contrary to the governing statute.

But don’t our legislators have legitimate expenses?
expense log
Sure they do. But keep in mind that their mileage and per diem for having to be in Little Rock when in session are paid from a separate fund. Their stationery and some other office supplies are covered under a separate fund as well. Outside of that, when your legislator is home in his or her district, he or she may need a separate phone line, miscellaneous office supplies and a minimal mileage allowance for in-district meetings with constituents.

However, 131 of our 135 state legislators are billing for and collecting a flat-rate amount for expenses every single month of the year(even though they are in session for only 2-3 of those months). Many are claiming “office space” in their homes or in private businesses in order to justify this much money per month. Depending on whether the legislator has opted out of collecting mileage and per diem, and whether he or she is in the leadership of the House, Senate or a committee, the amount billed each month ranges from $1,200 to $2,350.

Note that state law requires their expense claims be “within the IRS limitations.” As anyone who has dealt with IRS rules for claiming home offices can attest, those rules are strict. A home office must be your principle place of business and that space cannot be used for any other activity. Any legislator would have to justify his or her home office space as being a principle place of business (including while in session in Little Rock five days per week), and he or she would have to meet regularly with constituents in his or her home to meet IRS home-office expense requirements.

And since expense reimbursements are to be made for actual, legitimate expenses, and since those expenses surely fluctuate from month to month, it seems odd that so many legislators are drawing exactly the same amount month after month after month.

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