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The Associated Press January 6, 2011, 8:06AM ET

Beebe: Doubtful tax hike for roads could pass

Gov. Mike Beebe said Wednesday that he's willing to sign a tax increase to pay for state highways but doubts lawmakers would approve one in this year's legislative session.

Speaking to a group of reporters and editors, Beebe said he's not pushing for new money for highways during the session that begins Monday but that it's also not a waste of time for the incoming House speaker to explore whether a tax increases could pass.

"If they pass a tax increase for highways and it was reasonable, I'd sign it," Beebe said during a luncheon previewing the legislative session.

But, Beebe later added, "I don't think it's going to happen."

Arkansas faces $19 billion in highway needs over the next decade, when $4.1 billion is expected to be available to cover the costs. Officials say the current highway-financing methods of per-gallon taxes and registration fees are no longer enough to make up the gap.

A committee formed to study highway funding issued several recommendations last year on boosting money for the state's roads, including a new excise tax on the wholesale price of motor fuels, diverting sales tax revenue on cars and transportation products to highway projects and referring to voters a half-cent sales tax to pay for a 10-year highway bond program.

Incoming House Speaker Robert Moore said he's wary of referring a tax increase to voters without first seeing if there would be consensus for any type of tax increase among lawmakers.

"One reason I'm a little bit reluctant on that is . if the wisdom of the people is to not support a tax increase to fund the highway system, then that really puts us in a bad situation and in the next few years the people who voted us in say, 'We really don't want to do this,' then you've really got some obstacles to overcome," said Moore, D-Arkansas City.

Incoming Senate President Paul Bookout said he was open to looking at ways to raise money for highways but said he's skeptical that any hike would pass in the Legislature.

Beebe, Moore and Bookout spoke at a luncheon hosted by the Arkansas Associated Press Managing Editors, Arkansas Press Association and the Society of Professional Journalists.

They're heading into a legislative session likely to be dominated by discussion of tax cuts, notably Beebe's proposal to cut another half-cent off the state's sales tax on groceries.

After winning the most seats they've held in the majority-Democrat Legislature since Reconstruction, Republicans have said they want to see if there's room for other tax cuts. Beebe has said there's not room in the budget for other cuts without hurting state services.

Bookout, D-Jonesboro, said that he was open to looking at cutting the state's sales tax on used cars.

"I think we do owe it to the public to take a look at that and see if that's something we might be able to do a phase-out," Bookout said. "I think it's something we need to take a hard look at."

Beebe said he'd be open to other tax cuts if the state's revenue forecast improves. The state Finance and Administration Department reported this week that the state's revenues were $3.4 million ahead of the forecast but had seen a dip in corporate income tax collections. Beebe singled out a cut to the sales tax manufacturers pay on utilities as a tax cut he'd be open to if the forecast improves.

"If, at the end of the day, the revenues are up, the economy is rolling in a fashion that people I trust say we need adjust our forecast upward and if that means we can afford another 1 million, 2 million, 3 million or 4 million here or there, of course I'd be open to it . I hope our numbers are too conservative and we've got a lot more money," Beebe said. "But, trust me, I'd rather give you more money later rather than cut it later because I overestimated on the front end."

Beebe said he's still hopeful that lawmakers can approve a plan to repay more than $330 million the state owes the federal government for unemployment benefits. If Arkansas doesn't find a way to repay the money, the federal government will recoup it by raising the tax businesses pay for unemployment. The state has been working with labor and business groups to come up with a compromise proposal to present to lawmakers.

The state Chamber of Commerce has proposed effectively raising the taxes businesses pay into the unemployment trust while cutting unemployment benefits. Beebe said any tax hike on businesses would have to be temporary. Beebe said it would be difficult to pass anything without the support of both labor and business groups.

"I'm just trying to knock their heads together and be the masters of our own fate," Beebe said.

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