By Governor Asa Hutchinson

 SIFMA’s 2015 Annual Meeting
The Capital Markets Conference

Speaker Perspective with Governor Asa Hutchinson
46^th Governor of Arkansas

Did you know that Arkansas is leading the nation in enrolling high school students in coding classes, recently made the largest cut in income tax rates in the state’s history, and grew its capital investments to $1.66 billion this year? The man behind these initiatives, Governor Asa Hutchinson, will be at SIFMA’s Annual Meeting next week on a panel with Virginia Governor Terry McAuliffe talking about capital markets from the state lawmaker’s perspective.

We asked Governor Hutchinson a few questions to get to know him and the work he is doing to make his state economically competitive. In the first of our two-part series, we get an update on Arkansas’ economy and talk national issues. In the second part, we talk to the Governor about local initiatives he has introduced since he took office in January, 2015.

SIFMA: Can you tell us a little bit about the state of the Arkansas’ economy today? Since you took office in January, 2015, what size of capital investment have you overseen, what sorts of industries and projects have been bolstered with this injection?

Gov. Hutchinson: The number of capital investments has actually grown to $1.66 billion since I took office, according to the Arkansas Economic Development Commission (AEDC). Since January, AEDC has signed agreements with 80 new and expanding companies, creating 2,681 new jobs for Arkansans. This commission plays a vital role in recruiting industry to our state through expansion projects for existing business and retention of in-state businesses. As Governor, it is important to support market-driven growth that bolsters the creation of jobs for Arkansas’s business climate. To facilitate this growth, I have worked with the legislature to lower taxes and reduce burdensome regulations hindering business growth and productivity. Two examples of recent economic development in Arkansas include ArcBest Corporation’s announcement of its new corporate headquarters in Fort Smith, which will create 975 new jobs, and Baxter International Inc. adding nearly 225 full-time employees to its Mountain Home manufacturing facility.

SIFMA: Sounds like a very busy and productive start to your time in office. How have capital markets helped you invigorate Arkansas’ economy and provide funding to companies?

Gov. Hutchinson: Arkansas routinely accesses the capital markets in the form of bond issues to finance capital projects for the state and economic development projects. The favorable interest rate environment has allowed Arkansas to refinance many of its bond issues, providing $10 million in savings for the state since January 2015. We also recently completed an industrial development bond issue where we secured a ten-year, fixed-rate financing at three percent interest for an Arkansas manufacturer. These factors lend themselves to capital market growth and contribute to the ability of companies to raise funds. This results in existing and new company growth, which leads to more jobs and higher wages.

SIFMA: More companies and more jobs is great, but surely taxation must be adjusted to accompany this. How can states modernize their tax codes to encourage investment?

Gov. Hutchinson: Attracting capital to our state is a priority of mine. We know that capital naturally flows to where the returns are greatest. Reducing tax rates – both income tax rates and capital gains tax rates – raises the return on investment and is an effective method of encouraging future investment. Targeted tax credits and deductions can certainly influence specific investment areas, but nothing beats lower across-the-board tax rates when it comes to stimulating investment, economic growth and job creation. We have taken an important first step this year by lowering state income tax rates. In doing so, Arkansas is sending a message that our state is open for business. We want your business here, we want your capital invested here and we want the jobs that are generated by those capital investments.

SIFMA: Is it enough to make these changes at a state level? What is the role of state lawmakers in national financial regulatory reform?

Gov. Hutchinson: Federal regulations have a significant local impact. State lawmakers can use their influence with our federal delegation to help shape debates on policy. They are active proponents for the communities, people and businesses they represent. Lawmakers have the unique ability to tell the stories they see firsthand about the burdensome or overreaching regulation of our banking and financial system. They understand on the local level the impact these regulations have on Arkansas’s banks, businesses, and consumers. Reform efforts at the state level may encourage more investment opportunities while still maintaining adequate protections for investors.

SIFMA: How can the financial industry access these investment opportunities, and what are some of the protections in place?

Gov. Hutchinson: Arkansas has been and remains proactive when it comes to its relationship with the broker dealer community and those involved in the Municipal Bond Markets. Through subdivisions such as the Arkansas Development Finance Authority (ADFA), the State accesses the Municipal market on an almost monthly basis. ADFA alone has issued over a half billion dollars in municipal bonds this year. On the investor side of things, we remain engaged with the Ratings Agencies keeping our stable outlook with a goal of advancing our state standing. Our Revenue Stabilization process ensures prudent financial management on the State level, which has ancillary benefits for all participants in the bond markets from Arkansas. Our bonds have a good standing and I will work to ensure they remain dependent and reputable.

Join us at SIFMA’s 2015 Annual Meeting on Nov. 10 in Washington, DC