Week in Review

State Capitol Week in Review

LITTLE ROCK – Serving on a blue ribbon panel is usually prestigious, but few people envy the 19 members of the Arkansas Blue Ribbon Commission on Highway Finance.

Their task is difficult and their recommendations likely will generate controversy. They face tough choices and their decisions could affect every taxpayer in Arkansas. To top it off, they're under a tight deadline - the law requires the commission to report to the legislature by July 1 of next year.

That isn't much time to consider proposals from a large number of competing interests. Act 374 of 2009 created the commission and charged it with looking for ways to pay for the growing cost of building and maintaining highways. The act directs that membership reflect city and county government, business, transportation, engineering, finance, economic development and industry.

The director of the state Highway and Transportation Department recently said Arkansas needs to increase highway funding by $300 million a year to adequately maintain roads and bridges.

That estimate made headlines because it was much higher than the previous estimate that $200 million a year in additional funding was necessary.

The price of asphalt and petroleum products used in highway projects has gone up. The Highway Department's major sources of revenue are motor fuels taxes that are collected on a per gallon basis, and they do not increase with inflation.

When gasoline prices go up, motorists cut back on driving and buy fuel efficient cars. Fuel taxes based on volume, like those in Arkansas, decrease or stagnate. That has been the trend for several years and probably will continue.

Any recommendations made by the Blue Ribbon Commission will likely create opposition. Truckers do not want to pay increased registration fees. Some motorists don’t like toll roads, and they would be feasible in few areas of a rural state like Arkansas.

Some advocates for highway funding would like to dedicate revenue from sales taxes on new and used motor vehicles, as well as tires and car parts. The amount of revenue would be in the hundreds of millions of dollars.

That money now goes into the state's general revenue fund and moving it to highway maintenance would generate vigorous opposition from the areas that now receive the bulk of it. They are schools from kindergarten through 12th grade, higher education, technical education, health care, nursing homes and prisons.

The legislature met in special session last year to increase the severance tax on natural gas and allocate the increased revenue to highways. The Highway Department estimates it will bring in $23.2 million in severance taxes during the current fiscal year. Without the severance tax revenue the department would be facing possible decreases in total funding because motor fuel taxes were down 2.8 percent last year.

Consumption of gasoline has rebounded in the past few months because the price of gas is down compared to last year, but long term trends do not build confidence.

Another factor is that a large portion of the state's federal funding has been obligated to pay off bonds, which Arkansas voters approved in 1999 to finance improvements to interstates.