Gov. Asa Hutchinson backed away from a plan to tap into vehicle sales taxes for Arkansas’ roads and instead proposed relying on state investment returns Monday as he called lawmakers back to the Capitol.
The Republican governor issued the proclamation ordering that a special session begin Thursday to take up his highway plan and more than a dozen other bills. The session will start 10 days after lawmakers adjourned this year’s legislative session.
“The purpose of this special session is to address our state’s immediate highway funding needs without the unnecessary burden of raising taxes on Arkansans,” Hutchinson said in a statement. “In addition, the Legislature will be asked to approve legislation to promote efficiency and effectiveness of state government operations as well as a few items that warrant immediate action.”
A draft of the legislation outlining Hutchinson’s plan drops his proposal from earlier this year to divert tax revenue from new and used vehicle sales to highways, capping the annual transfer at $25 million in five years. Instead, it calls on using $1.5 million from the state’s investment returns this coming fiscal year and up to $20 million in future years.
The plan to use tax revenue faced resistance from Democrats, who say diverting those funds would jeopardize other state needs such as public schools. Hutchinson had initially called on using the investment returns to offset the loss in tax revenue.
“The moment you step over in to general revenue, then every single person who gets a portion of GR and is dependent on it gets heartburn,” said Republican Sen. Bart Hester, who is sponsoring the bill.
The proposal otherwise mostly mirrors Hutchinson’s original highway plan, with $40 million to be used from state surplus funds this year and setting aside 25 percent of the surplus next year. It also redirects to roads $4 million a year from a diesel tax that had been going toward general revenue and $5.4 million from a temporary sales tax for highways that had been directed to a fund for constitutional officers.
Hutchinson has said his highway plan will raise $46.9 million in new money for roads this year.
Arkansas lawmakers had floated the idea of a tax increase to raise money for highways, but legislative leaders have said there’s little support for such a hike in the GOP-controlled House and Senate. Hutchinson’s office repeated his opposition to any tax increases.
“We believe in this climate that a tax increase of any kind would not be met with a general consensus,” Hutchinson spokesman J.R. Davis said. “We believe we have great support for our plan that does not increase taxes.”
The top Democrat in the House, Minority Leader John Gray, said he was opposed to the plan since it’s not a long-term solution to the state’s road needs.
“It sounds like we’re more concerned about the politics than the safety of the people driving up and down the roads,” Gray said.
Hutchinson said the session will also include setting a Dec. 31, 2021, end date for Arkansas’ hybrid Medicaid expansion to protect it in case a judge overturns the governor’s line-item veto that saved the program.
Other items on the agenda for the special session include changing state law so residents in two school districts won’t have to cast separate ballots when they vote for new school board members in the November election, changing the way vacancies are filled on levee district boards and a reworked version of a publicity rights bill that Hutchinson vetoed last year.
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