Arkansas Panel Includes Fuel Indexing in Report on Funding Road Improvements

This story appears in the Nov. 29 print edition of Transport Topics.

An Arkansas committee that spent two years studying how to pay for road improvements has come up with a list of ways to raise revenue that includes indexing gas and diesel taxes to the state’s construction cost index.

If Arkansas did adopt such a fuel indexing plan, it would be the first state to do so.

“I doubt our organization would want to be the first to lead the country in that category,” Lane Kidd, president of the Arkansas Trucking Association, told Transport Topics.

He said the Arkansas trucking group has been monitoring and advising the work of the Arkansas Blue Ribbon Committee on Highway Finance.

The committee was scheduled to deliver its final report to Gov. Mike Beebe (D) on Dec. 1 but unveiled its list of possible revenue sources at the committee’s Nov. 17 meeting.

Three Arkansas trucking industry executives sit on a task force that over the past two years has been working with the blue ribbon panel, Kidd said.

And trucking association members expect to meet in December with the governor to “listen to what his priorities are and, if possible, partner with the administration in a program that he would propose,” Kidd added.

Among the other revenue sources the committee suggested are:

• A constitutional amendment creating a 10-year bond program paid for by a half-cent sales tax levy that would end when the bonds are paid off.

• 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.

• Diverting sales tax revenue on cars and transportation products to highway projects. That money now goes to the state’s general fund.

The proposals are designed to tackle what state highway officials said is $19 billion in highway needs over the next decade in a state where only $4.1 billion will be available for roads.

Kidd said, however, that the $19 billion figure is probably high, a little like coming up with a Christmas wish list from the Sears catalogue.

The Associated Press reported that some state officials have insisted that the current methods of per-gallon taxes and registration fees are no longer enough to fund the road system.

“It’s incumbent on us that we take some action,” said Rep. Robert Moore, 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.”

Though Moore and incoming Senate President Paul Bookout will not completely reject or endorse any of the panel’s proposals, both men said any tax increase will be tough to get through the legislature, AP reported.

“It would be extremely difficult, almost impossible, probably for us to be able to tackle anything like that now,” Bookout said.

The AP also reported that the governor has already rejected the idea of tax increases and of shifting general revenue away from schools and human services to roads.

Sen. John Paul Capps, chairman of the blue-ribbon panel, told the AP that he is not oblivious to the challenges the committee faces in selling its proposals to a skeptical legislature. But Capps also said 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. “We have to do this and forget about the economy and the tax sentiment and say what we think ought to be done.”

Republicans told the AP that their opposition to tax increases does not 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, co-chairman of the Joint Budget Committee.

Baker said the proposal that merits more discussion is diverting general revenue for highway products, but that is the proposal Beebe opposes.

The proposal trucking and others may support, Kidd said, is the one that would put before voters a constitutional amendment to create a 10-year bond program paid for by a half-cent sales tax that would end when the bonds are paid off.

Kidd said that bond program would be similar to a bond program instituted in 1999 by the state with trucking’s cooperation.

At the time, trucking agreed to pay 4 cents more per gallon in diesel taxes to generate the collateral for bonds that were issued to pay for maintenance of interstates running through Arkansas, Kidd said.

“Our organization supports highways, and if wasn’t for trucking, our interstate highways in Arkansas would still be in the abysmal condition that they were in 1999,” Kidd said.

The state highway department “conveniently ignores the fact that trucking paid to fix them,” he said.

Moore, the incoming House speaker, has said the bond proposal is one that lawmakers may view favorably.

“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 told the AP.