LITTLE ROCK — Persuading lawmakers to support tax hikes or the shifting of general revenues to the state’s roads would be tough any given year. Add an anti-tax environment and a legislative session likely to be dominated more by talk of tax cuts and it looks like a fool’s errand.
That’s the dilemma that a committee formed to find ways to boost funding for Arkansas highways now faces with its recommendations for next year’s legislative session. After nearly two years of study, the Blue Ribbon Committee on Highway Finance is recommending a series of proposals that include tax increases.
It’d be easy to call the panel’s ideas dead on arrival. Gov. Mike Beebe has already rejected the idea of tax increases and shifting general revenue to Arkansas roads. And Republicans made their biggest gains since Reconstruction in the majority-Democratic Legislature partly on their pledge to cut taxes.
Sen. John Paul Capps, the blue-ribbon panel’s co-chairman, said he’s not oblivious to the challenges the committee faces in selling its proposals to a skeptical Legislature. But the Democratic senator from Searcy also notes that the panel was formed to study ways to improve funding for the state highways.
“It didn’t say do this only if the economy is good or if there’s not an anti-tax sentiment,” said Capps, who is term-limited and won’t be back at the Legislature next year. “We have to do this and forget about the economy and the tax sentiment and say what we think ought to be done.”
The panel’s recommendations include a new excise tax on the wholesale price of motor fuels, increasing state aid to cities and counties through a 1-cent motor fuel excise tax and diverting sales tax revenue on cars and transportation products to highway projects.
The panel also recommended indexing the existing gas and diesel excise taxes with a three-year trailing average of the construction cost index.
The proposals are aimed at fixing a situation that highway officials say has gotten out of hand. Arkansas faces $19 billion in highway needs over the next decade, when $4.1 billion is expected to be available to cover the costs. Officials say the current methods of per-gallon taxes and registration fees are no longer enough to make up the gap.
“It’s incumbent on us that we take some action,” said Rep. Robert Moore, D-Arkansas City, who will be the House speaker in next year’s session. “This is a serious problem that affects the future economic development in the state.”
The problem is, most of the options are either costly politically or economically.
Though Moore and incoming Senate President Paul Bookout, D-Jonesboro, won’t completely reject or endorse any of the panel’s proposals, they both say any type of tax increase will be tough to get through the chambers. Beebe has focused most of his attention for next year on continuing to cut the state’s grocery tax, while lawmakers are hoping to pass other tax cuts as well.
“It would be extremely difficult, almost impossible, probably for us to be able to tackle anything like that now,” Bookout said.
Republicans say their opposition to tax increases don’t necessarily mean all of the committee’s plans are doomed.
“I think highways in the context of economic development are very high up the priority list,” said Sen. Gilbert Baker, R-Conway, the co-chairman of the Joint Budget Committee. Baker said one proposal that merits more discussion is diverting general revenue for highway products.
That proposal will likely face serious opposition from Beebe, who earlier this year said he didn’t want to take money away from schools and human services for state roads.
One idea that Beebe and legislative leaders appear most open to would put state roads in voters’ hands. The panel has called for referring to voters a constitutional amendment creating a 10-year bond program paid for by a half-cent sales tax, which would end when the bonds are paid off.
Beebe’s expressed skepticism in the past about bond issues, citing the uncertainty of the economy. But Beebe’s office said it may be worth looking at depending on the economy and if there would be public support.
Moore also pointed to the bond proposal as one that could be viewed more favorably among lawmakers.
“It’s hard in my mind to be in error to let the people make a decision at the ballot box on the revenue for our highway system,” Moore said.
Next year’s session could preview the campaign that voters would face if the Legislature refers the proposed amendment. Capps may have inadvertently laid out the question to voters as he unveiled the committee’s recommendations last week.
“The people of Arkansas will have to decide, ’Do we want roads, or don’t we?’ It’s just that simple,” Capps said.
DeMillo covers Arkansas government and politics for The Associated Press.