The Delta Grassroots Caucus (DGC) is a broad coalition of grassroots leaders in the eight-state Delta region. DGC is also a founding partner of the Economic Equality Caucus,
which advocates for economic equality across the USA.

Praise for Gov. Beebe & legislature for severance tax to improve transportation

Posted on April 03, 2008 at 10:08 AM

The Delta Grassroots Caucus congratulates Gov. Mike Beebe for signing into law a severance tax increase passed in a special legislative session to bring in transportation improvements funding from the proliferation of natural-gas wells in Arkansas. This will be helpful to improve the transportation system in the Arkansas Delta as well as the rest of the state. We commend the many legislators in east Arkansas who endorsed the severance tax proposal and are active in the Delta Grassroots Caucus, which earlier this year endorsed Gov. Beebe’s leadership on this issue.

The tax is expected to raise $57 million in 2009, going up to $100 million in 2013. Natural-gas industry experts have said the tax won’t be passed on to utility bills. We know the situation and issues are different in each of the eight Delta states, but we would commend Gov. Beebe’s leadership as a role model that could well be followed across the region, in the sense of finding constructive ways to fund improvements for the region’s development.

Gov. Beebe said “For years, people have talked about how we have one of the lowest if not the lowest severance tax in the nation. But [legislators have now] addressed that. Highways are important for safety and for travel but it’s also important for economic development, so they have now tackled that problem. I can’t say enough about the members of the General Assembly.”

The Delta Caucus partners are pleased to note Gov. Beebe’s reference to the importance of highways for economic development. The governor had conveyed to legislators and other grassroots leaders in east Arkansas that there are two basic policies regarding the use of the funding: there should be some concern for areas where better roads can be helfpul for economic development, and there should also be some concern for funding going where there is a high volume of traffic. This is a fair compromise. Of course, if the only policy was just to say that “all the dollars should follow the cars,” then all the money would go to western Arkansas and central Arkansas, and this would lock in a situation where the wealthier and more heavily populated parts of the state would forever get the lion’s share of the funding, and the Delta would get poorer and lag even further behind. But Gov. Beebe has made clear that there will be some consideration for the east Arkansas Delta getting a fair share of the funding, and that is all the Delta Caucus has asked for.

Ninety-five percent of the revenue would go toward road improvements. Of that, 70 percent would go to roads the state Highway Department maintains, 15 percent to county roads and 15 percent to city routes. The remaining 5 percent would go to general revenue, which is where current revenue from the severance tax on natural gas goes.

Johnnie Bolin, executive director of the Arkansas Good Roads Transportation Council and an active partner of the Delta Caucus, said that “I credit grassroots support in encouraging all the representatives and senators to support this initiative, and it was quite a remarkable feat by Gov. Beebe and the legislature to get this passed by such an overwhelming margin.”

The Delta Caucus would also like to thank Johnnie Bolin for all his important work in helping to get this done.

We appreciate that Beebe has acknowledged that this additional revenue won’t come near to covering all of the state’s road needs but he has said it will help. The Delta is badly in need of transportation improvement and this is a significant step in the right direction. The road system in much of the Delta lags far behind that in much of the rest of the state, so any help for improved transportation in the Arkansas Delta is deeply needed and appreciated.

The legislation passed the House 82-17 and the Senate 32-1 earlier Wednesday. Each bill had passed in the originating chamber on Tuesday. This overwhelming margin is a credit to Gov. Beebe and supporters of the initiative, because there was nowhere near that level of support in the Legislature for raising the severance tax earlier this year when Beebe was negotiating with natural-gas producers. Beebe had said an agreement from the industry was necessary to get enough votes for the plan in the Legislature.

One major producer commented: “I think it is safe to say that we worked collaboratively with the governor and his staff to find a reasonable tax policy that would not defer spending to other competitor states yet have a positive impact on the infrastructure in Arkansas,” said Tom Price Jr., senior vice president at Chesapeake Energy Corp. of Oklahoma City. “We look forward to many years of working well together to enhance the quality of life for Arkansans.”

Arkansas’ tax has been three-tenths of 1 cent per 1,000 cubic feet of gas since 1957. That tax, which will be replaced Jan. 1 by the one Beebe signed into law, doesn’t take into account the price of gas. The current price is about $9.80 per Mcf (1,000 cubic feet), having climbed from $2.16 per Mcf in 2000.