Hutchinson puts his pen to roads plan

Senate OKs it in 21-10 vote

With highway officials and legislators standing behind him, Gov. Asa Hutchinson confirms the date Monday with Senate President Pro Tempore Jonathan Dismang, R-Searcy, as Hutchinson prepares to sign the highway funding bill.
With highway officials and legislators standing behind him, Gov. Asa Hutchinson confirms the date Monday with Senate President Pro Tempore Jonathan Dismang, R-Searcy, as Hutchinson prepares to sign the highway funding bill.

Gov. Asa Hutchinson on Monday signed into law his highway funding bill, after the Arkansas Senate advanced it to him on the final day of a brief special session.

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Sens. Larry Teague, D-Nashville; Bart Hester, R-Cave Springs; Eddie Cheatham, D-Crossett; and Bruce Maloch, D-Magnolia, listen Monday to the debate before the Senate approved the governor’s highway funding bill.

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Sen. Bart Hester (left), R-Cave Springs, talks with Sen. Alan Clark, R-Lonsdale, after the Senate adjourned Monday after approving the highway funding bill. Clark spoke against the bill.


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The Republican governor put his signature on House Bill 1009 by Rep. Andy Davis, R-Little Rock, on Monday afternoon -- a few hours after the House and Senate adjourned the third special session called by Hutchinson during his more than 16 months in office. The latest session started Thursday.

The law relies largely on portions of state surpluses and increased earnings on state treasury investments to raise about $50 million a year, which will help the state obtain an additional $200 million a year in federal highway funds under a five-year federal highway funding law.

"It is a unique solution for a unique challenge that we had in this state," Hutchinson said at a news conference in the governor's conference room.

"The Legislature ... met that challenge and came out with a result that did not raise taxes, but resulted in a $1 billion highway program over five years," he said. "This is what I would consider a success, and I am delighted with the highway bill."

Earlier in the day, the Senate voted 21-10 to send HB1009 to Hutchinson.

Nineteen Republicans and two Democrats -- David Burnett of Osceola and Bobby Pierce of Sheridan -- voted for the legislation. Seven Democrats and three Republicans voted against it. Two Republicans and a Democrat didn't vote on the legislation, while one Democrat voted present.

Senate Democratic leader Keith Ingram of West Memphis told his colleagues that the legislation "fails to qualify as a short-term solution to a long-term problem.

"Instead, it creates a long-term problem with no solution," he said.

Ingram said the legislation reduces surplus funds and interest earnings needed to shore up the budget during economic downturns and to deal with emergencies in state government.

Ingram praised Sens. Bill Sample, R-Hot Springs; Jim Hickey, R-Texarkana; Greg Standridge, R-Russellville; and Ron Caldwell, R-Wynne, for seeking a "a thoughtful common-sense solution to an extraordinary, complex problem that needs far more than a Band-Aid as the cure-all."

In advance of the session, the four Republican senators circulated draft legislation to implement the first year of the governor's plan and then phase in an 8-cent-per-gallon increase in the state's gas and diesel taxes that would eventually raise about $160 million a year for highways and roads. They aimed to refer an initiated act to voters to replace the increased gas and diesel tax revenue before the tax increases expired after four years. The state's current gas tax is 21.5 cents per gallon, and the state's diesel tax is 22.5 cents per gallon.

Senate President Pro Tempore Jonathan Dismang, R-Searcy, said the highway funding legislation won't create more budget problems based on the state's general revenue forecast.

"I understand the question about using surplus funds for highway projects. At the same time, surplus funds should be used on capital projects, and I believe that highway construction qualifies for that," Dismang said.

Davis, who served on the Governor's Highway Working Group, said he's considering proposing legislation in the 2017 regular session to phase in the transfer of $100 million a year "over some number of years" in general revenue to the Highway and Transportation Department to fund overlay projects for non-federal highways.

Hickey said he's not sure whether he, Sample, Caldwell and Standridge would introduce their draft legislation in the 2017 regular session to raise gas and diesel taxes. They didn't introduce it in this special session.

"I think the governor was right by saying we may need to try to come up with a long-term plan and maybe try to do that in the offseason with members of the Legislature and members of the public and then maybe try to get that put on the ballot as an initiated act [in the 2018 general election]," with residents collecting signatures of registered voters, Hickey said.

Asked when he would start working on a ballot initiative for a long-term funding plan, Good Roads Foundation Executive Director Craig Douglass said he doesn't know.

"The idea I'm thinking about circulating is for Good Roads to convene and facilitate a group ... to focus on [the] long term. And that doesn't mean an automatic tax increase. But we'll see," Douglass said in an email.

The Senate's approval of legislation Monday came three days after the Senate Revenue and Taxation Committee on Friday had recommended HB1009. The tax committee's action came after the Senate voted 19-14 to re-refer it from the transportation committee to the tax committee. The bill had just arrived from the House, which approved it 75-15.

The Senate version of Hutchinson's plan -- Senate Bill 11 by Sen. Bart Hester, R-Cave Springs -- failed to clear the Senate Transportation, Technology and Legislative Affairs Committee on Thursday in a 4-4 vote. Before that vote, Hester's bid to re-refer his bill to the taxation committee fell three votes short in a 15-15 Senate vote.

HB1009 creates the Arkansas Highway Transfer Fund. The Highway and Transportation Department could use money with the approval of the governor and the Legislative Council.

The fund would include investment earnings on the state treasury's funds -- a transfer of $1.5 million in fiscal 2017 and $20 million in fiscal 2018 and later fiscal years.

The bill would provide for a one-time transfer of $40 million from the state's rainy-day fund to the Highway Transfer Fund. The state's current rainy-day fund balance is $30.6 million, and there will be a $50 million transfer of surplus funds to the rainy-day fund on July 1 under the state's Revenue Stabilization Act, said Jake Bleed, a spokesman for the state Department of Finance and Administration.

Under HB1009, highways and roads would get $8.4 million that now goes to state central services, which includes money for constitutional offices, starting in fiscal 2017. That money is a portion of revenue derived from a half-percent sales tax intended for highways. Highways and roads also would get $4 million from diesel taxes starting in fiscal 2018.

Starting in fiscal 2017, the bill also would provide that 25 percent of the surplus general revenue at the end of each fiscal year would be transferred to the Highway Trust Fund.

Richard Wilson, an assistant director of research for the Bureau of Legislative Research, estimated last week that the state could have a surplus of between $160 million and $185 million in fiscal 2016 based on conservative budgeting and lower-than-expected individual income tax refunds. In early February, the Hutchinson administration projected a $35.9 million surplus in fiscal 2016.

HB1009 would rename the Arkansas Rainy-Day Fund, which has existed for several years but was never funded, as the Long Term Reserve Fund to avoid confusion over which "rainy day" fund is being used, Bleed said. The Long Term Reserve Fund would be a "fallback funding source in the event of an economic downturn," and its funding would be from the securities reserve fund, which comes from earnings on investments made by the treasurer, he said. The fund would be capped at $125 million.

The bill also would create a 20-member Highway Commission Review and Advisory Subcommittee of the Legislative Council to review the Highway Commission's proposed rules regarding the criteria for distribution of funds and the spending priority designated for highway and road construction contracts. The subcommittee also would receive progress reports on construction projects costing at least $10 million.

A Section on 05/24/2016

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