The Arkansas Highway Commission’s unanimous vote last week to pursue placing a ballot proposal on highway funding on the November 2018 ballot came after the state Legislature failed in recent sessions to agree on a way to address highway needs.
A state representative who has sponsored unsuccessful legislation on highway funding says he no longer believes a solution to the problem is going to come from the Legislature. Others say it is premature to give up on that possibility.
One point on which there is wide agreement is that the current funding mechanism for highways is insufficient. Arkansas has not raised its motor fuel taxes since 2001, and those rates, 21.5 cents per gallon for gasoline and 22.5 cents per gallon for diesel, are now well below national averages.
The long-unchanged rates, combined with increased fuel efficiency in vehicles, have prevented tax revenues from keeping up with the increased need for highway maintenance as the number of cars on the roads has increased.
Lawmaker: No legislative fix
Rep. Dan Douglas, R-Bentonville, has seen highway proposals fail in the Legislature enough times to be convinced a citizen-led ballot initiative would be a better approach.
“I just don’t see a legislative solution to it right now in this political climate,” Douglas said.
Douglas’ most recent proposal was legislation this year that would have referred to voters a proposed 6.5 percent sales tax on wholesale gasoline and diesel to finance a bond issue to raise about $200 million a year for highways.
Lawmakers were unwilling to ask for a public vote on a tax increase, which critics said would be paid directly by retailers but would be passed on to consumers at the pump.
“We’ve got too many people that are worried about being re-elected or not having a primary than they are (about) figuring out the solution to maintain the state’s highways,” Douglas said.
The Highway Commission has not yet decided what approach or combination of approaches to propose for the ballot. Douglas said the idea he believes would be most palatable to voters would be to transfer tax revenue from road-related items, such as sales taxes on vehicle sales, to highways.
Douglas proposed doing that legislatively in 2015, without success. Getting support for the idea in the form of a ballot issue also would be a challenge, he said.
“It’s going to be very difficult because you’ll have all the opponents to that, higher ed and the other state agencies, fighting it” because they do not want to lose general-revenue funding, he said.
State agencies may be more inclined to support raising fuel taxes, but that is likely the approach voters would favor the least, Douglas said. Each approach has its own “unique set of obstacles,” he said.
Shannon Newton, president of the Arkansas Trucking Association, said her organization favors raising fuel taxes and believes the idea could receive support from voters.
“Everyone favors user fees when that makes sense, and in the case of highways, fuel taxes are the most easily collected, they have the least overhead, and it is the most direct link between those who use the roads and paying for them,” she said.
Newton said Arkansans have voted to raise taxes for roads a number of times in the past, most recently in November 2012 when they approved a half-cent sales tax to fund highway construction.
“Those efforts included a significant amount of voter education and a significant amount of transparency from the Highway Department about projects that the money would be used for,” she said.
Kelly Robbins, executive vice president of the Arkansas chapter of Associated General Contractors, said Arkansas voters “have stepped up to the plate before.”
Maybe a legislative fix?
Unlike Douglas, Newton said she still believes a legislative solution may be possible. She noted that the newly created Tax Reform and Relief Legislative Task Force is about to undertake a sweeping review of the state’s tax code and will recommend changes in advance of the 2019 session.
“I do anticipate that highway needs will be part of that discussion,” she said.
Sen. Jim Hendren, R-Sulphur Springs, co-chairman of the task force, was asked how much attention he expected highway needs to receive from the panel.
“I don’t think we’re going to be looking at additional revenue streams as far as more net general revenue, but we may be looking at the current streams we have: Taking a stream that may be going somewhere else into the state budget, directing it towards highways and offsetting that with something back towards general revenue if it makes more sense,” he said.
Asked if he thought redirecting revenue streams would encounter opposition, Hendren said everything the task force recommends is likely to encounter opposition from someone.
‘That’s the purpose of a task force, to look at things that have been politically challenging in the past,” he said.