Support for Arkansas Week provided by the Arkansas Democrat Gazette, The Arkansas Times and KUARFM 89.

And welcome to Arkansas Week.

I'm Don Scott.

Thanks for being with us.

A US Supreme Court ruling regarding how Alabama redrew its Congressional District boundaries has prompted an appeal of a case involving Arkansas Second Congressional District that's coming up.

But first, the end of the fiscal year in Arkansas is just two weeks away on June 30th, with the state on track for another significant budget surplus.

The Department of Finance and Administration projects a revenue surplus of just over $1 billion.

So joining us to discuss that and how business and tourism are impacted the economy, Doctor Michael Paco.

He is the Chief economist and state economic forecaster with the Arkansas Economic Development Institute.

And we have Katie Beck, the CEO of the Arkansas Hospitality Association.

Thanks to both of you for being here and sharing your thoughts today.

And I want to start with you, Doctor Paco.

The state again is forecasted to have another surplus.

Where do we stand right now, how of the past couple of months been and we have some new developments just today, on Friday of this taping.

Well, the surplus is really an indication that the economy continues to be strong, incomes are rising, consumers are spending and that's generating the tax revenue that creates the the surpluses so.

It's all a pretty strong economic environment.

And the latest evidence that just came out this morning, the unemployment rate dropped yet again to 2.7%.

That's a new record low in the history of all the recordings of Arkansas's unemployment rate.

So that's an indication of where this economy stands.

Forecasters for a long time have been saying that the higher interest rates that the Fed is engineering to get rid of, the inflation is going to slow down the economy and perhaps pushes into recession.

But we're really not seeing that, not not yet anyway, and not in the state at all.

And not in Arkansas for sure.

Yeah, and Katie for you, the hospitality industry, it's the second largest in the state and it plays such a vital role in tourism.

But what sectors make up this industry?

So within the hospitality industry?

And within the Arkansas Hospitality Association, we represent restaurants, hotels, lodging properties and travel and tourism destinations.

So all the things that make people's lives better here in Arkansas every single day and you're seeing it strong.

We are, we are, the industry is really coming back from the impact of the pandemic.

We're seeing record employment levels within the industry.

Increased tax revenue, just the latest tourism taker numbers, double digit increases from the same time last year.

So the industry, there's the sense of excitement and optimism within it and it's a really exciting time just to see where the industry goes.

It's a really interesting dialogue publicly right now with so many people have this sort of fear based thinking that Oh no, you know, we're in trouble, we're in trouble.

But what I'm hearing both of you say that's not the case at all.

Yeah, that's right.

The the tourism industry is very important for Arkansas.

I mean just outdoor activities alone account for about 2 1/2% of our GDP and as we just heard double digit increases in revenues for both hotels and restaurants and bars.

So that's an indication again of the that business is robust until along with the hospitality, what else are you seeing in terms of industries that are really doing well?

Well, it's really across the board and one of the things that's most remarkable about about leisure and hospitality in general and tourism industry is that it was so hard hit by the COVID pandemic by the shutdowns.

So to see it rebound such as so strongly is really encouraging.

But really it's across the board.

We're seeing a lot of construction activity, manufacturing is slowly rising and related industries across the board we're seeing growth, really no signs of weakness.

Even in those sectors where you might expect to see some interest sensitive weakness, it doesn't seem to be emerging, at least not significantly.

So where is this thinking coming from in your opinion, Dr. Paco?

Why is there this sort of fear that I was just kind of referring to?

I don't want to ask you that as well.

Well, I think the historical precedents that suggests that when we go through a period when the Fed is tightening policy to try to clamp down on inflation.

That there is a very likely a chance that the economy will slow down enough that we'll go into recession.

Most forecasters were calling for at least a mild recession sometime this year, but that just keeps getting pushed off further and further down the road with assessments of the probability and the severity of the recession being scaled back as we go forward.

So that's things are are.

Looking a lot different than they were six months ago when we thought that these interest rate increases were going to really hit the economy hard and you're not seeing it at all.

Well, we are with these record hospitality and tourism numbers throughout the state, I think coming back from the pandemic and again being the second largest industry in Arkansas, there is I hear from members and and hospitality business owners throughout the state.

Rising cost of food and sure that's that is that continues to be an issue and while we are at record unemployment rates, staffing does still continue to be an issue just throughout the hospitality industry.

So we are closely monitoring that and identifying new and innovative ways that we can.

Help with those challenges.

That was that was really one of my next questions.

With this record unemployment number that has just come out that I hear so many business owners say we just can't find good help.

And why is that?

Well, you know, with the 2.7% of the unemployment, there's not a whole lot of people out there looking for work.

Yes, that's really what it is.

Labor force participation rates are down a little bit from where they were pre Pandemic, but not really much more than you'd expect from baby boomers retiring.

So we really just have a labor shortage and is across the board like you.

I hear from business owners and all different sectors that they just can't find the employees to run their businesses.

It's so interesting.

I had a thought about you know we are post Pandemic but COVID really sort of cushioned people who had trouble.

You know with with jobs and not being able to work and is is there still that sort of thread for some of those employees thinking oh I should still get some government money or oh, I still should be helped up helped in some manner or some fashion.

Katie is that part of the problem in your opinion.

You know I I think that COVID and and during the pandemic it changed a lot of the way that.

We operate as humans and business operations.

So I think a lot of it is just adapting to this new business climate and just daytoday operations, you know one of the things to Shannon Newton, she's the president of the Arkansas Trucking Association and she noted recently that the US is in what's called a freight recession.

So while we're strong here in Arkansas, what does that mean exactly and is there need to be concerned?

Well, you know that's supply chains have been kind of crazy lately, but yeah, so they've been whipsawed back and forth between over demand and then having not enough business.

And so the the trucking industry is right at the heart of that that as as conditions whipsaw back and forth, they're finding that their their freight fees are going down and demand going down as well.

That might be a precursor, but everything else in the economy looks strong and consumer spending at the at the retail level is continuing to maintain.

So I wouldn't be too concerned about that.

But of course, there's always going to be sectors that are particularly affected by conditions in different ways than others.

Sure.

What sectors would you say that impacts most?

Well, you know, the transportation sector has been through the ups and downs.

The ones we'd expect to see having some difficulty are those that are interest sensitive, so real estate, durable goods sales, auto sales and yet we're still not seeing the weakness that we might expect given the fact that we've had 10 interest rate increases over the past year and a half.

So, but those are the sectors to keep an eye on where the weakness is likely to emerge.

And Katie, what are your expectations as we head into to the summer months?

I know there's a lot of people like to travel and take vacation and.

Are you you expecting a strong summer?

Yes, we are.

I actually spoke to a few of our members yesterday and they are, they're having very good summer seasons.

It's peak season for tourism throughout the state and we are hoping to see even larger numbers after this summer than our record numbers from last year.

So there's a, there's a lot of optimism within the industry for the summer months and I think.

So just the first few months of this year with the doubledigit increases is is a sign that we're set for a very strong summer, strong summer and then continuing, I mean Arkansas is always strong in terms of tourism and our natural state we have great weather you know all the way really through November almost.

So you know that's that's such a good good news to hear I guess is what was what I'm hearing you both say and your predictions for 2024 Doctor Paco.

Well, not not completely dismissing the idea that there might still be an economic slowdown, weakness in the future, maybe the third or fourth quarter we'll see some slowdown.

The Federal Reserve officials when they had their meeting this week indicated that they thought unemployment was still going to rise above 4% sometime later this year and next year.

But still that's not.

Terribly severe situation, but that's in line with my outlook.

Some slow down in the second-half but probably not something that we'd call a recession, certainly not seriously and what slowdown do you do you anticipate the consumer spending dollars, big purchases, you know you mentioned cars and real estate.

Things like that, turable goods, things that people generally buy on finance and are sensitive to interest rates.

That's what we expect to see the demand to drop off at first.

There's a little bit of inflation psychology going on now by those things now before they go up in price.

But I think as as the inflation impetus slows a little bit, that will go away as well.

And we'll see things level out and consumer spending probably will take something of a dip later this year.

There is a psychology to it for sure.

It's interesting that you pointed that out because there is, there's so much goes into a consumer's thinking about where to go, what to do, how to spend my money.

Should I stay back in Arkansas?

Should I go away across state lines?

You know, should I buy this?

Should I not?

It's very fascinating.

But what I'm hearing you say is all indicators are good.

So far so good.

Things are going well.

Final thoughts from both of you today, I'll just say the the hospitality and tourism industries are vital.

To not only the state's economy, but just the entire culture and quality of life here in the state.

And we have such a an incredible industry right here.

And I know that there are great things to come from.

Yeah, hospitality and tourism in the state.

And I'll just reinforce that point by pointing out that tourism is one of those sectors where.

It's like we're exporting our goods and services, but the customers are coming to us, so we don't even have to ship them the transportation.

So it's tourism is a very important sector for a state's economy.

All right.

Thank you so much both for being here.

Katie Beck, the CEO of the Arkansas Hospitality Association, We sure appreciate you.

And as always, Dr. Michael Packer, the chief economist and state economic forecaster with Arkansas Economic Development Institute.

Thank you both for your thoughts.

Thank you for having me.

Yeah, and we'll be back with more of Arkansas Week in a moment.

Welcome back in the aftermath of a surprise Supreme Court ruling last week concerning how the state of Alabama drew its Congressional District boundaries, plaintiffs in an Arkansas lawsuit challenging how the 2nd Congressional District was drawn.

Are appealing their case.

Attorney Richard Mays represents the group of plaintiffs and he is in studio with me now.

And we so appreciate you being here to break this down for us.

Thank you so much.

My pleasure.

Thank you for having me.

Well, let's just start from the beginning.

Arkansas's congressional map was redrawn after the 2020 census and 2021 and 1st, let's go over what you think was improper about how that was done.

And we're going to draw up a map here so we can see the changes.

It'll show the previous boundaries.

And now the current boundary.

So we know Cleburne County was added into District 2.

The the legislature that adopted this Congressional District map Congressional reapportionment took a community in southern Pulaski County that consisted of approximately 22,000 black voters.

And divided them, took them out of the 2nd district and put them in the in District 1, which is E Arkansas and District 4, which is in South Arkansas and western Arkansas.

These 22,000 black residents of Pulaski County had a tight community.

They have issues that they see frequently feel in common about everything.

They are Their vote was sought by politicians because they tend to vote as a block, and the legislature divided them up between these two districts, which took about 20 the 22,000 black residents out of Pulaski County and District 2.

And they moved 22,000 people in Cleburne County, which is in north, north, Central Arkansas in and the north part of District 1.

And District 2 and to the District 2.

So it it they replaced 22,000 black voters, it was 22,000 white voters.

And that's a problem.

Well, it was done in order to to 1st off.

We think it was racially motivated.

The 22,000 black voters tend to vote a certain way.

And the people who did the redistricting, which is primarily the Republican majority in the State House of Representatives in the Senate, are largely Republican.

So it it had something to do with politics, but it also had a lot to do with race.

How do you do you want it changed back?

What do you what in your ideal world would you like to see happen?

Well, there was really no reason for doing this other than the racial motivation and.

The boundaries were fairly satisfactory.

They obviously when you redistrict there's a certain adjustment that has to be made to try to achieve an equal population balance between the four districts that we have.

But it wasn't necessary to do this kind of major surgery on the 2nd District.

And we we think that a better, a more equitable reapportionment map can be easily achieved.

Well, getting into a little bit of the legalese, there were some earlier rulings that dismissed the claims that there were violations of both the US and the Arkansas Constitution.

And last month there was a three judge panel of the 8th US Circuit Court of Appeals.

And that held that the plaintiffs failed to document a racial motivation on the part of state legislators and approving this new congressional map.

But how do you respond to that?

Well, we filed the suit about a year and a half ago and a three judge panel, federal court panel was appointed to hear the case.

Now 3 judge panels are very rare.

They are used most often in this kind of case where you have a voting rights issue.

The panel consisted of two of the US district judges, excuse me, here in Arkansas, and 1 judge from the US Court of Appeals, which is seated in Saint Louis.

It's very unusual to have that kind of panel, but it it does happen in these cases.

What they We had a hearing in the spring of last year.

The court ruled against us on the counts, but they gave us an opportunity to amend the complaint to try to overcome their objections.

We contend they use the wrong standard.

They claim that we had to prove the intent of all of the legislature.

Was to discriminate against these black people, the law says.

The voting rights law says that it's the effect that you look at, not the intention of the legislature.

If we had to prove the intent of every person in the legislature, that would be almost it would be impossible to overcome a a a gerrymandered map, reapportionment map.

The Supreme Court has recently ruled in the Alabama case, in an Alabama case involving essentially the same facts that we have here that it's not the intention that you have to look at.

It is the result of the reapportionment that you look at to the and then you can presume a certain amount of intent from that.

And so that's the contradiction between what's happening in Alabama and what's happening here.

Yes.

And that is the our, our three judge panel in our case happened to rule as they did a week before the Supreme Court made their ruling in the Alabama case involves quite similar facts and we were going to appeal it anyway, but it's given us.

Perhaps renewed optimism, I should say, to try to appeal on the basis that we may have a better opportunity than before.

Well, Attorney General Tim Griffin's office is defending the state in this appeal, and we invited Griffin to join us.

He was not able to be here with us, but he did, however, provide a written statement and it says this the Supreme Court's recent decision.

Has no effect on any of Arkansas's ongoing redistricting litigation.

The Voting Rights Act claim in Simpson was dismissed months ago, and the remainder of the case was recently dismissed because the plaintiff failed to plausibly plead discrimination.

Mr. Mays, how do you respond to that?

I would say that I'm not surprised that the attorney General has characterized it this way, the fact that the court.

And our there are three judge panel in this case that rendered a decision months ago dismissing some of the claims but also giving us the opportunity to re resate our claims and to try it again and they they just dismissed it again this last week.

So we are.

Appealing that the time is still right for the appeal.

We did appeal it for Monday within time.

So the fact that the statement doesn't really have any real bearing on this, I mean it's it's something they usually put out to make it sound good from their perspective.

But it doesn't change the facts that we have the right to appeal to the United States Supreme Court.

And we think that the we hope that the Supreme Court is willing to reexamine their decision or the the three judge panel's decision in this case and and render a different judgment because it's pretty clear based upon the Supreme Court's decision last week that.

This panel used the wrong standard for evaluating our claims.

They didn't look at the result of the legislators actions.

They looked at the intent or they tried to say we had we had to prove that it was intended to be discriminatory instead of showing what the results were.

And so I think that's a big distinction and I hope the Supreme Court of the United States will agree with that.

Well, the Supreme Court decision says Alabama will have to draw.

Its congressional map to include a second majority black district.

Do you think Arkansas you should review the Congressional District map and just take a closer look?

Well, I I think that the legislature would be well advised to to reconsider their map because I I think that there is no explanation for what they did other than racial discrimination.

It may have also had political considerations as well but.

You can't just take 22,000 black people out of an area and say that it's not a racial over doesn't have racial overtimes.

And so I think they would be well advised to do that, although I don't expect them to do it.

They they'll probably take their chances with the Supreme Court.

We we have filed a notice of appeal.

We have 60 days within which to file a statement of our case.

And we will meet those deadlines and I can't tell you what the schedule will be as far as the Supreme Court's the taking up the case.

It may be months probably will be because they don't move real fast, but it will eventually.

They'll get to it, I hope.

And then you know any prior elections or upcoming elections that this could affect.

Well, it it should affect the next election, which will be in 2014, next 2024, next year.

There's plenty of time for the the Supreme Court to consider our appeal prior to that election.

If we're successful, then the legislature or the court could redraw a new map.

There would have to be some hearings on that.

I think they would prefer to let the legislature do it.

Usually they do, but the courts can do it themselves and have done it in other cases.

What would be your preference?

Personally, I'd rather see the court do it.

I do not think that the legislature, as it's currently constituted with could resist the temptation to to insert politics and race into it.

Again, Any final thoughts?

Well, I think this is very important.

I mean the right to vote is a cornerstone of our democracy and I think that these legislators and the the political parties paid play games with this, this process.

I think it's too serious to do that.

We need to have a voting, a voting map that is fair to everybody and gives everybody as equal to vote as possible.

Very important issue and a lot up in the air.

Attorney Richard Mays, thank you for laying it all out for us today.

Thank you, Don.

I've enjoyed being here.

Thank you.

We appreciate you very much.

And that does it for Arkansas week.

Thanks for being here.

I'm Dawn, Scott.

See you next time.

Support for Arkansas Week provided by the Arkansas Democrat Gazette, The Arkansas Times and KUARFM 89.