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Between the lines: Debate over how to pay for Arkansas' highways continues

Debate over how to pay for Arkansas’ highways continues

The argument really hasn't changed much.

While most agree state highways need more funding, there is big disagreement on where that money should be found, or rather, where it should not be found.

Again this session, a lawmaker has proposed dipping into the state's general fund to build and maintain state highways, which have traditionally been supported by dedicated revenue from license fees and fuel taxes.

Generations of Arkansas taxpayers have heard the arguments.

General revenue pays for schools and prisons, health care and virtually all other state services. There is no lack of demand for funding from state agencies responsible for all those aspects of state government.

But the state Department of Highway and Transportation (and the commission that oversees it) has become an increasingly squeaky wheel, demanding more money.

The dedicated revenue stream that pumps state fuel taxes to AHTD has flattened out as vehicles have become more fuel-efficient and drivers have learned to use less fuel.

A per-gallon tax on gasoline and diesel fuel naturally brings in less when drivers buy less fuel.

Perhaps even more significantly, the Federal Highway Trust Fund, which sends federal tax dollars back to the states, is projected to run out of money again soon. The Congress hasn't seen fit to do anything about that situation yet, which leaves states like Arkansas in an even greater funding limbo.

The state has had to postpone millions in highway projects and cancel millions more in maintenance.

It is not a pretty scenario. But that doesn't make it right to siphon general funding off for highways.

Notably, Gov. Asa Hutchinson opposes this year's effort, which is House Bill 1346 by Rep. Dan Douglas, R-Bentonville. This governor, like others before him, sees it as a state budget buster, a change Arkansas cannot afford.

Douglas' bill ties the funding shift to the growth of state sales-and-use tax revenue. Money would be diverted to highways only after the tax revenue exceeds $2.2 billion in one year. And the take would happen gradually, with highways gaining 10 percent more of the tax revenue each year from new and used vehicles, car batteries and tires and other such vehicle-related items. In 10 years times, all that tax revenue would go to highways.

What does that mean in dollars?

Larry Walther, the state's Department of Finance and Administration director, put the proposed revenue shift at $548 million when it reaches 100 percent in the 10th year. The cost to general revenue in fiscal 2017 would be $35 million.

From the highway department view, that's not much money. AHTD Director Scott Bennett says the state has $20 billion in needs over the next 10 years and is only projected to collect $3.2 billion.

Still, should this be the state's priority?

Lawmakers would definitely be making highways a spending priority if they go along. Other needs in the state will be met with whatever taxes are derived from other sources as sales taxes on vehicles and related spending eventually go 100 percent to highways.

Douglas' bill contains the usual sweeteners to get support from the state's cities and counties. Whatever dollar amount is transferred each year would be split 70 percent to the state, 15 percent to counties and 15 percent to cities.

Plus, the bill would redistribute severance tax receipts. Some of the state's two-year colleges would get a financial boost, as would the state Highway Industry Workforce Development Fund.

Again, the sweeteners are intended to pick up votes for a tax-shifting idea that has been repeatedly rejected by successive Legislatures and disabused by successive governors.

Nonetheless, this is a different year and a Legislature that is built a bit differently, with strong Republican majorities in both chambers. They might be expected to listen to the Republican governor's budget concerns, but time will tell on this one.

As of Friday, Douglas' HB 1346 sat high on the House agenda for consideration. It cleared the House committee on public transportation earlier and will presumably run on the House floor when the sponsor believes he has secured enough House votes.

That won't be the end of the journey, but how the House responds could be telling about the future of highway funding.

Brenda Blagg is a freelance columnist and longtime journalist in Northwest Arkansas. Email her at [email protected].

Commentary on 03/01/2015

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