Hutchinson asks Good Roads group to lead long-term plan to pay for highways, but calls for no new taxes

In a speech highlighting the top business and economic development accomplishments of his administration to date, Gov. Asa Hutchinson on Thursday (June 30) asked members of the Arkansas Good Roads Foundation to come up with a recommendation for a long-term solution for state highway and transportation improvements sans a tax hike.

Hutchinson offered his challenge to the Good Roads Foundation at the nonprofit’s group annual meeting held at the Governor’s Mansion. The group, whose supporters including companies and trade organization like Tyson Foods, Entergy Corp., Riceland Foods and Associated General Contractors of America, advocates for state transportation investment and spending.

“It is important that the Good Roads Foundation lead the discussion into the future, so I would like to see (you) work to build a consensus on the next step – what type of plans should we have in terms of permanent financing for the long-term needs of our highways in this state,” the governor said in a 15-minute speech.

During his entreaty to the pro-highways group Hutchinson also laid out a preview of his long-term highway planning agenda for the next legislative session in 2017 at the Governor’s Mansion dining hall attended by more than 150 business leaders, lawmakers and government officials. He challenged the Good Roads Foundation and lawmakers at the assembly that between the “pause” – from the end of the fiscal year 2016 that ended June 30, and the beginning of 90th General Assembly in January – to think about new ways to pay state highway needs beyond the next five years.

“I believe what we have done is a good solution for our state for some time,” Hutchinson said of the five-year Arkansas Highway Improvement Plan of 2016 that was passed by lawmakers during a special session earlier this year. “But we also recognize there is a need for an overlay, there are additional needs down the road long-term, and so as you look to the January session it is important for me to send the right signal.”

However, the governor said any new plan must not increase taxes.

“That is the mood of the Arkansas voter, and I think that is the right thing to do in terms of protecting lower gas prices that they have and helping them in their pocketbook.”

Secondly, the governor said, there should be no new transfers from general revenue funds without any offsets.

“We have tapped into general revenue as unallocated surplus because we want to protect (those funds) for education and all other needs of our state.”

The popular Republican governor also said any new plan to fund highways must also mesh with his highway plan approved by lawmakers at the recent special session.

“We’ve got a great foundation, we are meeting our federal match and (have) budget resources set – and anything in addition to that should be consistently with what we’ve already done.”

VOTER REFERENDUM POSSIBLE
Lastly, Hutchinson said if there is a proposal to raise taxes for highways, it must go before Arkansas voters.

“That is not bad news, it is good news – because if you look at how voters have responded to specific highways, they said ‘yes’ when it was a good plan, and they say yes’ when there is confidence that the money is well-invested and it is clear and transparent …”

Hutchinson told the nonprofit highway advocacy group, which was established more than 40 years ago, that he believes voters will support any proposal that they might put forward if it is well-thought out.

Asked after the event if pushing the Good Roads group to back a possible a voter referendum new taxes for state highway needs was sidestepping a potentially hot political issue, Hutchinson said the nonprofit group is a better vehicle to spearhead such a public initiative.

“The governor always has role to play, but I think the Good Roads Foundation is a good partner to really see what the sweet spot is in the future and what the public wants,” he said.

Hutchinson’s challenge to the Good Roads Foundation comes more than a year after he appointed the Working Group on Highway Funding to look at ways to pay for the state’s short-term highway needs. That group convened to focus on immediate short-term needs first and focus later on mid-term needs for system preservation as well as long-term, broad-based funding. It set a short-term funding target of $110 million.

However, the Good Roads group crossed ways with the governor and some lawmakers in the governor’s Working Group after recommending an increase in the state’s motor fuel taxes of 10 cents per gallon to raise $125.7 million for state highway needs, and asking for a special session to accomplish it.

Craig Douglass, the foundation’s executive director, wrote in an August 2015 letter to the governor’s Working Group that the 10-cent increase would be the quickest way to close a short-term funding gap facing the Arkansas Highway and Transportation Department.

Hutchinson later signed a five-year highway bill into law during a called special session in May after it passed the Senate. At the time, the governor said any longer term plan should come as a result of a voter-initiated act.

The new highway act will raise about $50 million a year over the next five years in order to make the state eligible for $200 million a year in federal matching funds. For 2017, the state would make a one-time transfer of $40 million in rainy day funds to the Highway Transfer Fund, which Hutchinson said would take place in late September.

In the future, the Highway Transfer Fund would be financed by deposits of 25% of state surplus funds. A Securities Reserve Fund would generate $1.5 million for the Highway Transfer Fund in fiscal year 2017 and $20 million in the following years. The bill also would dedicate to highways money generated by diesel taxes as well as revenues from the half-cent sales tax passed by voters in 2012. Some of those tax dollars go into general revenues.

REPORT: HIGHWAY SPENDING ADDS $2.5 BILLION IN GDP GROWTH
Earlier in his speech, Hutchinson highlighted his administration’s job expansion and economic development accomplishments, citing the fact that the state’s unemployment has declined to an all-time low of 3.8% in June and more than 50,000 jobs were had to employer payrolls under his watch.

Hutchinson said new funding from the recently-enacted highway bill, together with federal transportation funds, will add $200 million annually to the state’s economy.

“Which over the course of five years, as you know, is one billion dollars. This is not small change. This is a significant investment that we have tapped into.”

To drive home the governor’s point, the Good Roads Foundation later released the results of a privately-funded study to spotlight the economic impact of highway investments on the number of jobs created and the state’s Gross Domestic Product (GDP).

The foundation partnered with the Nathan Watson, a student at the University of Arkansas’s Clinton School of Public Service, to analyze the effects that $1.4 billion in 2014 highway spending had on the state’s economy.

According to Watson’s presentation, highway spending contributed $2.5 billion to the state’s GDP, or generated an economic boost of $1.75 for every dollar spent on highway construction and maintenance. Highway spending in Arkansas also added more than 15,300 jobs to state’s labor pool, generating some $665 million in labor income, the report said.