Governor Asa Hutchinson’s five-year highway funding plan, which appears on the verge of passing,* is a short-sighted gamble that eats away at funds for our child welfare system, our schools, and other critical services. Because of a refusal to increase any taxes, this plan simply shuffles money among different funding groups and hopes for an economic miracle to fill in the holes. Without that economic miracle, young children who would benefit from pre-K and summer reading programs, along with child welfare workers, public school teachers, and community-based juvenile justice programs have the most to lose.
The most concerning part of the plan is how much money it takes from general revenue (the primary source of funding for public programs). Starting in 2018, about half of the $50 million needed for federal matching comes from funds that would have gone to general revenue ($20 million from investment earnings and $4 million from a portion of the diesel tax). There is no plan for how will we handle the unprecedented withdrawal of general revenue funds, which are already taking a beating from $242 million in recent tax cuts.
We have already seen the results of general revenue loss in the form of cuts to libraries, the juvenile justice system and underfunded pre-K programs. This highway plan takes even more out of general revenue and means a long list of critical services could be on the chopping block. Think of programs that protect abused and neglected children, kids in after-school and summer programs, public defenders, and firefighters.
In addition to relying on general revenue funds that should go to other programs, the plan assumes significant state surpluses and economic growth that are in no way guaranteed. The level of surplus revenue required to keep the plan afloat ($195 million per year, every year) is optimistic. To see that, you just need to look back at the state’s balance sheets over the last decade. Of the 10 most recent fiscal years, less than half have had surpluses high enough to fully fund the Governor’s plan. There is no apparent contingency for making up the difference if we see a lean year between now and 2021. Arkansas is just emerging from a recession; we can’t pretend the economy is on solid ground or immune from turbulence.
There is a backdoor strategy to increase the odds of a big surplus year after year. If the state works in an overly conservative forecast for general revenue on the front end, they can artificially inflate the surplus at the end of the year. That inflated surplus comes directly at the cost of general revenue, so many see using surplus funds for highways as yet another bite out of general revenue.
Even if we see a five-year economic boom with sky-high surpluses, and even if a magical windfall fills the hole in general revenue, the recent highway funding plan still doesn’t achieve the basic goal of a sustainable, long-term highway funding solution. With the best case scenario, this plan will still leave us with a highway system that mostly depends on dwindling fuel tax revenue because of a refusal to increase any taxes. In five years’ time, prices will go up and our 21.5-cent-per-gallon fuel tax will be worth even less than it is now. In five years we will also almost certainly see cars get more fuel efficient, meaning we will all be chipping in less to the fuel tax on our daily commutes.
When the legislature comes back in 2017, we hope they will consider raising and indexing Arkansas’s gas and diesel taxes. A modest 2.5-cent-per-gallon increase (which will cost about 37 cents extra every time you fill up your 15-gallon tank) would provide funding to meet long-term highway needs without sacrificing programs that benefit kids in our state. You might be surprised to find that funding highways with a 2.5-cent fuel tax increase would cost the average middle-income Arkansan only $25 a year. I think most of us would be willing to pay that extra 50 cents a week to have decent roads and prevent cuts to public services. We cannot have functioning public services and safe roads while eternally refusing to increase any taxes.
For more information and analysis on highway funding options in Arkansas, see the following reports : https://www.aradvocates.org/problems-down-the-road-with-governors-highway-plan/
Surplus to Allotment Reserve Fund in millions from DFA’s 10 most recent fiscal notes:
From Arkansas Fiscal notes (https://www.dfa.arkansas.gov/offices/directorsOffice/Documents/june_2012_fiscal_notes.pdf)