Creative funding solutions for highways are elusive
By Roy Ockert Jr.
Sept. 22, 2015
Historically, the best method for building and maintaining state and federal highways is the one our political leaders are avoiding like a tax increase. That’s because it would be a tax increase.
Some of them foolishly signed a lobbyist’s pledge a few years ago that they wouldn’t vote for a tax increase, no matter what. Thus, the nation’s highway system can go to gravel, lest Grover Norquist be disappointed.
Congress can’t pass a highway bill that lasts more than a few weeks at a time, and most state governments, including our own, have frozen many projects in place.
Nevertheless, in May Arkansas Gov. Asa Hutchinson formed a task force to study the lack of highway funding, this one called the Governor’s Working Group on Highway Funding. At the group’s first meeting in June the governor urged its 20 members to “think creatively but realistically about possible funding solutions.”
He said all possible solutions ought to be on the table, including taxes based on vehicle miles traveled, toll roads and public-private partnerships but seemed to shy away from raising fuel taxes.
You might say Congress is shy about that, too.
But most of our state and federal roads were built with revenue raised from fuel taxes, and those taxes have been used to maintain and rebuild them as needed. That way those who use the roads help pay for them. It was a great model while it lasted, producing the finest motor transportation system in the world.
Unfortunately, fuel-tax revenue doesn’t rise with fuel prices. Higher gas prices led to more efficient vehicles, and the model isn’t working well any more. Highway builders and government leaders are therefore looking for “creative funding.”
The Governor’s Working Group has held a few meetings, gathered tons of information — typical task force stuff — and must produce by Dec. 15 “recommendations for the state to create a more reliable, modern and effective system of highway funding.”
The Arkansas Good Roads Foundation has been offering suggestions, as well it should since many of its members have a business interest in road and bridge building.
The foundation has proposed a complicated plan that includes a temporary 10-cent-per-gallon increase in the state tax on gasoline and diesel fuel. Those state rates now are 21.5 and 22.5 cents, respectively, as they’ve been since 2001. Combined with federal fuel taxes, unchanged since 1993, we pay 40.2 cents of tax per gallon of gas and 47.2 cents per gallon of diesel in Arkansas.
Craig Douglass, the foundation’s executive director and a member of the Working Group, recently presented the plan to the group. With fuel prices at their lowest levels in years, the time seems right for a fuel tax increase at either the state or federal level, or both.
There is a catch to the word “temporary,” of course.
Other elements of the Good Roads Foundation plan would include transferring sales tax revenue on new and used vehicles from the general fund to the highway fund. That’s about $225 million a year, and the plan calls for phasing that in over five to seven years. Meanwhile, the 10-cent fuel-tax increase, raising about $198 million a year, would be phased out.
Other elements in the plan would also divert revenue from the general fund to highways. In the long term that would theoretically improve the highway funding model because sales tax revenue tends to grow as prices go up, even if the rate remains the same.
The down side is that money diverted from the general fund will be money not available for other purposes — public education, higher education, law enforcement and the prisons, and human services. Even in a state budget now above $5 billion a year, $225 million is not an insignificant sum. Public education gets about 40 cents of every dollar and is constitutionally protected from budget cuts so the other areas would have to take the hits.
Douglas told an Arkansas News Bureau reporter that he believes the public would support a fuel-tax increase.
“We believe that Arkansans would immediately recognize the benefits for additional revenue that would go toward improved maintenance of the highway system,” he said. “And if we were to raise the gas and diesel tax by 10 cents now, the continuing volatility and the trend in falling gas prices would absorb that increase almost immediately, which would lessen the impact on motorists.”
Getting the Legislature to agree would be the trick. Our lawmakers would rather wait till Congress quits “kicking the can” down the road on a federal road bill.
One of them, state Rep. Andy Davis, R-Little Rock, also a member of the Working Group, told Talk Business and Politics that he opposes raising fuel taxes, even as a short-term fix. He named four possibilities, but taken altogether, they wouldn’t make a dent in the state’s current $110 million highway funding deficit, much less provide a long-term solution.
The Working Group must be realistic. We’re not ready to make a major change in the way we finance our highways, such as with a per-gallon sales tax or a per-vehicle-mile tax. Bite the bullet and raise the fuel taxes while prices at the pump are relatively low. At least we won’t be creating other problems while trying to solve this one.
Roy Ockert is editor emeritus of The Jonesboro Sun. He may be reached by e-mail at royo@suddenlink.net.