By Rob Moritz
Arkansas News Bureau

LITTLE ROCK — A state panel today endorsed imposing a new excise tax on wholesale motor fuel and indexing increases in gas and diesel taxes to fund state highway improvements.

The recommendations by a subcommittee of the Blue Ribbon Committee on Highway Finance are to be discussed by the full committee next week, along with a separate subcommittee’s recommendation last month to shift $425 million annually from general revenue.

Gov. Mike Beebe has said he opposes shifting general revenue to fund road construction.

The Legislature created the 19-member panel last year to study the state’s highway system and recommend to the 2011 General Assembly ways to address needs that state highway officials say total more than $10 billion.

“It’s time to act,” said Mark Lamberth of Batesville, a member of the subcommittee that is looking for new revenue to fund the highway projects. “We need to present a couple of options that the state can sink its teeth into.”

The panel, which has been meeting for several months, considered a variety of new revenue sources, including a carbon tax, income tax, gasoline and diesel excise tax and toll roads, among others, before making today’s endorsements.

One of the advantages of an excise tax on the wholesale price of motor fuel, according to a policy brief prepared by the committee, is that it would be elastic and would increase revenue in conjunction with construction cost increases.

Indexing the motor fuel tax revenue based on the annual Construction Cost Index increase, a general measure of inflation associated with construction commodities, would “maintain the purchasing power (the state) currently has at a certain level,” committee chairman Jim McKenzie of Little Rock said.

Any revenue projections would not be based on an average price of diesel for the previous three years, he said, noting that under the proposal the tax would not increase more than 2 cents per gallon a year.

McKenzie said the full committee must now determine just how much money it wants to raise for future highway improvement projects.
The two subcommittees and the full committee are scheduled to meet Jan. 13 at the state Capitol.