Governor Hutchinson signed a bill Tuesday that will devote $95 million annually to pay for repairs and expansions to Arkansas’s highways through a combination of existing state revenue and new taxes and fees.
Senate Bill 336, which is now Act 416, will raise money from three sources. New wholesale fuel taxes of 3 cents per gallon on gasoline and 6 cents per gallon on diesel will generate an estimated $58 million. Another $35 million will come from reallocating taxes on casinos that currently go toward state general revenue. New registration fees on electric and hybrid vehicles will add $2 million.
But Act 416 is just the first of two pieces in the road funding plan approved by lawmakers. The second is a constitutional amendment that the legislature last week referred to the 2020 ballot, House Joint Resolution 1018. If approved by voters, HJR 1018 would raise another $205 million for highways by permanently extending a statewide half-cent sales tax.
On Tuesday, Hutchinson said the combined $300 million package was “historic … in terms of what it will accomplish for the people of this state” and struck a balance between competing interests.
“It tightened the belt on general revenue so we can support highways and do our share there,” the governor said. “But it also includes a referral to the voters, that they can make a decision on really the largest chunk of it. … It gives them the final say-so.”
States everywhere have struggled with transportation funding shortfalls in recent years, partly because of increased vehicle efficiency. Roads are traditionally paid for with fuel taxes — sometimes called “user fees” — but cars and trucks today travel more miles on fewer gallons of gas and diesel. Yet state legislators have been reluctant to raise rates on fuel, fearing a backlash from voters.
This session, the governor and Republican legislative leaders identified highway funding as a priority. Other Republicans balked at any tax increase and wanted to use more existing general revenue to meet the highway budget shortfall.
In the end, the governor’s plan passed both chambers by comfortable margins, though both pieces of legislation relied on Democratic support. SB 336 received 27 votes in the Senate and 71 in the House, while HJR 1018 received 25 votes in the Senate and 67 in the House. Most Republicans supported the bills, but a sizeable minority did not.
Michael John Gray, the chair of the Democratic Party of Arkansas, said after Tuesday’s press conference that Democrats — who are vastly outnumbered in both chambers — couldn’t claim credit for directly shaping the package. But, he added, “the governor would have had to do a lot more work” to win passage if not for Democrats.
The highway funding measures were passed only weeks after legislative Republicans approved a personal income tax cut for the state’s highest earners. Most Democrats opposed that bill.
“You’ve got to find [highway] funding somewhere, and in this world, in the majority [Republican] legislature we have, the tax cuts were going to happen,” Gray said, when asked whether he was concerned about the state’s tax structure becoming more regressive. “So, no, I don’t necessarily love the structure, but I know we need better roads where my kids are going to school.”
Senate President Pro Tem Jim Hendren (R-Gravette) said it was an “incredible lift” to convince a Republican-controlled General Assembly to pass a bill that included $95 million in taxes and fees.
“I’ve been in the legislature a long time, and I don’t think I’ve ever voted for a tax increase, but somehow I’m sponsoring this one. …. But it just goes to show, I think all of us have come to realize how important roads are,” Hendren said.
Though tax hikes or extensions are often a hard sell at the polls, Arkansans have been willing to vote for ballot measures to fund roads in past elections. In 2012, 58 percent of voters approved a temporary half-cent sales tax to finance construction bonds for highways. The $205 million measure that was just referred to the 2020 ballot by the legislature would make that tax permanent; otherwise, it will sunset on Jan. 1, 2023.
Hutchinson said he believed the measure will pass, as long as voters are informed about what it will do.
“I think it has broad popular support. I think the need is that they are clear as to how this money is going to be spent, and that it’s going to be spent fairly and distributed appropriately,” he said.
J.R. Davis, a spokesman for the governor, said extending the half-cent sales tax would allow the state to shift to “pay as you go” funding for highways, rather than issuing bonds, which will save a significant amount of money each year. A sheet distributed by the governor’s office said about 28 percent of the current half-cent sales tax now goes toward servicing debt.
This reporting is courtesy of the Arkansas Nonprofit News Network, an independent, nonpartisan news project dedicated to producing journalism that matters to Arkansans. Find out more at arknews.org.