By Steve Brawner
© 2017 by Steve Brawner Communications, Inc.
Arkansas does not have Tennessee’s Great Smoky Mountains, but it does have the Ozarks and the Ouachitas. It does not have Elvis’ Graceland home, but it does have the birthplace of Johnny Cash. Unlike Tennessee, it does not have $2 billion to play with, but, like Tennessee, could it also find hundreds of millions of dollars for highways?
The question is asked after the Arkansas Highway Commission voted June 7 to pursue a ballot initiative for 2018 to raise up to $400 million a year for road construction.
That was step one of about a thousand. Forgive this run-on sentence, but the Commission and supporters such as the Arkansas Good Roads Foundation would have to decide on a specific proposal, obtain the attorney general’s approval, raise money to collect 67,887 voter signatures, raise money to defend against the inevitable last-minute legal challenge, raise money for the campaign, and then win the campaign.
The Highway Commission took this step because it’s tired of waiting on the Legislature and Gov. Asa Hutchinson, who have talked some about highways but not made them a priority. Funding for highways has been mostly flat for decades as spending for other state needs has increased significantly. Arkansas voters did approve an interstate bond issue in 2011 and passed a temporary half-cent sales tax in 2012, and last year Hutchinson cobbled together $50 million in state funds to make the state eligible for $200 million in federal ones. But the Highway Commission and the state Department of Transportation say that’s not enough.
One reason for the shortfall is the primary highway funding mechanism, the motor fuels tax, has not increased at the state level since 2001 and at the federal level since 1993. While motorists are paying the same 39.9 cents per gallon that they were in 2001, road construction costs have increased. Meanwhile, cars have become more fuel efficient, which means we’re buying fewer gallons and therefore paying less in taxes.
The easiest way to increase highway funding is to raise fuel taxes, or at least index them to inflation, but polls have shown Arkansans oppose much of an increase, and those polls are backed up by what legislators hear personally from their constituents. Aware of public opinion, legislators said no this year to a proposal that would have asked voters to approve a wholesale sales tax increase on fuel. Meanwhile, efforts in previous years to direct various auto-related revenues to highways, such as sales taxes on car purchases, failed because of opposition from other interests who depend on those revenues.
Would voters be OK with higher fuel taxes if they received a tax cut elsewhere? That’s what happened this year in Tennessee, where the Legislature and Gov. Bill Haslam raised $350 million for highways primarily through a six-cent gasoline tax increase and a 10-cent diesel tax increase. At the same time, $410 million in other taxes were cut, including that state’s food tax by 20 percent.
The combination means Tennesseans will pay less in taxes while spending more on roads. Also, Arkansans will help pay for those roads when they drive in Tennessee and stop for gas.
Could Arkansas do the same? Unfortunately, not so easily. Tennessee has nearly $2 billion in surplus funds this year, while Arkansas had to cut its budget to bring it into balance. Meanwhile, Arkansas would need much higher taxes. To raise $400 million here, fuel taxes would have to increase 28.4 cents a gallon.
So unlike Tennessee, Arkansas probably could spend significantly more on highways only through increasing total taxes or cutting spending elsewhere, or a combination thereof. That’s politically very challenging, which is why elected officials haven’t done it. A legislative task force is combing through the tax code trying to make it simpler, potentially creating room for tax cuts by ending some deductions. In the process, it might find more money for highways. But its recommendations won’t be considered by the full Legislature until 2019, and there’s no guarantee any will become law.
About half the states have increased fuel taxes in the past five years, including five this year. States know they can’t wait for money for Uncle Sam, who has his own problems. Will Arkansas join them, or find other ways to fund highways? It could happen, but it won’t be easy in a state that’s home to Johnny Cash but not much extra cash.