Lawmakers Hit Roadblocks with Highway Funding

It’s not the sexiest political issue, but it’s one of the most important in the state of Arkansas, and right now, it’s causing an existential crisis for Arkansas lawmakers. The issue: How do we fund the highways?

After much discussion and debate, the highways have come to collect, and while there are many high-profile suggestions, no plan has passed through Arkansas legislature yet that can meet the $300 million need.

Governor Asa Hutchinson submitted his proposal to fund the state highways on Monday February 11, seeking to draw revenue from four main sources:

• $205 million would be raised by making a half-cent sales tax currently used for highway bonds permanent.
• $58 million would be raised from a new fuel tax at the wholesale level. This would likely increase the cost of gas by 3 cents and the cost of diesel by 6 cents.
• $35 million would be raised from casino revenue that is currently allotted for the state’s general fund.
• $1.9 million would be raised by creating a new fee for hybrid and electric vehicles.

The Governor has called the plan a “pay as you go” program, suggesting that it could eliminate the need for highway bonds entirely. “Ever since the legislative session began, everybody has been asking me what is the governor’s plan, what is my plan for a new long-term highway funding program for the state,” said Hutchinson. He said his proposal “is the top dollar amount that in my judgment the people of Arkansas can afford.”

This proposal does not necessarily mean that the highways are as good as funded. A proposal submitted by Republican Rep. Dan Douglas of Bentonville failed in 2017, and the Highway Commission itself failed to place the issue on the state ballot in 2018. “Everybody knows we need it. Nobody wants to pay for it,” Douglas said.

Democrats have met the proposal with skepticism, suggesting that the sources of funding may not be appropriate given Hutchinson’s recent tax plan to cut the income tax for Arkansans making $456,000 a year. Economists say that the tax plan would leave some $73.6 million of taxable income in the pockets of the richest people in Arkansas.

Democratic Sen. Linda Chesterfield of Little Rock was one of the dissenting members of the state legislature. “We just cut taxes on the wealthy,” she said.

“One of my main concerns in the Senate was, that you’re going to raise taxes on the little guy. You’re talking about a three cents tax on gas or a six cents tax on diesel —  that’s the little guy. So in order to balance the budget or to get highway funding, you’re going to have to call on the little guy to up some more money one way or another. That’s what’s troubling to me about the whole thing,”

Democratic Senate minority leader Sen. Keith Ingram of West Memphis, also voiced concerns about the plan, calling for a mix of sources of incomes to be used. He also voiced the urgency of the issue, saying, “I just find it hard to believe we’re going to be so selfish as to not invest the necessary dollars for our children and grandchildren. The problem gets worse every day.”

Ryan Norris, the state director for the Americans for Prosperity group suggested that the fuel tax would hit “the poorest drivers the hardest.”

“It also doesn’t make sense to negate the welcomed income tax relief to hard-working taxpayers. Gov. Hutchinson and legislators deserve credit for cutting taxes but they shouldn’t turn around and take Arkansans’ new-found money every time they put their car in drive,” Norris said in a written statement.

Others point to the fact that while every surrounding state but Mississippi has passed or sought to pass tax incentives for drivers of electric vehicles, under the Governor’s suggested plan, fees would be raised.

Governor Hutchinson’s proposal was met with praise by Republicans in the legislature, and members of the trucking lobby.

The president of the Arkansas Trucking Association, Shannon Newton, stated, “We look forward to continuing to invest in Arkansas highways, so that [truck drivers’] workplaces can be safe, so the roads can be well maintained for our equipment and so we can be better, more efficiently and reliably deliver our customers freight on time.”

As for the sales tax being made permanent, voters will have to make that decision in 2020. It appears as though the great highway debate will continue, at least in part well through the next year.

READ MORE: Governor’s Address: The Highway Funding Plan