LITTLE ROCK - In Arkansas, 2011 was a year of record flooding and searing heat, a busy and deadly tornado season and a slow recovery from national economic woes. However, our agricultural industry has rebounded after those floods, we continue to rebuild and recover from the storms, and Arkansas remains one of only four states to make it through the past two fiscal years without a general-revenue shortfall.

We can’t predict everything 2012 will bring with it, but we know some of the events that are on the horizon. First and foremost, the Arkansas General Assembly will convene in February to set the state budget for the coming fiscal year that begins in July. This is only the second fiscal session since Arkansas voters created them in 2008. This session is designed to address only budget issues, not to fashion and debate new policies. The legislature held to this ideal two years ago, and I have seen no indications that this February will be any different.

The state’s general-revenue budget will again be tight, and operations budgets for most state agencies will remain flat. With a small increase in revenue being forecast, I will propose a funding increase in K-12 education to ensure our continued push for excellence and compliance with adequacy requirements. Beyond that, we will examine other areas where the demand for government services has continued to increase.

One area we’ve been watching closely is Medicaid. Rising health-care costs and a struggling national economy continue to increase demand for Medicaid services, and soon our state budget will be unable to keep up with that demand. We now believe we will have sufficient Medicaid funding for the coming fiscal year. But our improved national standing for per-capita income means that federal matching funds for Medicaid will be ...