Group to present road funding options

Panel seeks to extend finance deliberation beyond its deadline

LITTLE ROCK —A governor’s working group on highway finance soon will present Gov. Asa Hutchinson with a menu of options he and the Legislature can choose to increase funding for road construction in the short term.

The Governor’s Working Group on Highway Finance also will formally ask Hutchinson to extend its deliberation beyond its December deadline so it can consider further options to increase money for road construction.

The options, in the main, include increasing the state taxes on fuel, a series of revenue neutral changes across the state budget to direct more money to highways and transferring general revenue on the sales tax on new and used vehicles over several years.

Options also include indexing fuel taxes to the consumer or construction price index, increasing vehicle registration fees to the average of surrounding states as well as adjusting the traditional split accorded each state dollar for roads — 70 percent now goes to the state with cities and counties sharing the remainder.

Duncan Baird, the working group’s chairman, said at a meeting Thursday providing multiple options to Hutchinson and legislators would allow them to tailor a program to fit within a budget.

“In the end, it will be the responsibility of the governor and the Legislature to take that mix, evaluate it and look at our other needs to make a determination of what we can do,” added Larry Walther, the director of the Arkansas Department of Finance and Administration.

The preliminary recommendations, which will be fine-tuned at the group’s Oct. 8 meeting, also reflect the tension among the working group’s 20 members, all of whom Hutchinson appointed.

They are a mixture of advocates for the Highway Department, higher education officials concerned about any transfer of general revenue, Hutchinson budget officials, including Walther and Baird, as well lawmakers who say their colleagues have no appetite to raise taxes.

The short-term goal within two years is $110 million, which highway officials say would cover the cost of an overlay program. At about $200,000 per mile, they say the program provides an inexpensive way to extend the life of a road.

Three draft packages were circulated at Thursday’s meeting.

They included the Good Roads Foundation package calling for a mix of

short- and medium- term funding, including increasing the tax on fuel 10 cents per gallon. It would raise $198 million annually, netting state highways $125 million with cities and counties each receiving $31 million.

The tax on gasoline is 21.5 cents per gallon now. For diesel, it’s 22.5 cents per gallon.

The package also calls for transferring the proceeds from the sales tax on new and used vehicles over a period of five, seven or nine years from the general revenue to highway needs. As the transfer is gradually phased in, the increase in the motor fuel tax

would be phased out.

A second package developed by state Rep. Andy Davis, R-Little Rock, would return the $4 million in fuel tax to the department. It also would eliminate a percentage of the 1/2-percent state sales tax voters approved for road construction in 2012 that now goes to the state central services fund, a figure estimated between $5 million and $7 million.

Davis’ package also would create a sales tax rebate for road construction material, which would net an additional $17 million to $20 million annually for highways.

Finally, he would take the $70 million the state no longer will pay for desegregation costs in the Pulaski County

schools that’s earmarked to pay for eliminating the remaining sales tax on groceries and use it instead for highways.

Davis is among those who doubt the Legislature would raise taxes for roads.

The third draft package, from Frank Scott Jr. of Little Rock, a member of the Highway Commission, calls for increasing the state fuel tax by 5 cents each of the next three years. Scott said other states, led by Republican governors and legislators, have seen the need in recent years to raise taxes for highways.

But Rep. Dan Douglas, R-Bentonville, said fuel taxes no longer are effective because even though more vehicles are on the road, less fuel taxes are collected because those vehicles use less fuel. He also agreed with Davis the Legislature wouldn’t raise taxes, anyway.

“It’s not going to happen,” he said.

Douglas said he wanted his proposal from the recent legislative session to be part of the mix of options for Hutchinson to consider. It would take a percentage of growth in the sales taxes on new and used vehicles and steer it to the Highway Department.

Some of the other proposals, he said, amount to a “shell game,” that’s using the highway funding issue to reform other tax rates.