Beebe: Hands Off Gas Tax

Arkansas Gov. Mike Beebe said last week that the recently enacted increase in the state’s natural gas severance tax should not be diverted to make up a $107 million reduction in the fiscal 2009 general fund budget.

The Legislature met in a three-day special session in early April to increase the severance tax on natural gas from 0.3 cents per 1,000 cubic feet of gas to 5% of the value that production companies receive when they sell the gas.

The new tax, which will go into effect Jan. 1, is expected to generate almost $60 million in the first year and $100 million a year by 2011. The existing tax — which has not been increased since 1957 despite numerous attempts over the last 50 years — will bring in $660,000 in 2008.

“This tax is a specific itemized program with a totally new and different revenue source for highways,” Beebe said on his weekly TV call-in show. “It’s got nothing to do with general revenue. We’ve been up front all the way around on this that we wanted it for highways.”

The tax law allocates 95% of revenues to highway and bridge projects, with 5% to the general fund. The Highway and Transportation Department will receive 70% of the severance tax revenue road fund, with cities and counties each receiving a 15% share.

The Department of Finance and Administration said last week that the general fund’s lower-priority “B” budget allocations for fiscal 2009, which had been set at $244.5 million by the Legislature in 2007, would be cut to $137.8 million due to a decline in sales tax and other revenues.

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