Beebe: Put road tax back on ballot

Voters eventually should be asked to make permanent the statewide half-percent sales tax they approved two years ago to pay for road construction, Gov. Mike Beebe said Tuesday.

The tax increase, scheduled to be in place for 10 years, supports a $1.48 billion construction program aimed at building more four-lane highways and other road projects of regional significance. The program includes 35 projects covering 181 miles.

Making the tax permanent would be one way to give the Arkansas Highway and Transportation Department money that it needs to help pay for new roads and maintain the ones it has, Beebe said.

The agency’s recently updated needs study says it expects about $3.5 billion in revenue over the next 10 years but has more than $20 billion in needs. Additional revenue for highways is expected to be part of the discussion when the Legislature begins its regular meeting next month.

“I think you’re going to have to ask the public to make the sales tax permanent,” he said. “You tell the people the truth. You give them a chance to respond.”

For Beebe, the proposal is preferable to transferring state general revenue from the sale of road-related items, such as new and used cars, to the department, which the governor called “stealing.”

A proposal to phase the transfer of general revenue funds to the Highway Department failed in a state House transportation committee two years ago but is expected to be considered again.

The major source of state funding for highways comes from taxes collected on the sale of gasoline and diesel. But that revenue has been flat for years as cars and trucks become more fuel-efficient. The vehicles can drive more miles and inflict more wear and tear on roads and bridges but bring in less revenue. Increasing construction costs, meanwhile, also have squeezed the department, supporters of the proposal have said.

They say other recent measures, such as a temporary half-percent sales tax, serve as “short-term fixes” to the more permanent solution that highway proponents say the general revenue transfer addresses.

In his remarks to the highway boosters, Beebe noted he helped raise the severance tax on natural gas to raise money for highways and also backed renewal of a bond program that targets making improvements to the interstate system in Arkansas.

Given voter and legislative reluctance to raise taxes, the governor conceded, “I don’t have the answers.”

Outgoing state Rep. Jonathan Barnett, R-Siloam Springs, said it would be “very, very inappropriate” to ask voters to make the statewide half-percent sales tax permanent.

Barnett, who is term limited, was the lead sponsor on legislation that referred a constitutional amendment to voters for the half-percent sales tax and on the legislation that would transfer general revenue to the department.

“We told them it would only be a 10-year program,” he said in an interview. “We have an obligation to voters.”

That’s why the general revenue transfer is necessary, Barnett said. The maintenance needs of state highways can’t go underfunded another 10 years.

“Somebody’s got to do something for highways,” he said. “We talk about it year after year after year. We have to quit talking about it and do something.”

Highway Department Director Scott Bennett, who also spoke at Tuesday’s meeting, said it would be premature to discuss making the sales tax increase permanent now. He noted that one of the arguments against the tax was that it would eventually be made permanent. It also is early in the program, and only three projects financed by the tax proceeds will be under construction when the Legislature is meeting early next year.

It remains unclear where Gov.-elect Asa Hutchinson, a Republican from Rogers who will succeed Beebe next month, will fall on the issue. He has been holding meetings, making administration appointments and weighing other issues that will affect the state’s general fund, among them the future of the state’s private-option health care program.

The private-option program taps federal Medicaid dollars to purchase private health insurance for low-income Arkansans. More than 180,000 Arkansans have enrolled in private health insurance through the program, according to the state Department of Human Services.

The expanded Medicaid program extends private-option eligibility to adults with incomes of up to 138 percent of the poverty level — for example, $16,105 for an individual and $32,913 for a family of four.

The state will be required to pay 5 percent of the cost of the program starting in fiscal 2017, and its share will gradually increase to 10 percent in fiscal 2020.

The election of several Republicans to the Legislature who campaigned against the program prompted an architect of the program, Senate President Pro Tempore Jonathan Dismang, R-Searcy, to acknowledge last month that the private option won’t survive in its existing form.

Meanwhile, Hutchinson also has proposed an income-tax cut that he has said would reduce state general revenue by $50 million in fiscal 2016 and $100 million in fiscal 2017, while Beebe has recommended lawmakers delay the implementation of tax cuts approved in 2013. They are projected to cut state general revenue by $29.4 million in fiscal 2016 and $24.5 million in fiscal 2017.

Hutchinson was in meetings throughout the afternoon and evening Tuesday and was not immediately available for comment, according to a member of the governor-elect’s transition team.

But Bennett said that, as a steward of the state highway system, it was incumbent upon him to push for more funding to maintain it, arguing that the department needs an additional $250 million to $300 million annually.

And only two options exist, he said: reallocate existing revenue or raise taxes.

The department’s legislative package has a range of options to raise new revenue, including proposing a pilot program to allow people to pay for the miles they travel in lieu of fuel taxes; increasing registration fees on electric vehicles, which generate no fuel taxes; and phasing in fuel-tax equivalent levies on vehicles that run on compressed natural gas and other alternative fuels.

None of the proposals would raise a large amount of money, however, Bennett said.