Governor Hutchinson unveils highway funding plans

Governor Hutchinson unveils highway funding plans

Program will generate $ 750 million without raising taxes

Arkansas News Bureau LITTLE ROCK — Gov.

Asa Hutchinson on Tuesday unveiled a plan he said would generate $750 million for highway projects over the next 10 years without raising any taxes or fees.

In a news conference at the state Capitol, the governor said he will ask the Legislature to support directing a combination of surplus funds and general revenue to the Arkansas Highway and Transportation Department to allow it to provide matching funds for about $2 billion in federal highway money over the coming decade.

In December, a working group presented to Hutchinson a list of recommendations for boosting highway funding that included raising taxes.

Hutchinson said Tuesday he incorporated some of the group’s recommendations into his plan but chose to exclude anything that would raise the tax burden on Arkansans.

The working group had discussed boosting highway funding by between $110 million and $125 million per year. Hutchinson said his more modest plan focuses on the short-term need to match federal highway dollars so that money is not left on the table.

“You could say, ‘Well, that’s just a starting point, that is the immediate needs, but you also have an overlay program, you’ve got continued maintenance, you’ve got new roads that need to be constructed,’” he said.

“I agree with all of that, but my responsibility as governor is to make sure that we handle continued highway investment with the other needs of our budget and with what we can do now.”

In the first year, fiscal 2017, Hutchinson’s plan calls for transferring $20 million from the current unallocated budget surplus of about $40 million and $20 million from the state’s rainy day fund of about $46 million to the Highway Department.

The governor also is proposing a phased-in transfer of sales tax revenue generated by the sale of new and used vehicles from general revenue to the Highway Department. The amount going to highways would start at $1.5 million in fiscal 2017 and gradually increase to a maximum of $25 million in fiscal 2021.

Also under the plan, $5.4 million in revenue from the state’s half-cent sales tax for highways that now goes to the Central Services Fund to help fund various government offices would be redirected to highways each year. That tax expires in 2023.

Starting in fiscal 2018, the plan calls for redirecting $4 million in annual revenue generated by the diesel tax. Of that money, $2.7 million would go to highways each year, and the remaining $1.3 million would go to cities and counties.

Also starting in fiscal 2018, Hutchinson is proposing that up to 25 percent of each year’s unallocated budget surplus go to the Highway Department.

Based on the past 10 years, that would be about $48 million a year, he said.

If the economy takes a downturn and the state does not have the annual budget surpluses needed to support the plan, then the state will have to consider other options, Hutchinson said.

The loss in general revenue would be made up with “efficiencies in state government,” he said, adding that he had specific efficiency measures in mind but was not ready to name them because he wanted to allow room for negotiation with legislators.

All of the states surrounding Arkansas now direct a portion of their general revenue to highways except Texas, Hutchinson said, but he noted that in November, Texans voted to approve directing up to $2.5 billion a year in sales tax revenue to highways.

“It is a step that is important for us to take,” he said.

The governor said he also has asked the state Highway Commission for internal reforms that would bring more transparency to the commission’s distribution of funds to highway projects.

Hutchinson said earlier this month he favored asking the Legislature to consider the future of the state’s Medicaid program and highway funding in a single special session, but Tuesday, he said that after getting feedback from legislators, he is leaning toward calling two special sessions.

In the Medicaid session, lawmakers will consider whether to continue accepting federal funding for Medicaid expansion.

Hutchinson said Tuesday that his plan is based on a budget that “is not workable if we do not have access to the federal funds that are part of the Medicaid expansion.”

Highway Department Director Scott Bennett told reporters Tuesday that the governor’s plan is “as good a plan as we can come up with for the short term and making sure that we can still match all the federal aid that we have.”

House Speaker Jeremy Gillam, R-Judsonia, and Senate President Pro Tem Jonathan Dismang, RBeebe, said they had not polled legislators about the plan but said they were inclined to think it would be supported.

“I think we’re heading down the right path,” Gillam said.

By John Lyon