Gov. Hutchinson: Highway tax increase must be offset with other cuts

Gov. Asa Hutchinson said Wednesday (Nov. 4) that any state highway funding solution should be revenue neutral and that the formulas that pay for highways should be changed. He told reporters afterward that this was the first time he had publicly expressed support for a revenue neutral proposal.

“In this political environment, I do think our legislative leaders are correct that if we’re going to have any kind of tax increase, it will have to be offset by a tax reduction, and that is an important focus as we look at both the needs of our state in terms of highways, but also the political challenge of getting the support that is necessary to change the formula to increase our highway revenues,” he said.

Hutchinson was speaking at the American Trucking Associations’ Safety, Security and Human Resources National Conference and Exhibition, which is being held this week in Little Rock.

Hutchinson did not use the words “revenue neutral,” but the same idea has been advanced by legislators, including Senate President Pro Tempore Jonathan Dismang, R-Searcy, and Speaker of the House Jeremy Gillam, R-Judsonia, on the most recent episode of Talk Business and Politics.

Highways are funded primarily by motor fuel taxes that were not indexed to inflation and have not changed at the federal level since 1993 and at the state level since 2001. The taxes no longer fully fund highways at the federal level, forcing Congress to supplement highway funding out of its general revenue fund. Seventy percent of Arkansas highway construction is funded by federal dollars.

Hutchinson said highways should be funded through a method that is not static and that “can grow with our economy as every other tax does.” He told reporters that one example of what other states have done is to base the fuel taxes on costs rather than gallons purchased.

Hutchinson earlier this year appointed the Governor’s Working Group on Highway Funding to provide options to increase funding for highways. The group has prepared a menu that it will present to the governor before the end of the year.

Hutchinson said he is “delighted” with U.S. House Speaker Paul Ryan’s decision to allow open debate on amendments for the highway funding bill that is being considered by that body. The current bill would set highway priorities for six years but is only funded for three years. The Senate has already passed its version.

The Highway Trust Fund is now funded by a continuing resolution that lasts until Nov. 20. Hutchinson said a long-term bill is needed.

“Right now, the temporary extensions, the short-term extensions are not building confidence that we can enter into long-term contracts,” he said. “It gives uncertainty, and so we need certainty most importantly as well as increased funding. The highway bill gives us both of those.”

Hutchinson pointed out that the trucking industry employs 83,000 Arkansans – one in 11 workers, producing $3.5 billion in annual wages and $448 million in fuel taxes. Trucking companies pay 44% of all taxes owed by Arkansas motorists while being responsible for 15% of vehicle miles traveled, he said.

He expressed support for bills sponsored by Rep. Rick Crawford, R-Ark., and Sen. John Boozman, R-Ark., that would allow trucking companies to get credit for drug testing using hair follicles rather than a urinalysis. Many in the industry believe that hair follicle testing is a more accurate test. He said his son, John, a district manager for a sporting goods company, said that some job applicants immediately will depart when told the company uses a hair follicle test because they don’t believe they can beat it.