Options slim after defeat of Arkansas highway initiative

LITTLE ROCK—The defeat of an effort to put a highway initiative on the Arkansas ballot next year shows how difficult it will be for any plan to raise new revenue in a Legislature that’s turned increasingly conservative and anti-tax. The loss leaves highway advocates few options for finding new ways to close a growing funding gap.

The proposal that failed before the state House last week would have put a 20-year bond issue on the ballot and potentially raise $200 million annually for the state’s highways. The measure failed over opposition among Republican lawmakers to an accompanying bill to raise taxes on gas and diesel to pay for the bonds.

The highway plan called for levying the state’s 6.5 percent sales tax on the wholesale price of diesel and gasoline, a tax increase that wouldn’t have taken effect unless voters approved the bond issue next year. The plan had the backing of Republican Gov. Asa Hutchinson, who said voters should have the opportunity to decide whether to raise taxes to pay for road improvements.

“I can’t think of any good arguments against referring to the people an opportunity to vote on a highway plan in a general election. The voters can vote it up or down, but it’s their decision,” Hutchinson told reporters days before the vote.

This week could determine whether the highway plan can find any new life. The proposal fell 13 votes shy of the 51 needed in the House chamber, with 27 lawmakers either not voting or voting “present” on the bill. The lawmaker behind the proposal says he’s polling his colleagues to see if he should seek another vote on the proposals.

Advocates of the highway funding plan say they face few options to address the highway funding shortfall if this initiative doesn’t reach the ballot.

“It’s not an encouraging picture if we can’t get this proposal. … This is the best chance we have for a significant highway program going forward,” said Craig Douglass, executive director of the Good Roads Foundation.

The tax increase is highlighting an ongoing rift among Republicans who control the Legislature over the best way to fund road needs. Conservative groups have been urging lawmakers to reject the plan, saying there’s little distinction between putting a tax increase on the ballot and approving it themselves.

One of those groups, Americans for Prosperity, has said the proposal would a hit a state it argues are overtaxed as it is. David

Ray, the group’s Arkansas director, said the state should look at ways to tap into or better manage existing revenue sources. Those ways include a modest transfer of tax revenue from auto-related sales to highways and a rebate on the sales and use taxes the state Highway and Transportation Department pays for construction materials.

“(Voters) want our elected officials and the folks who work for the highway department to turn over all the couch cushions and make good use of the revenue that we currently have before going back to voters to ask for more,” Ray said.

None of those efforts to tap into existing money would be an easy sell either, especially after another round of tax cuts approved this year and a state revenue picture that’s still coming in less than forecast. Other ideas have also been floated among lawmakers, including using the revenue expected from Amazon’s decision to begin collecting sales taxes in Arkansas and money from a settlement with Volkswagen.

The divide among lawmakers on the best path forward was evident as they debated the highway plan before its defeat last week.

“Wouldn’t you also agree that the people of the state of Arkansas in 2016 already decided they didn’t want taxes and that’s why the Republicans have a majority in the House now? That was their decision. That’s why they’re here,” Republican Rep. Brandt Smith, who voted against the measure, said.

Republican Rep. Dan Douglas, the plan’s sponsor, later shot back: “We’re here to solve problems, not just run for re-election.”

Douglas said he isn’t sure whether the plan would ultimately have enough votes to move forward, but he’s painting a bleak picture if a new revenue source isn’t found.

“Instead of improving our highway system, we will have to just manage the decline of our highway system,” he said.