By Rob Moritz
Arkansas News Bureau
LITTLE ROCK — A special state highway panel decided Wednesday to take a two-prong approach to researching new ways to fund road improvements.
The Arkansas Blue Ribbon Committee on Highway Finance voted to split into two subcommittees — one to focus on potential new sources of revenue, including tax increases, the other to look at existing sources, including tapping general revenue for highway construction.
The committee charged with recommending new road funding sources to the Legislature and the governor before the 2011 regular session also voted to hold a daylong session to evaluate the various funding options, but no date was set.
The committee chairman, Sen. John Paul Capps, D-Searcy, said the panel is trying to get some members of the state’s congressional delegation to attend the August meeting, and in September, a representative from the national Council on States is to attend and talk about financing options.
State highway officials estimate maintaining state roads at their current level alone will take about $200 million a year. At least $100 million more is needed to maintain city and county roads at their current level, said Dan Flowers, director of the state Highway and Transportation Department.
Don Zimmerman, executive director of the Arkansas Municipal League, suggested the committee recommend removing the sales tax exemption on the purchase of gasoline and diesel. He estimated the change would generate $233 million annually for state highways and local roads.
Some committee members appeared interested in the possibility of transferring the annual revenue generated from the sales tax on new and used vehicles, about $233.4 million, to the highway department.
However, Rep. Bill Sample, R-Hot Springs, warned that using general revenue would mean the panel would have to find a new source of revenue to replace the shortfall in funding for other state services.
Madison Murphy of El Dorado, a member of the Arkansas Highway Commission, suggested using the tax revenue on vehicle sales and then using funds generated from a the proposed taxing of Internet sales to offset the general revenue loss.
Richard Wilson, assistant director of the Bureau of Legislative Research, said Congress has yet to approve taxing Internet sales, estimated to generate about $100 million to $400 million a year in Arkansas.
Lawmakers attending Wednesday’s meeting appeared cool to a sales tax increase fund road improvements and Gov. Mike Beebe said raising taxes to pay for highway needs would be “problematic.”
“I think there will be some discussions on that commission. We’ll just have to wait and see what they say and see how that’s received by the people,” Beebe said this morning.
Committee member David Malone of Fayetteville, a former state senator, told the panel that whatever it decides must be seen as fair by Arkansas voters. He suggest the Highway Commission reconsider its policy of distributing highway funds evenly across the state, not based on traffic volume.
“We’re not going to pass a tax increase … unless people think it’s going to be spent in a fair manner,” Malone said.
Murphy said the commission has discussed the possibility of distributing any new it receives on traffic volume. No final decision had been made, he said.
Beebe repeated his preference that funding follow the traffic.
“What I said through the campaign, what I’ve always said, is the bulk of the money should follow the cars,” the governor said. “However, there’s a caveat, and that is, for some places where road money is available for economic development, that may not actually be based on money following cars. But the … majority of distribution should be in such a way that the money follows cars.”
Jim McKenzie of Little Rock admonished the panel to develop a plan to fund necessary improvements into the future and not just settle for the status quo.
“That would be a disservice,” McKenzie said.
