Prioritizing HURF Funding in the FY 2017 State Budget

This week Governor Doug Ducey kicked off the 2016 legislative session with the annual State of the State speech. The Governor reiterated his commitment to continuously improving the business climate in Arizona by keeping taxes low and regulations in check. The Governor will have a further opportunity to outline his priorities this Friday when he releases his budget proposal. Later this month the House and Senate majority and minority will each release their preliminary budget proposals as well.

The condition of our state’s revenues are stronger than they have been in several years with the Joint Legislative Budget Committee (JLBC) projecting a $555 million surplus. Of this, $218 million is expected to be ongoing revenues with the remainder being one-time revenues resulting from unusually high capital gains and corporate income tax collections. Wise budgeting principles call for the prioritization of core government functions, such as maintaining the state highway system, rather than the creation of new initiatives when it comes to ongoing commitments.

The Highway User Revenue Fund (HURF) is Arizona’s primary source of revenue for transportation projects. The HURF is funded by a combination of the state gas tax, vehicle license fees, vehicle registration fees and other transportation related fees. These are “dedicated funds” that are designed to be protected from diversion to other government programs. Funds in the HURF are allocated to cities, towns, counties and the State Highway Fund according to a distribution formula.

HURF was hit especially hard during the Great Recession. First, revenues coming in declined significantly as consumers drove less and purchased fewer new cars. Revenues are just now returning to their pre-recession levels. Second, the Arizona General Contractors Association calculated that lawmakers re-allocated approximately $1.9 billion in HURF funds for other governmental activities during the recession.

Fiscal Year 2017 is the time to restore much-needed HURF funds for important transportation maintenance and construction projects. The Arizona Department of Transportation (ADOT) has determined and the Auditor General has reaffirmed that a $63 billion funding gap exists between needs and revenues on the state transportation system.

As we traveled the state last fall during Accelerate Arizona’s Transportation Roadshow, we learned of pressing needs extending from our large urban centers to our smaller communities. Some of the needs include:

As Governor Ducey and legislative leaders prepare to release their FY 2017 budget proposals, we strongly encourage full funding for HURF so that these and other important infrastructure projects can get underway. A strong, modern and safe transportation system is integral to our state’s continued economic success.


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