Arkansas Trucking Association

Highway Dollars and Sense: Power of the Purse After a Pandemic

Power of the Purse After a Pandemic

Ed. note: In November 2020, Arkansas voters will have the power to decide if the state should keep collecting a half-cent sales tax in order to raise over $205 million annually for state highways and bridges, plus an additional $43 million each for counties and cities. In each issue leading up to the election, we’ll be covering the potential impact of that decision. In this month’s issue, we tackle the economics. We encourage you to educate yourself before you vote and to help educate your friends, family, neighbors and coworkers who will help Arkansas make critical choices about our state’s infrastructure. Read Part 1 of this special series "Highway Dollars and Sense" on the political history of the half-cent sales tax for infrastructure,  Part 2 on the necessity of roads to our everyday lives, and Part 3 on how highway funding creates a safer state for everyone.

It’s no surprise that Issue 1, and most issues and candidates on the ballot, can’t be divorced from the current moment—we are in the middle of a pandemic that has created, highlighted and exacerbated problems in our society.

Throughout the pandemic, Arkansas’s Gov. Hutchinson has reminded citizens that both public health and the economy are on the line.

While the state’s economy has suffered as people reduced movement to contain the spread of the virus, Arkansas has fared better than many other states. Restaurants closed their dining rooms for months and swiftly adapted to safe, efficient, sometimes contactless take-out operations. Salons, tattoo parlors and gyms mostly had to cancel all their business during the first few weeks in order for hospitals to create plans and acquire supplies in case of a surge in cases.

Experts agree that the economy will not recover until the virus can be contained. Containment does not necessarily mean a vaccine or a cure. Few enough cases in a community that can be identified and traced to contacts, who follow orders to quarantine, would contain the virus. Arkansas isn’t there yet. But the economy has held more than expected while citizens and government works toward containment.

Jobs

According to the Arkansas Division of Work Force Services, unemployment dropped from its April peak of 10.8 percent to 8 percent in June, which is still better than the national June jobless rate of 11.1 percent. That’s still more than 100,000 Arkansans out of work.

The good news is that a vote for Issue 1 can address economic recovery. Continuing the half-cent sales tax is expected to support 3,600 jobs each year and provide $8.2 billion of economic activity over ten years. In November 2019, when Gov. Hutchinson kicked off his campaign for the ballot issue—Vote for Roads. Vote for Issue 1.—these numbers were a boon. Unemployment was at only 3.6 percent.

And there’s historical evidence that infrastructure building can support economic recovery. It’s happened before. After the Great Depression.

President Franklin Delano Roosevelt’s New Deal included the Works Progress Administration to improve the nation’s infrastructure and put Americans back to work. The program was responsible for 3.2 million jobs and constructing 650,000 miles of road and 78,000 bridges.

But Arkansas can’t count on Washington to come to the rescue again. The current highway funding law expires Sept. 30, and Congress is just expected to pass an extension rather than tackle long-term needs.  

The rest of the purse

When Gov. Hutchinson passed his highway bill last spring, he told Arkansas Trucking Report that he couldn’t wait on the federal government because he was skeptical that Washington could pass a bipartisan plan. Instead, what he could do is focus on his own sphere of influence—Arkansas.

He was right. Though it was a key campaign promise of Pres. Donald Trump, as we near the end of his first term, the nation seems no closer to an infrastructure package than it was four years ago.

The Highway Trust Fund, which funds the construction and maintenance of highways and bridges, collects almost 90 percent of its revenue through the gas tax (18.4 cents/gallon for gasoline, and 24.4 cents/gallon for diesel). The HTF already had a shortfall and has required transfers from the general fund, not to mention the tax is not indexed to inflation and has not been adjusted since 1993. But as we know, the pandemic highlights and exacerbates flaws in our society.

The American Association of State Highway and Transportation Officials estimates a 30 percent drop in gas tax revenue based on their data from the 2008 recession. Though Arkansas never had a shelter-in-place order, driving still dropped drastically this spring. Out-of-state travel was limited to essential business and many workers halted their commute when they began working remotely.

Less driving means fewer fuel purchases and less money collected at the gas pump. This doesn’t just affect the HTF. The highway bill passed last year included an increase in state fuel taxes. The state began collecting an extra 3 cents/gallon of gasoline and 6 cents/gallon of diesel in October 2019, but the $58 million the fuel tax was expected to raise annually likely didn’t figure in a global pandemic that decreased travel for months.

The highway bill also included money from the state’s new casinos . . . which have been delayed in operation for a host of reasons both political and pandemic. There was money from new registration fee on electric and hybrid vehicles, but new data from IHS Markit Ltd has revealed that Americans are driving their vehicles longer. The average age of vehicles on the road is at a 20-year high, and the age of cars, trucks, and SUVs is 11.9 years. With so many unemployed and fuel prices remaining low, buying a new hybrid car may not be a top priority until the economy recovers.

When the sales tax ends

The sales tax may deliver less revenue this year, too, so failing to pass Issue 1 may not solve all the problems in our economy and infrastructure. But failing to pass Issue 1 will undoubtedly hurt both.

Because it’s not a grand new idea. It’s an extension of an idea that has been supporting business and citizens for seven years already. Voting against Issue 1 is not like not giving ArDOT a pay raise. It’s a pay cut, because they already use that money to maintain and construct roads. Without it, funding is expected to fall 30 percent. Cities and counties could lose over $40 million a year.

The expiration of the sales tax is June 2023.

Maintaining infrastructure has a cost, but poorly maintained infrastructure costs drivers, too. Right now, pothole-related costs average about $300 per driver annually or $3 billion for all U.S. motorists. Those personal costs to repair your vehicle after an encounter with crumbling roads won’t come down if the sales tax expires.

In 2023, when we hope to be healthier, happier and more prosperous, traffic will pick back up, so, too, will the cost of idling on congested roads and the shipping costs of everything to counteract the $74.5 billion the trucking industry loses in productivity.

The November elections aren’t happening in a bubble. It’s 2020, and everything that’s happened this year in our national, state, local communities and our own homes will affect the decisions we make. The opportunity to make the next years better, with fewer literal and metaphorical potholes, should also affect the decisions we make.

At Arkansas Trucking Association, we encourage you to make sure you are registered to vote, know your polling place, and learn about the issues.

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Part 1: Why the Choice is Yours

Part 2: Mythbusting and Life Saving on the Essentiality of Open Roads

Part 3: A Safer Way Home

Part 4: Power of the Purse after a Pandemic