Between the lines: The road ahead

Group makes recommendations on highway funding

That working group looking for ways to finance highways in Arkansas has finished its work, setting up a potential legislative fight over spending priorities.

Gov. Asa Hutchinson, who set the group to work months ago, will officially get its recommendations in mid-December. What he will do with them isn't quite clear.

He has said that whatever he might do must be "revenue-neutral," which means he's unwilling to reach into taxpayers' pockets for more money, expecting lawmakers to offset any increases with cuts elsewhere in the state budget.

"It is important to fund our highways, but we want to keep the hard-working Arkansan in mind when they are at the gas pump filling up their truck as they commute to work," Hutchinson said in a prepared statement thanking the 20-member Governor's Working Group for its efforts.

Those hard-working Arkansans would likely appreciate the effort, but they'd best pay attention to where any parallel cuts might be made before getting on the bandwagon for highway funding.

The goal for the working group was to suggest ways to raise $160 million, although only $110 million, or 70 percent of the new money, would actually go to the state Highway and Transportation Department.

The other 30 percent would be split between county road and city street departments. That split is a long-standing practice in Arkansas, and one that is unlikely to be abandoned.

The state's part of the money would apparently be used to match federal money for road construction projects and to pay for overlay and sealing projects.

So where would the money come from?

The working group is basically offering the governor a number of options, which could be mixed and matched to come up with the $160 million over a three-year period.

Among them is an increase in motor fuel taxes, which is the traditional way this state has found new money for highways.

The tax now on gasoline at wholesale is 21.5 cents per gallon. The diesel fuel tax is 22.5 cents.

The working group has talked about a 5 cent hike in diesel taxes, maybe more; but they've also included a proposal to index motor fuel taxes to inflation. That idea is to limit the resulting hikes to no more than 2 cents a gallon annually.

Comparatively low fuel prices, if they stay low, present an unusual opportunity for a successful fuel-tax hike. The state could raise the tax by quite a lot and still not bring total fuel prices back to where they had been.

But that's not necessarily the preferred option for many involved in the search for highway funding. They'd like a break from the fuel-tax tradition because improved fuel efficiency in vehicles has caused revenue from that source to flatten out.

That drives interest in other options. Notably, the working group has also suggested phasing in a transfer of state general revenue from the sales tax on new and used cars to highways.

That's become a familiar proposal in recent legislative sessions, but one that hasn't gotten a lot of support.

There's a reason for that. It would, as the working group acknowledged in its recommendations last week, "negatively affect the funding for other services" in the state budget.

Those other services include just about everything the state funds, including education. There are advocates for all those other spending priorities, too, which is why some sort of battle over priorities is sure to come.

There are other options in the working group's menu of funding recommendations, although many of them won't produce a lot of new money. Each would help toward the aggregate, should the governor decide to include them in the mix. Some would take money from other uses. Others would not.

Duncan Baird, the former state lawmaker who is Hutchinson's budget director and chairman of the working group, explained why the group offered something like 20 options to his boss.

"The important thing about the group is that we all recognize that highway funding is an important issue," Baird said.

"We're going to present the report to him, and there are any number of ways he could move forward with that."

Hutchinson expects to share his own recommendations in December or early January.

Commentary on 11/25/2015

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