A group appointed to recommend highway funding options to the governor is poised to offer five of them. The Governor’s Working Group on Highway Funding will offer five separate short-term proposals, with the expectation that Gov. Asa Hutchinson (R) could pick and choose elements of all of them.
The group hopes to raise $110 million for the Arkansas Highway and Transportation Department for each of the next 1-3 years. To do that, it will actually need to raise $160 million because of a traditional 70-30 road funding split with cities and counties.
Duncan Baird, the working group’s chairman, said the proposals could be provided to Hutchinson as early as next month. It meets until Dec. 15 under the executive order that created it, but that could be extended by the governor.
At issue is the fact that highway funding is not meeting highway needs. The primary source of highway funding, the motor fuels tax, has not increased since 1993 at the federal level or since 2001 at the state level. The group is considering mostly how to fill short-term needs and could consider long-term needs if its existence is extended by Hutchinson.
In a meeting on Thursday (Oct. 22), the working group reviewed five proposals.
Proposal 1, which was offered by the business group Arkansas Good Roads Foundation, would enact a 10-cent gas and diesel tax increase that would be phased out as it is gradually replaced by general fund revenues from sales taxes paid on new and used vehicles.
Among several other provisions, the proposal would potentially index motor fuels taxes, meaning they would rise automatically with increases in the highway construction cost index or some other measure. The proposal also would increase registration fees for hybrid, electric, compressed natural gas, and other alternative fuel vehicles that currently pay less in fuel taxes than gasoline and diesel fuel vehicles.
The proposal also would consider depositing road funds for cities and counties into county and city aid funds rather than being transferred directly to local governments.
Proposal 2, which was offered by Rep. Andy Davis, R-Little Rock, is a “revenue neutral” proposal based on the idea that legislators will not support a tax increase. The proposal’s main feature would increase the diesel fuel tax at the same time that sales tax decreases are planned to occur in 2017 when the state stops making desegregation payments to the Little Rock, North Little Rock and Pulaski County school districts. The proposal also would allow the Highway Department to receive a sales tax rebate collected on road construction materials.
Proposal 3, which was offered by Highway Commissioner Frank Scott, would increase gasoline and diesel taxes by 15 cents phased in over three years and index existing taxes to inflation.
Proposal 4 would eliminate the sales tax exemption for motor fuels so that drivers would pay sales taxes on fuel in addition to gas taxes.
Proposal 5 would increase the diesel tax by 5 cents per gallon.