Arkansas Gov. Asa Hutchinson’s declaration that he’ll fight any effort to pay for the state’s road needs by tapping into its general revenue leaves state highway officials with few alternatives for closing a widening gap in funding.
None of the choices are pretty: they can move forward with a ballot measure that’ll face opposition from a popular governor, ask voters in an increasingly Republican state to support increasing taxes, or they can try again with a state Legislature that has split over how to pay for highway needs.
Hutchinson’s opposition to diverting tax revenue from road-related items like used and new car sales is hardly any surprise, given the resistance he and past governors have shown to a move that would limit funding for other state needs like public schools.
“I will vigorously oppose any plan that taps additional revenue from our general stream. There’s some discussion of, ‘Well, we ought to divert sales tax on new and used cars or batteries over to highways,‘” said Hutchinson, who said such a move could create a hole between $100 million and $300 million in Arkansas’ budget. “Those are funds that are necessary for education, for public safety and for all the other needs of our state, and so I say, ‘No, we cannot divert that general revenue stream.’”
But the timing of his announcement — coming a day before the state Highway Commission planned to discuss potential ballot measure ideas — came as a surprise to state highway leaders who acknowledged how much steeper the fight for road funding has become.
“There’s been a real change from yesterday to today as far as the way we’re looking at it,” Highway Commission Vice Chairman Tom Schueck told reporters.
Arkansas highway officials aren’t completely giving up on the idea of a ballot measure for next year, but acknowledge the obstacles they face in pursuing that route. Aside from Hutchinson’s opposition to tapping general revenue, a highway funding campaign also faces the prospect of business groups that would normally be allies focused instead on a proposed constitutional amendment to limit damages in civil suits. A coalition of groups that include the state Chamber of Commerce and the Arkansas Trucking Association was launched last week to campaign for that initiative.
“I do think it would be a heavy lift in 2018 because of the other issues that are going to be on the ballot, but we haven’t decided it’s completely off the table,” State Transportation Department Director Scott Bennett told reporters last week.
Bennett said he’ll come back to the commission in December to outline possible funding proposals that wouldn’t rely on general revenue, a move that would mean raising taxes and fees to pay for road needs. He’ll also present a list of projects that could be covered under a highway funding plan, something he and other officials said would be important in building support for any initiative. Bennett showed the panel several scenarios that called for both raising taxes and transferring general revenue to help raise the more than $400 million annual funding gap the department says it faces.
Relying solely on tax or fee increases would be a challenge in Arkansas, especially in an election year that’ll be dominated by Republicans who became the majority party in the state partly by vowing to fight any tax increases. Any push for tax increases will also likely face resistance from conservative groups who say money needs to be found elsewhere for roads.
There are just as many obstacles to the commission taking another crack at the state Legislature in 2019. A highway plan that would have put a 20-year bond issue on the ballot to potentially raise $200 million a year for highways failed in the state House this year after some Republican lawmakers opposed an accompanying bill to raise taxes on gas and diesel to pay for the bonds.
A highway funding plan would have to navigate that anti-tax sentiment along with opposition from Hutchinson and others to tapping into existing sales tax revenue. Another complication would a task force that is studying further tax cuts to propose during the 2019 session.
For now, highway officials say they still hold out hope there’s a narrow path to developing a highway funding plan despite the latest obstacles.
“We’re just going to continue to find out what we can do and if we can continue to pick up help from legislators and the governor on the way,” Commission Chairman Dick Trammel said.