Funding plan for roads advances to House vote

An Arkansas House committee on Tuesday advanced legislation that would raise about $95 million more a year for the state Department of Transportation to spend on highways.

With no audible dissenting votes, the House Revenue and Taxation Committee recommended House approval of Senate Bill 336 by Sen. Terry Rice, R-Waldron. The bill is the first part of Gov. Asa Hutchinson’s two-part plan to eventually raise $300 million a year more for the Transportation Department.

The bill would levy a sales tax on wholesale gasoline and diesel fuel; increase registration fees on electric and hybrid vehicles; and transfer at least $35 million a year in casino revenue and other state funds to the department.

“The committee’s vote to send the highway bill to the full House for a vote puts us one roll call away from passing into law a historic highway bill to maintain our roads and highways far into the future,”

Hutchinson said after the committee’s meeting.

“I am grateful for the bipartisan support that puts the good of the state first,” the Republican governor said in a written statement.

Rep. Mike Holcomb, R-Pine Bluff, who is the House sponsor of SB336, said in an interview that he expects the House to consider his bill on Thursday, and he’s pretty confident that a majority of House’s 100 members will approve the bill.

Rep. Les Eaves, R-Searcy, told reporters he plans to vote against the bill on the House floor, but “my guess is it passes,” since it only requires 51 votes for approval.

Earlier, Holcomb told the House committee, “I know this bill … is not everything that we wanted it to have.

“However, it is a giant step. It’s fair. It’s long term and I know it is necessary. I know there are some that don’t think we should do anything. However, we can’t continue to just shove our infrastructure problems over into the corner and just pretend like they don’t exist,” he said.

Officials for the Arkansas Farm Bureau, Arkansas Municipal League, Association of Arkansas Counties and Arkansas Trucking Association testified for the bill, while several owners of electric and hybrid vehicles testified against the proposed fee increases for their vehicles.

SB336 would create a new wholesale motor fuels sales tax. The tax would start at 3 cents a gallon on gasoline, which already has a 21.5-centa-gallon excise tax, for a total of 24.5 cents. The wholesale tax on diesel would start at 6 cents a gallon, on top of the 22.5-cent-a gallon excise tax, for a total of 28.5 cents. The increases would be effective Oct. 1.

Future increases would be limited to one-tenth of a percent a year, meaning the maximum increase would be 1 percent over a 10-year period.

The wholesale sales tax is projected by the state Department of Finance and Administration to raise $58.9 million for the Transportation Department in fiscal 2021 — the first full fiscal year of the new tax

— and raise about $13 million each for cities and counties.

The last time the Legislature increased gas and diesel taxes was in 1999, said Transportation Department Director Scott Bennett. The gas tax was increased by 3 cents over a three-year period and the diesel tax was increased by 4 cents over a two-year period,

Bennett said.

Jeff Pitchford, the Farm Bureau’s director of state affairs, public affairs and governmental relations, said the Farm Bureau’s members “have had a policy for quite some time on paying for a highway program, supporting for the first option an increase in fuel taxes.

“It is a crucial for the state to make the investment to better maintain our roads, especially secondary roads, so the largest engine for the state, agriculture, can thrive and help our farmers and ranchers,” he said.

“We simply have to provide the maintenance dollars for these farm-to-market roads. We would appreciate support for this program and this bill to be adopted,” Pitchford said.

Since 2013, 27 states and the District of Columbia have enacted legislation to increase fuel taxes, according to the National Conference of State Legislatures.

Missouri voters in November rejected a proposed increase.

In 2018, Missouri and Oklahoma enacted legislation to increase motor-fuel taxes, the conference reported. However, Missouri’s increase was subject to voter approval because of constitutional limitations on revenue increases, and Proposition D failed at the ballot box.

SB336 also would increase annual registration fees for each electric vehicle by $200 a year and for hybrid vehicles by $100 to raise a projected $1.97 million in fiscal 2021, according to the finance department. About $1.4 million of the funds would go to the Transportation Department and about $600,000 to the cities and cities, Holcomb said.

The fee increases would be effective Oct. 1. Base vehicle registration fees are $17, $25 and $30, depending on weight class, according to the finance department.

“I think this is a fairness tax,” Holcomb said. “These vehicles are causing wear and tear on our roads, but they don’t pay an equivalent fee for usage.”

He added: “We all use the same highway. We all have to put a little skin in the game for maintenance of the roads.”

But Bruce McMath of Little Rock countered, “The hybrid and electric vehicle will pay more total tax than the conventional vehicle that is just essentially its twin on the road.

“That is unfair. It is bad policy. It seems punitive,” he said. “This adds up to around $500 over the life of the vehicle that you are penalizing these cars.”

According to the National Conference of State Legislatures, 21 states have enacted legislation requiring a special registration fee for select hybrid and plug-in electric vehicles as of October 2018, although Oklahoma’s legislation was subsequently struck down by the state Supreme Court, bringing the total number of states implementing fees to 20.

SB336 also would guarantee at least $35 million a year for the Transportation Department from casino tax revenue, the governor’s restricted reserve fund or other funds designated by the governor.

Revenue received from casino gambling tax receipts and deposited into the general revenue reserve account that exceed $31.2 million per fiscal year would be transferred to the Transportation Department on the last business day of each fiscal year.

The finance department projects casino tax revenue would provide $20.8 million to the Transportation Department in fiscal 2021 and ultimately $43.2 million in fiscal 2028.

“We are expecting that $35 million commitment of Senate Bill 336 will be met in approximately in fiscal year 2025 and in successive years as we get additional revenues from the casinos we would anticipate there would be more than $35 million being transferred,” said Paul Gehring, an assistant revenue commissioner.

Holcomb said the finance department’s projections factor in expansions of Oaklawn Racing and Gaming in Hot Springs and Southland Gaming and Racing in West Memphis and the development of a casino in Jefferson County, but not in Pope County. The casinos are authorized under Amendment 100 to the Arkansas Constitution approved by voters in November.

But Eaves said he plans to vote against SB336 on the House floor in part because “I don’t like putting the guaranteed $35 million in front of” the Revenue Stabilization Act that distributes state general revenue to various state-supported programs.

“If we have a downturn in the economy or if we have a big shortfall, we are going to have to cut somewhere. You are going to put that fund ahead” of higher education, pre-kindergarten, the Department of Human Services and others, he said.

Meanwhile, Rep. Jeff Wardlaw, R-Hermitage, said Tuesday that he plans to present the second part of Hutchinson’s highway funding plan to the House State Agencies and Governmental Affairs Committee this morning.

Wardlaw is sponsor of House Joint Resolution 1018, which would refer to voters in 2020 a plan to permanently extend the half-percent sales tax that was enacted by voters in 2012 for a 10-year period.

If approved by voters, the proposed extension would become effective July 1, 2023, according to the finance department. The plan is projected to raise about $205 million a year for the Transportation Department and about $44 million a year more for the cities and counties, the finance department estimated.

“That’s an incredibly regressive way to maintain our roads,” civic activist Barry Haas told the House tax committee on Tuesday about Hutchinson’s two-part highway funding plan.