Governor: Severance tax is only real possibility for a road program

The governor was asked Friday morning on his monthly KARN call-in show why revenue from an increased severance tax cannot go to general revenue rather than being dedicated. He responded that "without this for highways, there is no real possibility of a road program in Arkansas," Beebe said. "That's because we can't raise the gas tax. I won't raise the gas tax. Gasoline's too high now. It's killing our people." Here's more from the Arkansas News Bureau.

The last time a highway bond proposal was put to a vote of the people (12/13/2005), it struggled to get 40%, so he's likely right that this would be the only opportunity to increase funding for highways in the foreseeable future (and without bond financing). State highway officials have estimated the needs to be $19 billion over the next decade.

I've previously advocated here that an increase in the severance tax should be added to general revenue to leverage tax cuts, including the other half of the sales tax on food and food ingredients (price tag of $90-$120 million annually), and then to lower the sales tax on energy consumption on both residential and commercial electricity, natural gas, and water bills. The governor is right, though, that if we are to have a road program for the coming decade, the severance tax may be the only solution, and besides, we may be able to repeal the other half of the grocery tax without an additional revenue source. A portion of any increase using the governor's plan is still likely to go to general revenue to replace the $600,000 we're currently getting from it, so an increased severance tax can theoretically be used to leverage other tax relief as well. It'll be interesting to follow this in the coming months as competing petitions are likely to be circulating around the state.

Update: Here's a response column by David Sanders.