By Rob Moritz
Arkansas News Bureau

LITTLE ROCK — Raising taxes and driving blind are major roadblocks for a state panel trying to develop a new funding source for highway improvements, principals in the last successful road program say.

After meeting for more than a year, members of the Arkansas Blue Ribbon Committee on Highway Finance agreed last week to miss a July 1 deadline for recommending to Gov. Mike Beebe and the Legislature ways to make up some of the $15 billion gap in projected highway needs and anticipated funding over the next decade.

The 19-member panel instead will submit an interim report by Thursday’s deadline and continue meeting through the summer and fall in hopes of making final recommendations by Dec. 1 in advance of the 2011 regular legislative session.

“They have a lot more to think about,” said John Paul Hammerschmidt, the former congressman who then-Gov. Mike Huckabee tapped in 1997 to chair a blue ribbon committee asked to develop a plan for improving Arkansas’ crumbling interstate highways.

The Governor’s Citizens Council on Highways and Transportation came up with a plan that devoted a portion of the state’s future federal highway dollars to repay $575 million in bonds that financed improvements on more than 300 miles of some of the worst interstate highways in the nation.

In the spring of 1999, the Legislature approved a 3-cent a gallon increase in the state gas tax, with proceeds earmarked primarily for improvements on secondary roads, and a 4-cent a gallon diesel tax increase to help repay the bond issue that lawmakers referred to a public vote.

Voters overwhelmingly approved the bond issue later that summer, and the plan eventually led to nearly $1 billion in road improvements statewide.
Eleven years later, a new committee created by the Legislature in 2009 is trying to find a funding source to augment about $4 billion in road funds expected to be available to address an estimated $19 billion in highway needs over the next decade.

Hammerschmidt said the current panel is having to include in its discussions factors his group did not, including the state’s struggling economy — Gov. Mike Beebe has cut $206 million from the budget this fiscal year due to declining revenue — and rising fuel costs.

Fuel costs are critical as the funding source for the state Highway and Transportation Department, he said. The taxes are collected on a per-gallon basis and revenues do not rise with inflation. When gasoline prices go up, motorists cut back on driving and buy fuel-efficient cars.

This year’s highway panel appears to have narrowed its new funding options to diverting proceeds from state sales taxes on vehicles and related parts and services from general revenue to highway improvement and imposing a half-cent sales tax to finance a bond program for road construction.

Beebe has said he opposes both, unless new revenue can found to replace the loss of revenue to the general fund.

Hammerschmidt said he is against raising the sales tax to pay for highway construction.

“We never … discussed a sales tax increase because we always thought that highways should be (improved) with user taxes, not with people’s income taxes,” he said. “Politically, it’s a hard thing to do, but I’m not sure it’s the right thing to do.”

The chairman of the current panel defended the group’s deliberations.
“Every time you talk about raising money, there is only one way to do that and that’s with tax money,” said state Sen. John Paul Capps, D-Searcy, though he acknowledged the difficulty of passing a general tax increase in tough economic times and downplayed the likelihood lawmakers will approve a road program next year.

“I think it’s absolutely necessary that something take place within the next two or three years or we’re going to be in an unfortunate situation with our infrastructure and roads,” Capps said.

He also said he has no doubt Beebe ultimately will support a highway program.
Another roadblock the current committee faces is its inability to show Arkansans where proceeds from a tax increase to pay for roads would be spent, said Lane Kidd, president of the Arkansas Trucking Association.

“I believe the public should be shown exactly where the dollars would be spent,” said Kidd, who also served on the highway panel Huckabee put together.
He noted that in 1999, voters were shown detailed maps of roads where bond money would be spent.

“One reason we were successful in 1999 is that we were able to show that specific highways were being neglected,” Kidd said.

Capps has told the panel he chairs several times that its only charge is to find a new funding source. He also has said more than once that members’ hands are tied because the state constitution puts funding responsibilities in the hands of the Legislature but gives lawmakers little control over how the Arkansas Highway Commission spends road money.

Capps said the committee’s job is difficult, but important.

“I spent the first 17 years of my life on a mud, dirt road,” he said. “I was raised way out in the country. I thought to myself that if I have the opportunity to do something like this, I will. And I did.”