Arkansas Gov. Asa Hutchinson's Landmark Transportation Plan Includes Sales Tax Revenue
Hutchinson’s plan was announced last month and needs to be approved by the Legislature in a special session before the end of the fiscal year July 1. It calls for an extra $750 million in highway funding over the next decade, thanks in part to $2 billion in federal dollars from the FAST Act. For fiscal 2017, Hutchinson has proposed $20 million apiece in surplus state funds and from the governor’s rainy day fund as well as up to $25 million from the sales of new and used vehicles.
Arkansas needs $46.1 million by the end of the fiscal year Sept. 30 and an average of $50 million in future years to be eligible for the annual $200 million in FAST Act dollars.
“It’s feasible, and it’s flexible,” Arkansas Trucking Association President Shannon Newton said of Hutchinson’s plan. “The governor’s looking at something he can get through the Legislature that is tax-neutral. We’re pleased that he put some thought into finding some funds to dedicate to highways. The long-term solution will require digging a little deeper, but the will of the voters and the will of the Legislature are not in place to go there right now. We want them to become more comfortable spending more money on [transportation].”
Arkansas Department of Transportation spokesman Danny Straessle said his department had hoped for $110 million per year but is “grateful” that Hutchinson has suggested $75 million.
“It’s a positive step forward in meeting the funding needs for Arkansas highways,” Straessle said. “He still has to pitch this to the Legislature. It may not look the same in the end. There may be less money. There may be more. This agency has long contended that sales taxes on new and used cars, tires and batteries is revenue that should go to maintain the highways because they all impact the highways.”
Arkansas’ DOT has been benefiting from a half-cent sales tax on everything except gas, food and medicine that voters approved in November 2012. A majority of the state’s road construction and widening is being funded by that revenue, but it sunsets in 2023.
“The governor’s plan is an effective first step, although we all need to understand that it’s a very short-term fix and not a long-term solution,” said Craig Douglas, executive, director of the Arkansas Good Roads Foundation. “One of the positives of the governor’s plan is that this is the first time that the sales tax on used and new vehicles has been recognized as road-user revenue. Phasing it into the highway fund, even though it’s capped at $25 million, at least recognizes that revenue as road-user revenue. In the big scheme of things, it’s not a lot of money, but it sets a precedent.”
Douglas added that going forward, “It’s a crapshoot whether we’ll be able to match federal funds. And we still won’t have enough money to fund the much-needed annual overlay program, which was canceled last year because of a lack of funding. That takes another $50 [million to] $75 million since federal money can only be used on highways that meet federal standards. Unless we get the full amount from future surpluses [which Hutchinson said have averaged $48 million annually over the past decade], that’s not gonna happen.”
What is likely to happen, all the Arkansas insiders said, is the Legislature approving Hutchinson’s history-making transportation plan.
