Stop talking about 'surpluses.' Asa has raided general revenue for highways. | Arkansas Blog

Saturday, May 21, 2016

Stop talking about 'surpluses.' Asa has raided general revenue for highways.

Posted By on Sat, May 21, 2016 at 6:58 AM

click to enlarge ROAD TO FINANCIAL RUIN? Gov. Asa Hutchinson bikes to Capitol Friday, a day when he all but completed his legislative plan to raid general revenues for highway construction.
  • ROAD TO FINANCIAL RUIN? Gov. Asa Hutchinson bikes to Capitol Friday, a day when he all but completed his legislative plan to raid general revenues for highway construction.

Descriptions of Gov. Asa Hutchinson's highway spending plan — here and elsewhere — speak often of the use of "surplus" to pay for road-building and also often include comments of critics who bemoan the failure of Arkansas to devote general revenues — as opposed to user fees like fuel taxes — for highways.

Please stop. This is, if not fiction, highly imprecise.

To recap, here's  the governor's plan to raise $50 million next year to qualify for $200 million in federal matching this year and to continue paying for more highway construction in future years:

* A one-time transfer of $40 million in "rainy day fund," or surplus, money. This is general revenue. It is money that accrues because the governor intentionally underbudgeted all other parts of government — schools, colleges, public safety, environmental regulation, you name it — to create a "surplus" to send to pave roads. Zero pay raises for state employees. An annual decline in meeting the state's obligation for adequate college funding. A lack of money for school construction. The list is long.

* The annual transfer in future years of 25 percent of state "surplus" to highways. Again — this is either 1) a highly unreliable source of  money or 2) a more reliable creation of an intentional raid on general revenue created by starving other state agencies. (A big contingent of the Republican legislature is perfectly happy with this, of course.)

* $1.5 million in 2017 and $20 million in 2018 from investments on state earnings held by the treasurer's office. This is general revenue that otherwise would reach other agencies.

* Ending a small transfer of money from fuel taxes to the fund that pays for state constitutional offices and central services. That's another diminishing of revenues to non-highway agencies, though it IS user-fee generated money.

Thanks to Gov. Asa Hutchinson, the highway construction lobby  has achieved its long desired raid on general revenues by sleight of hand and PR.

If employment stays high and income taxes continue to rise, all may be more or less OK — at least status quo. But the state's 5 percent share of the Medicaid expansion is around the corner. All areas of government have rising costs. If, even with penurious budgeting, the surpluses don't develop, difficulties will arise.

I tend to side with those who think the governor's free lunch highway plan holds peril not many miles down the road. He only hopes that the peril isn't evident until after his re-election in November 2018. By then, it might be apparent that this year's free lunch was just political theater and voters might again be willing to vote for a tax increase. That's objective No. 1 these days — spare the governor and legislators from having to exert leadership and advocate such a thing themselves. Sen. Jimmy Hickey and his small band, plus several Democrats (a politically irrelevant minority) are excepted from those judged derelict of duty.

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