Gov. Hutchinson Releases Highway Funding Plan

File photo of Gov. Asa Hutchinson speaking at the Capitol in January 2015.
Credit Michael Hibblen / KUAR News

Gov. Asa Hutchinson on Tuesday announced a plan to increase highway funding by $750 million over the next 10 years, making the state eligible for an additional $2 billion in federal matching funds over that time period that was made available by the federal highway bill passed by Congress in December.

The first year’s funding will come from $40 million in allocated surplus funds – $20 million of it from fiscal year 2015’s unobligated surplus funds and $20 from the governor’s rainy day fund. In later years, 25% of unallocated surpluses will transfer to the Highway Department after budget needs have been met.

More money will be generated by sales tax revenues generated from the sales of new and used vehicles, capping out at $25 million at the end of the period. Another $4 million will come from general revenue funds collected by diesel tax collections. Of that amount, $2.7 million will go to the Arkansas Highway and Transportation Department and $1.3 million will go to cities and counties, reflecting the traditional 70-15-15 split.

Another $5.4 million will come from state sales taxes collected from the 1/2-cent highway sales tax passed by voters in 2012 that until now has been directed to the Central Services Fund, which funds government administrative offices with a 2-3% deduction of net general and special revenue collections.

The state needs $46.1 million by Sept. 30 of this year and an average of $50 million in future years to be eligible for $200 million annually in matching funds provided by the Fixing America’s Surface Transportation Act, or the FAST Act, passed by Congress and signed by President Obama in December.

In Tuesday’s press conference announcing the plan, Hutchinson emphasized that the plan does not raise taxes. Highways typically get less than 70 cents for every dollar raised for roadways, after 3.2 cents goes to the Central Services Fund and other administrative costs. Fifteen cents goes to cities, and 15 cents goes to counties.

Hutchinson had appointed a Governor’s Working Group on Highway Funding to look for ways of raising money for highways, which have suffered in recent years. The primary means of funding highways, the motor fuels tax, has not increased at the federal level since 1993 or at the state level since 2001, and those taxes were never indexed to inflation. While construction costs have increased, fuel efficiency has improved, meaning vehicles are using less fuel to travel the same miles while generating less in fuel taxes.

The Working Group presented Hutchinson a menu of items in December, most of which would have increased taxes one way or another, but Hutchinson insisted that any increase in revenues for highways would have to be offset by a decrease in revenues elsewhere.

The Arkansas Highway and Transportation Department had hoped for $110 million in new funding for itself over the next one to three years and $250 million over the next three to five years. That amount would enable the department to implement an enhanced maintenance program for existing highways and fund a $125 million resurfacing program. The Highway Department would be able to overlay and rehabilitate half of the highway system every 15-20 years.

The Highway Department said it needs $400 million in new revenues in six to nine years, counting the $250 million. That amount would, among other efforts, enable the department to undertake an economic development improvement program.

Ten years in the future, the Highway Department would like $1.68 billion in new revenues annually for 10 years, which would enable the completion of I-49 along the state’s western border and I-69 through south Arkansas, and also result in no major capacity or congestion issues anywhere in Arkansas.