A group asked by Gov. Asa Hutchinson to develop options for new sources of state money for road and bridge construction is examining a preliminary proposal that would include a tax increase on motor fuel.
The possible tax recommendation to Hutchinson would be coupled with a plan to transfer revenue from and cut costs in other areas of state government so more money could go toward the Arkansas Highway and Transportation Department.
Meeting Thursday afternoon at the state Capitol, the Governor's Working Group on Highway Funding discussed a proposal that would raise Arkansas' motor-fuel tax by 10 cents a gallon on its wholesale price.
Currently, Arkansas' gasoline tax is 21.5 cents a gallon, and its diesel tax is 22.5 cents, also at wholesale.
The motor-fuel tax increase proposal was introduced by group member Craig Douglass, executive director of the Arkansas Good Roads Foundation, an organization that promotes better highways.
Douglass' proposal was in response to the group's decision in its August meeting that its focus should be on finding immediate funding for the department to meet the short-term needs of Arkansas roads.
The Highway Department has said it has a short-term funding target of about $110 million, which would cover the cost of the reintroduction of an overlay, or resurfacing, program. Costing about $200,000 per mile, the program would provide an inexpensive way to lengthen the life of roads before they need total reconstruction, which costs about $1.5 million a mile, according to department officials.
The extra money also would allow the agency to match all the funds it anticipates the federal government would make available to Arkansas for road construction.
Douglass said the motor-fuel-tax increase would net the Highway Department about $125.7 million a year.
The maintenance-centered proposal would improve highway and bridge safety, reduce cost of miles traveled, extend the usable life of existing roadways, create and sustain private-sector jobs, and enhance economic activity and development, Douglass said.
"We know of no other capital investment by state government that has a proven return on investment in numbers of jobs and economic activity than does the ... allocation of state's capital into highway construction and maintenance," Douglass said.
The proposal also included finding more permanent highway funding, possibly through moving existing sales taxes on new and used vehicles over a five-year period from the general fund into the highway fund. The more permanent revenue would be necessary because motor-fuel taxes are based on consumption, and consumption is declining.
Frank Scott Jr., a state Highway Commission member, agreed on increasing the motor-fuel tax but said the group should look at a 15-cent increase phased in over three years at 5 cents a year.
Other group members threw their support behind a motor-fuel-tax increase of some sort, too.
"I'd like to support the idea of a 10-cent fuel tax [increase]," said Randy Zook, president and chief executive officer of the Arkansas State Chamber of Commerce. "It's just a matter of timing and implementation."
Zook said he'd like for the motor-fuel tax to be phased in; perhaps 5 cents at first and then 1 cent every six months for two years.
But Rep. Andy Davis, R-Little Rock, said working-group members needed to realize that the current political climate does not favor tax increases.
"The idea of a tax increase is politically [unfeasible]," he said. "The governor asked us to be both creative and to consider political realities.
"The Legislature, I don't believe, is going to consider any new revenue until they are confident that we have turned the couch upside down and shaken every penny out of it we can."
Instead, Davis said, the group should examine "revenue neutral" ways of finding new Highway Department funds. His plan included transfers of existing revenue, sales-tax rebates and making cuts elsewhere.
Davis said his plan was "strictly short-term."
Rep. Dan Douglas, R-Bentonville, said, "I agree a gas tax would be the quickest way to generate money and get it going, but the reality is also we have to look for these cuts."
"It's a balancing act. We need to cut everywhere we can, transfer revenue that's not being used efficiently. But then I do not feel that it is practical to even think we can come up with the numbers we need to maintain our infrastructure with 'revenue neutral' spending. We're going to have to have some type of increase, but we need to offset that as much as possible."
Scott, the Highway Commission member, proposed focusing on a motor-fuel-tax increase while also exploring ways revenue could be transferred and spending cut.
"It's not an either-or; it's a both-and," he said. "We get a chance to look at revenue neutral as well as revenue growth."
Group member Jackson Williams, a Little Rock lawyer, said it was important that the group share its discussions with the public.
"Whatever recommendation we make, make it as a preliminary one of this committee and have that reported. And let's get some feedback from the public or anybody else, including the governor's office, on what they think about some of these things before we try to say this is the definitive recommendation of this committee," he said.
The working group's meetings are public and streamed via the Internet.
Duncan Baird, the working group's chairman and Hutchinson's budget director, said the group will be presented at its Sept. 17 meeting with more details on the motor-fuel-tax increase proposal and its possible impact, along with more information on revenue transfers and spending cuts.
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.
The group was created because revenue "available for highways and local roads are inadequate for the preservation and maintenance of the existing infrastructure and for improvements," the executive order said.
State general revenue has risen more steeply than highway revenue, which depends primarily on fuel taxes. Those taxes have been flat, while construction costs continue to rise.
The executive order also noted that the future of the Federal Highway Trust Fund is uncertain.
Hutchinson created the working group to stave off a fight in the legislative session earlier this year over House Bill 1346, which would have shifted some money the state receives from new-car and -truck sales and some road-user items gradually from the state general budget to the Highway Department.
The shift would have applied only to a portion of money above the amount that came in the previous year and thus, proponents say, would not only have preserved the base general revenue being collected but also have allowed general-revenue growth to be available to other agencies and providers.
A Section on 09/04/2015