by Tyler Kane, Transportation Investment Advocacy Center

Arkansas Gov. Asa Hutchinson (R) signed House Bill 1009, titled the “Arkansas Highway Improvement Plan of 2016”, into law on May 23 in order to generate nearly $50 million for the state’s highways over the next year. The bill was passed by the House of Representatives 75-25 on May 20 during the 2016 Third Extraordinary Session, and by the Senate with a vote of 21-10 on May 23. The Senate also confirmed the legislation’s emergency clause, which guaranteed that the bill would go quickly into effect once signed into law by the governor. The bill will go into effect on July 1.

The legislation contains several measures to raise revenue for the Arkansas Highway Transfer Fund, the key sponsor of several infrastructure projects around the state. The measures used to gather revenue for the Fund are as follows:

  • 25 percent of Arkansas’s general revenue surplus will be diverted into the Arkansas Highway Transfer Fund, with the remaining 75 percent contributing to Arkansas’s General Fund.
  • The renamed Rainy Day Fund, now the “Long Term Reserve Fund” will contribute a one-time, $40 million payment into the Arkansas Highway Transfer Fund.
  • Through interest and investment revenues gathered through the State Treasury, payments of $1.5 million and $20 million will be made into the Arkansas Highway Trust Fund in FY 2017 and FY 2018, respectively.
  • Revenue from a diesel tax that generated $4 million for Arkansas’s General Fund will be diverted into the Arkansas Highway Transfer Fund.
  • Revenue from a half-cent sales tax that benefitted the Constitutional Officer’s Fund and the State Central Services Fund will be diverted into the Arkansas Highway Transfer Fund.
  • A new subcommittee, The Highway Commission Review and Advisory Subcommittee, was formed to oversee several infrastructure projects. One of its key roles is to assess projects costing over $10 million with a “report card”, assessing its implementation and overall success.

Arkansas’s need to match their federal funding under the FAST Act with their own highway taxation served as the main purpose for HB 1009’s revenue plan. With $50 million in annual highway revenue, Arkansas can still qualify to receive $200 million in funding from the federal government through the FAST Act.

This bill also seeks to generate revenue while avoiding raising the gas tax. Many Arkansas Congressmen, both Democrat and Republican, advocated for a gas tax increase throughout the year. Senator Jimmy Hickey(R) proposed a 5 cent gas tax increase for FY 2017, followed by three years of 8 cent increases. However, the controversy over raising the gas tax permeated much of the bill’s discussion, with Gov. Hutchinson reaffirming his opposition to a gas tax hike. Ultimately, gas tax increases were left out of HB 1009 in favor of reallocating current funds to serve as the primary matching factors for Arkansas’s Highway Transfer Fund.