The House Public Transportation Committee shot down HB 1418, which would shift sales and use tax revenues tied to cars and vehicles from state general revenue to a designated highway fund. The bill only received 10 yes votes, but needed one more.
The bill, filed by former Highway Commissioner Rep. Jonathan Barnett (R-Siloam Springs), would phase in the tax revenue transfer over 10 years. The phase-in would not take place until general sales tax revenue as a portion of state General Revenue reaches $2.25 billion.
The bill is an outcome of a bipartisan Blue Ribbon Commission on Highway Funding. Barnett argued that highway revenues have been in decline for nearly two decades due to car fuel efficiencies reducing the taxes collected on motor fuel taxes – a primary source of highway funding.
It has been amended to allow nearly 30% of the shifting revenues to be steered to counties and cities to be used for any county or municipal purposes, in addition to roads, streets and bridges.
While highway commissioners, city and county government leaders, and traditional road construction groups supported the bill, Gov. Mike Beebe (D) and a contingency of K-12 and higher education officials objected to it. Beebe’s lobbying against the measure has been intense among lawmakers.
The House Transportation Committee is comprised of 10 Democrats, 9 Republicans and one Green Party member. Of interest, 67 of 100 House members and 23 of 35 Senators are co-sponsors on the bill, including 13 House members on the transportation panel. Only 11 votes were needed to spring the bill from committee.
In a roll call vote, all 9 Republicans and one Democrat – Rep. Walls McCrary – voted for the measure.
Rep. Barnett told reporters that the bill had become “extremely partisan” in recent days even though he didn’t consider it a partisan measure.
Also speaking for the bill was newly appointed Highway Commissioner and former Speaker of the House Robert Moore. He argued for the economic benefits of the bill – to steady a revenue stream for future highway funding – but also acknowledged the politics of the bill’s fate.
“It’s turned out to be a lot more controversial than I hoped it would be,” said Moore, who has championed highway improvement needs during his three terms in the House.
Still, Moore emphasized that with revenues in decline and costs on the rise, using growth revenue to fund highways over the next 10 years is the only solution he foresees.
“This is good public policy legislation, this is necessary legislation,” Moore said. “This bill will not take any money from anybody – this problem is very real. It’s not going away. This is the one funding mechanism for the future.”
Rep. Warwick Sabin (D-Little Rock) questioned why the bill was amended to allow nearly one-third of the revenue to be collected to be used by cities and counties for any purposes when its original intent was to aid in road construction and maintenance.
Wes Fowler, a representative of the Association of Arkansas Counties and a member of the Blue Ribbon Commission, addressed Sabin’s question.
“County government is where the rubber meets the road, but there are a lot of counties out there where there is no rubber meeting the road,” Fowler said.
Fowler said most judges would want to use new money for road needs, but he couldn’t guarantee that it would all be spent for transportation. “To tell you that it’s all going to be used for transportation, I can’t give you that,” he said.
Don Zimmerman, executive director of the Arkansas Municipal League, which represents more than 500 cities and towns, said the bill was not just tied to highways in his eyes.
“We see this as more than a highway bill, we see this economic development,” Zimmerman said. “We want those cities to be safe and attractive.”
A number of education advocates spoke against the measure.
One member, Rich Nagel, executive director of the Arkansas Education Association, said his group sees the usage of general revenue for the specific purpose of highway funding as poor public policy.
“I can’t say that public K-12 education will or will not be hurt with a high degree of certainty, but what I do know is that in this era of politics, we shouldn’t be robbing each other.”
Richard Weiss, director of the Department of Finance and Administration, said the general revenue shift was “unprecedented,” and he warned that by amending the highway funding bill to allow cities or counties to spend the money on non-road purposes could raise a legal challenge.
“When you have a bill out there that it’s going to do one thing and then you change it, you run into some real constitutional concerns,” Weiss said. “I think that’s very problematic.”