Revenue options discussed for short-term Arkansas highway funding

Highway funding has been more than a speed bump for policymakers to find a way to increase revenue while gas tax collections sputter and inflation keeps raising the price of construction. A governor’s task force is working on potential recommendations to try something new and it will meet again on Thursday to discuss options.

Rep. Andy Davis, R-Little Rock, who sits on the Governor’s Working Group on Highway Funding, has been vocal about not raising fuel taxes to meet short-term goals of $110 million in road funding, but he has other ideas for closing the gap. Some of those ideas include:
• Transferring diesel tax collections of $4 million that currently go to general revenue to highway funding;

• Steering $7 million of the recently passed half-cent sales tax for highways that is going into the state’s Central Services Fund to highways;

• Redirecting $17 million of sales tax paid for highway construction materials from general revenue to highway funding;

• Using the grocery tax reduction and income tax cuts to offset a diesel fuel tax increase.

“It’s a mix of new revenue offset with tax decreases in other places and some general revenue transfer,” said Davis, who appeared on this week’s edition of Talk Business & Politics.

Davis said his proposals would require a package of bills in the state Legislature that would be more complicated than simply raising the sales tax on gasoline. He also said all of the legislation needed to implement his plan would require a 51% vote in the General Assembly with the exception of the diesel fuel tax hike, which would need 75% support.

“It’s not as simple as a gas tax increase, it’s not as quick as a gas tax increase,” said Davis. “But they are things legislators believe need to be done before we start to look for new revenue.”

Other task force members have proposed raising the gas tax while gas prices are low and trucking industry leaders support raising the diesel tax.

A “variable tax,” a vehicle miles traveled (VMT) tax, switching to a percentage sales tax versus a per gallon sales tax, using surplus funds and indexing the fuel tax for inflation are all longer-term ideas that Davis said should be discussed and vetted by the task force.

For now, the working group is focused on finding funding to help road construction and repairs for the next two years. He said after the short-term proposals are passed along to the governor, the group should center its attention on these ideas with long-term vision.

“Hopefully, we will set a plan in place to meet our short-term needs and then we can vet those things for medium- and long-term,” he said.