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With legislative support, Beebe calls special session to raise severance tax Saturday, Mar 22, 2008 By Jason Wiest Arkansas News Bureau LITTLE ROCK - With most legislators backing him, Gov. Mike Beebe on Friday called a special session to raise the state severance tax on natural gas. Beebe summoned lawmakers to the state Capitol for a three-day extraordinary session, to begin March 31, to consider the pact he negotiated with gas companies operating in the state to set the severance tax at 5 percent of market value at the time of extraction, with reductions and exemptions for qualified wells. The current rate, three-tenths of 1 cent per 1,000 cubic feet of gas, is among the lowest in the nation and has not changed since 1957, in part because of the three-fourths majority in both chambers of the Legislature - 75 votes in the House, 27 in the Senate - required to increase the tax. Beebe said Friday he had more than enough legislative support for his plan, noting commitments from 81 House members and 30 senators. "It's pretty overwhelming and it's pretty bipartisan," Beebe said at a news conference. "It's amazing that the support has come from every corner and from every geographic region." Support from legislators was not instant. Last week, several Republicans said raising the severance tax might slow investment in the Fayetteville Shale play, which a recent University of Arkansas study projected will have a nearly $18 billion economic impact on the state through 2012, including about 11,000 new jobs. A hypothetical 5 percent severance tax without reductions or exemptions would prompt gas companies to diminish their investments by an average of 13 percent, the study found. "I'm a no vote," Rep. Rick Green, R-Van Buren, said Friday, noting his constituents had told him overwhelmingly they opposed the measure. "With the economic climate that's out there, I don't think it's a good time to be looking at any sort of tax increase." Some GOP lawmakers also criticized the governor for discouraging any changes to his proposal and said the extra revenue a tax hike would generate should be distributed differently. Beebe wants the bulk of the revenue to go to road improvements. But after learning Thursday from the Bureau of Legislative Research that the overall effective tax rate, calculated after factoring in reductions and exemptions, would be 1.5 percent for the first two years of the tax, some legislators' only opposition to the proposal was that it did not raise the tax enough. "I think that 5 percent right straight across the board (without exemptions) would pass," Rep. Junior Rogers, D-Walnut Ridge, said Friday, noting that he had committed to supporting the proposal anyway. "There's a proposed 7 percent to be put on the ballot, and I'm not sure that wouldn't pass," Rogers said, referring to a ballot initiative by former gas executive Sheffield Nelson, who has said he will abandon his measure if Beebe's proposal passes. The consensus among legislators and administrative officials Thursday at a joint meeting of the House and Senate revenue and tax committees appeared to be that changing the reductions and exemptions or the rates later would require a three-fourths vote of both the House and Senate. The legislation was intentionally drafted that way, Beebe said Friday. "I don't want to trick anybody. We didn't want to do something and then somehow trick somebody and say, 'Well we can raise it on you or change it on you with 51 percent.'" As proposed, the tax would generate about $57 million for the state in the first year, gradually increasing and reaching the $100 million mark by 2013, according to conservative estimates from the state Department of Finance and Administration. Of the revenue generated, 95 percent would go to road improvements. Of that, 70 percent would go to state highways, and counties and cities would receive 15 percent each. The remaining 5 percent would go to general revenue to replace the current tax, which amounted to less than $700,000 last year, and to fund environmental and conservation needs, Beebe said. Beebe said he hoped the special session would last the shortest requisite length of time to pass legislation - three days - to minimize the cost to taxpayers. The severance tax proposal was the only item on the governor's call for a special session. Beebe said he might amend the call to include technical changes to Arkansas' marriage-age law and legislation regarding the unitary status of two Pulaski County school districts should enough legislators indicate a desire to do so. Last year, in an attempt to set a uniform age of consent to marry in Arkansas, the Legislature inadvertently made it possible for persons of any age to marry with parental consent. Proposed legislation would extend the deadline for the North Little Rock and Pulaski County school districts to seek unitary status. The Little Rock School District was largely released from federal court supervision of its desegregation program last year. |
