Highway Funding Group Follows Blue Ribbon’s Footsteps

Jun 23, 2015

Credit Arkansas Highway & Transportation Dept.

On Wednesday, the 20-member Working Group on Highway Funding will hold its first meeting to discuss the state’s road funding options. Six years ago, the Blue Ribbon Committee on Highway Finance did the same thing.

That committee was formed by Act 374 in 2009 and brought together 24 legislators, local officials, representatives from the financial and construction industries, and others. Sen. John Paul Capps, D-Searcy, was chairman.

So far in 2015, the Arkansas Highway and Transportation Department has canceled 70 construction projects worth $280 million because of federal funding concerns. In 2010, the Arkansas Highway and Transportation Department was saying it had a $19.5 billion shortfall – an increase from 1998, when the shortfall was $10.3 billion.

The problem was the same then and now: Much of the state’s road funding is generated by a consumption-based tax at a time when consumption is decreasing. As vehicles become more fuel efficient, motorists pay less in fuel taxes. Meanwhile, construction costs are increasing. According to the Blue Ribbon Committee’s report, the gasoline tax, currently 21.8 cents per gallon, would have to be raised to 52.6 cents per gallon to have the same purchasing power that it did in 1955, when it was 6.5 cents.

For 18 months, the committee considered a variety of options. Public meetings were held in North Little Rock, Hot Springs, Fort Smith, Jonesboro and El Dorado. As many as 50 people attended each meeting, said Craig Douglass, now executive director of the Arkansas Good Roads Foundation. Douglass, who was not a member of the committee, led the meetings and helped write the final report. He is a member of the current working group.

Douglass said the general consensus in those public meetings was that highway funding had to be increased. Attendees supported a bond issue that voters later would pass in 2011 to fund the Interstate Rehabilitation Program. They also agreed with dedicating a sales tax to highways because it’s broad-based and was perceived to be equitable and fair.

“One thing that they told us, and it was a thread that ran through all five of the focus groups, was that Arkansans wanted the state to be better connected, and that thought came through in all of the focus groups,” he said.

That word – “connected” – helped lead to the naming of the Connecting Arkansas Program, which was funded by a half-cent sales tax approved by voters in 2012.

The final report was presented to Gov. Mike Beebe and the Legislature on Dec. 1, 2010. In addition to the bond issue and half-cent sales tax, another recommendation, a new State Aid for Cities Program, also became a reality. The Legislature dedicated one cent per gallon of the motor fuels tax to cities, contingent upon voter passage of the Connecting Arkansas Program. That provision raises $20 million a year for city streets. The downside for the Highway Department is that it’s a permanent reduction in funding dedicated to highways, while the offsetting half-cent sales tax funding the Connecting Arkansas Program ends after 10 years.

One other of the Blue Ribbon Committee’s recommendations attracted a lot of support, but it hasn’t passed: a 10-year phased-in transfer of taxes raised from the sale of vehicle parts and services from the general fund.

In 2013, Rep. Jonathan Barnett, R-Siloam Springs, a former highway commissioner, filed a bill to do that. It attracted widespread legislative support, but it failed under opposition from Gov. Beebe and from other interests that feared a loss of funding. They called it the “highway robbery bill.”

This year, a similar bill by Rep. Dan Douglas, R-Bentonville, was defeated by the same forces – competing interests and a governor who was opposed. However, Gov. Asa Hutchinson did agree to appoint the Working Group on Highway Funding.

Other Blue Ribbon Committee recommendations that have failed to gain traction included indexing the current per-gallon tax on motor fuels to the state’s highway construction cost index, implementing a new excise tax on the wholesale price of fuel, a constitutional amendment allowing counties to levy more than the current 3-mill county road tax, and reducing the size of the state’s highway network.

The report recommended against using toll roads and public-private partnerships. It also recommended against a vehicle miles traveled tax, which assesses motorists based on the amount of miles they have driven. The report noted problems with collections, the absence of federal standards, and privacy issues. However, it said a mileage-based tax eventually will be needed as more drivers switch to vehicles that use less fuel, such as hybrids, or none at all, such as electric cars.

In a recent speech to the Arkansas Good Roads Foundation, Hutchinson pointed out that in the 20-member working group, those who are “pro-additional funding for highways … probably outnumber those that are a little bit more concerned by five to one.”

Sen. Bill Sample, R-Hot Springs, is the only member of both the Blue Ribbon Committee and the Working Group on Highway Funding. He said he would have liked to have seen more business executives in the new group. On the plus side, he said it includes two representatives from the education community: Dr. Brett Powell, director of the Department of Higher Education; and Dr. Robin Brown, president of Arkansas Tech University.

Sample said that the task force is needed despite the Blue Ribbon Committee’s recent work.

“I think that we have got to continue to look at all of our options to do something about the health of our highway system. It’s certainly apparent that the federal government is not willing to step up and help,” he said. “And the friends that I have all across the U.S. that do a lot of transportation work, we’re all in the same boat. Every state’s in the same boat. We’re short on money, and we have highways that are deteriorating faster than we can fix them.”