A working group tasked by Gov. Asa Hutchinson to find new highway financing sources expects to deliver a finalized menu of options for funding road construction to the governor next month.
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The Governor's Working Group on Highway Funding reviewed a draft of preliminary recommendations for the governor's consideration during a Thursday afternoon meeting at the state Capitol.
The working group's draft includes about 20 proposals for finding immediate funding for the short-term needs of the Arkansas Highway and Transportation Department.
The draft offers several additional "catch-all" recommendations.
"We [want] to present a menu of options to the governor that he [can] look at, examine and make a decision based off of," said Duncan Baird, the working group's chairman and state budget administrator.
The group has determined its funding solutions need to net $110 million for the Highway Department over the next three years. Since state dollars for roads are split among the Highway Department and cities and counties -- with 70 percent going to the state and the remainder going to cities and counties -- the group's target is $160 million.
Highway officials say that the $110 million would cover the cost of the reintroduction of an overlay program. The program costs about $200,000 per mile, providing an economical way to extend the life of a road before it needs a total reconstruction, which costs about $1.5 million per mile.
The working group's draft includes five different proposals as examples of how the different items could potentially be grouped.
The recommendations include an increase in the state taxes on fuel to varying degrees, a series of revenue-neutral changes across the state budget to direct more money to highway needs and transferring general revenue from the sales tax on new and used vehicles over several years.
Arkansas' gasoline tax at wholesale is 21.5 cents a gallon now, and its diesel tax is 22.5 cents.
Rep. Dan Douglas, R-Bentonville, cautioned the group against depending too heavily on fuel taxes, which are unsustainable, he said, because newer model vehicles use less fuel and that means less tax collected.
"One of the charges of the [group], I felt like, was to try to come up with sustainable funding," Douglas said. "Some of these things -- while they are good ideas to get us out of the crunch here and to put a Band-Aid on our situation -- are not real sustainable. The reason we are here is because the fuel tax hasn't been sustainable."
Baird said that a finalized report could include explanations with each item, including its positive and negative aspects.
Other options would eliminate the sales tax exemption for fuel and diesel, or initiate a $300 registration fee for hybrid and electric vehicles.
"With a new governor and a new structure in the legislature, taking a look at all of this, it seems to me, is a good exercise," said group member Craig Douglass, executive director of the Arkansas Good Roads Foundation, an organization that promotes better highways.
"There are very few options to raise significant revenue for highways. ... What [this] allows the governor to do -- if you give him a set of options -- is plug in highway funding into all of his other budget considerations because this will either affect existing revenues or tax policy. It will affect one or the other or both."
The 20-person group was created in April by executive order to provide the governor recommendations "to create a reliable, modern and effective system of highway funding." The group has until Dec. 15 to deliver its proposals.
The group includes state legislators, members of the governor's administration, highway-interest promoters, higher education representatives and others.
"This [working group] gave us an opportunity to take a look in a comprehensive way at all the options that were out there," Baird said. "This is a big issue for the state; it's a big issue for economic development purposes."
State Desk on 10/23/2015