Northwest Arkansas Democrat-Gazette
With one tax path out, road-funding puzzle restarts
One day after Gov. Asa Hutchinson said he would “vigorously oppose” any effort to siphon Arkansas general revenue for road construction, state highway officials are returning to the drawing board to develop measures that don’t include general revenue.
“He did trigger that,” Scott Bennett, the director of the state Department of Transportation, said Wednesday after an Arkansas Highway Commission meeting.
Bennett also said that while he and commission members haven’t ruled out a 2018 ballot measure for voters to consider, they also will consider going to the Legislature in 2019 as well.
Regarding such a measure, the department staff will draw up a list of projects for voters or legislators so they can see what would be built if it is approved, he said.
“I think the support, whether it’s legislative support or general public support, in a ballot measure … is going to come from showing the improvements that will happen more so than the way you are going to fund it,” Bennett said.
Exactly what that measure is no one knows.
“As we’ve gone around the state, there is a lot of support for a highway program,” Bennett said. “I think we have to find that sweet spot in what that right measure is — whether it is a ballot measure, whether it is a legislative measure. And that sweet spot is both from the amount of revenue you generate and where that revenue is going
to come from.”
The commission has been seeking an additional $400 million annually to meet its needs in order to maintain the existing state highway system and provide some construction to ease congestion.
Nine scenarios the department developed to reach that figure included a mix of fuel tax and fee increases along with a transfer from general revenues, which mainly include the taxes on the sale of new and used vehicles.
One scenario included a 10-cent diesel tax increase phased in over three years, a 6-cent increase in the gasoline tax also phased in over three years, and a $15 increase in registration fees phased in over 10 years.
Once all phased in, they total about $200 million, or less than half of the $419 million the scenario would net the department after accounting for $179.8 million that would be evenly divided between cities and counties under a traditional formula used for every state dollar allocated for road construction.
The bulk of the money would come from transfer of the sales tax on new and used vehicles and tires, which would be phased in over five years and raise $397.8 million once the phase-in period ends.
State highway officials say it would be difficult to find a formula that would raise that amount of money without transferring revenue, which is why they are reluctant to rule it out, Hutchinson’s objection aside. To raise $400 million from fuel taxes alone, the fuel tax would have to go up 28.4 cents. Alternatively, people would have to pay an additional $208 to register their vehicles.
“As far as the revenue transfer, I believe it is probably still alive,” said commission member Tom Schueck of Little Rock. “If you look at the spreadsheets, you will see 60 percent of the money comes from that. I don’t see how else you get there. You are either going to have lower your needs — I don’t know you are going to do that — or we’re going to have to find all different kinds of ways to get money.”
But the governor spoke, and the commission heard.
“There’s been a real change from yesterday as far as the way we were looking at it,” Schueck said.
And it would be difficult to go against the governor.
“He was important to us,” Schueck said. “We’d miss that support.”
Hutchinson said he opposed the transfer because the general revenue funds education, prisons and human services and that, should there be growth, it would eliminate the possibility of income tax cuts and other opportunities for the state overall.
Bennett cited an online survey available on the department’s website that shows large support for the general-revenue transfer. Sixty-four
percent of the approximately 2,000 respondents to the unscientific survey say they would support the transfer.
“From the survey results that we have received so far, I don’t think the people have closed the door on that option,” Bennett said.
Also complicating the calculations of state highway officials for the 2018 ballot measure is the fact that several other measures will be on the ballot, including a high-profile “tort reform” measure on which interest groups on both sides likely will spend heavily. One of those interest groups is the Arkansas State Chamber of Commerce, which is also a department ally.
“I do think it would be a heavy lift to do something in 2018 because of the other issues that are going to be on the ballot,” Bennett said. “But we haven’t decided it is completely off the table.”
Commission Chairman Dick Trammel of Rogers said agency officials want to work with Hutchinson.
“I respect the governor, I respect the Legislature and I respect the people,” he said. “His opinions depend on what the people want because he says he wants to reduce taxes. People like that. People don’t like new taxes. We’re not upset with his comments.
“We’re just going to continue to find out what we can do and if we can continue to pick up support from legislators and the governor. We need the governor’s support.”