Budget Challenges Ahead: Rising Costs and Lower Tax Revenues
In mid-May, the House Transportation and Infrastructure Committee approved the BUILD America 250 Act, a $580 billion, fiveyear surface transportation reauthorization bill. It now awaits a full vote in the U.S. House of Representatives, replacing the current Infrastructure Investment and Jobs Act, which is set to expire Sept. 30.
Nationwide, gas and grocery prices have been hitting new highs in recent months, and there is no indication that prices are going to reverse their trajectory anytime soon. Higher costs are affecting all parts of the economy, from the prices of new cars and homes to construction equipment and operating costs. As of early 2026, consumer prices in the U.S. have risen by approximately 8.37 percent, cumulatively since 2023.
Against these economic trends, the Arkansas Department of Transportation (ARDOT) is looking closely at the ramifications of flat revenue streams, while the need to continue year-to-year work on key Arkansas infrastructure projects doesn’t slow down.
Like all states, our roads and bridges built in the 1940s need replacement, and road and bridge projects cost more than they did five years or even one year ago.
While federal and state budget issues are evaluated for the coming years, Americans shift to more fuel efficient vehicles, which drops gas tax revenue coming into the ARDOT budget. All of these issues together mean some complex infrastructure funding issues are coming in the next few years.
The annual inflation rate was 3.3 percent for the 12 months before March 2026, and it jumped to 3.8 percent in April, indicating continued increases in the cost of living, according to the Bureau of Labor Statistics’ Consumer Price Index report. In April, inflation was almost a full point higher than it was in 2025.
Since the start of the Iran war and as of the end of May, gas prices have risen more than 45 percent, the largest monthly increase since 1967, and the energy index jumped by 10.9 percent, the biggest since 2005. This is costing Arkansans more.
Jared Wiley, ARDOT Director, said increased costs are eating into the budget as well. Road construction costs have experienced significant inflation since the pandemic, with key indicators showing cumulative increases of roughly 65 percent to 70 percent between late 2020 and early 2026. Wiley says, “We have seen costs rise dramatically over the last five years. It’s affected the cost of jobs in Northwest Arkansas and across the state. Its impact has caused price increases, or projects have been delayed.”
Construction material prices for steel, asphalt, fuel, labor, and more have skyrocketed, possibly by more than 40 percent since 2020, Wiley said. Construction costs continued to surge at about a 12.6 percent annual rate through early 2026, in part driven by higher energy and labor costs.
Wiley added, “Another factor driving up highway construction costs is rising right-of-way (ROW) acquisitions.” ROW purchases continue to cost ARDOT more due to higher land values, litigation costs, increased urban development, and expensive (and often lengthy) utility relocations. Wiley said, “ROW costs are rising faster than construction expenses.”
“Four years ago, we were feeling positive and good about our funding, but things have really turned a corner. Those (ROW) issues, coupled with construction costs, mean we have lost buying power,” Wiley said. According to the Bureau of Transportation Statistics, “Construction costs affect the amount that governments invest in new roads, highways, and bridges,” and Arkansas Highway Commission Vice Chairman Keith Gibson agreed.
Gibson said, “It’s alarming that our revenues are flat.” Cars are more efficient, fuel prices are up, so people are curbing their driving habits, and higher prices don’t mean higher tax collections, so he said, “We’re getting about half the amount of revenues that we were just a few years ago.”
Shrinking revenues and higher construction costs ultimately mean fewer roads are built, and we’re able to adequately maintain fewer miles of state roads.
Possible Construction Delays Ahead
On November 15, 2021, the President Biden administration’s Infrastructure Investment and Jobs Act (IIJA), also known as the “Bipartisan Infrastructure Law,” was enacted and authorized funding for highway and transit programs for five years, fiscal years 2022-2026.
It is set to expire on September 30, marking the end of a five-year authorization for federal surface transportation, highway, and public transit programs. The 2021 package meant close to $3.8 billion in funding for Arkansas infrastructure.
Senator John Boozman said a few days ago, “I know the EPW and Commerce Committees in the Senate are working hard on crafting a new highway bill, and I will continue supporting those efforts as well as helping build momentum to pass it. These policies provide ARDOT and state transportation agencies around the nation the certainty they need to strengthen the core infrastructure that underpins our communities. This priority is also a bipartisan one, with Republicans and Democrats having a track record of coming together to get it done, and I expect that will be the case again.”
Wiley said funding for the Statewide Transportation Improvement Program (STIP) comes from the Federal Highway Administration (FHWA) and accounts for 80% of the new construction projects in Arkansas. A state match of 20% covers the rest of the work on a given project.
The 2025-28 STIP has about 230 projects under construction, which are valued at about $2.4 billion. STIP is a continuous endeavor, with about 500 projects worth about $5.5 billion, planned to carry the state through 2030, Wiley said.
Moving Forward
Once again, Wiley said ARDOT could face inadequate funding issues amid rising gas prices, declining consumption, and the expiration of the five-year federal funding. The U.S. Congress must act before the end of the 2026 fiscal year to ensure no lapse in funding for national infrastructure projects. Lawmakers could extend the current law or draft an entirely new reauthorization bill. Wiley said, “We’re going to have to be creative, and we’re going to need help from our partners, the industry, and our partners at the (U.S.) Capitol, as we look for innovative ways to tackle these challenges.”
Gibson said, “We have a great legislative delegation, and they have done a great job, but we depend on them for our federal funding. They understand the need for maintaining the country’s transportation system.” He also recently met and talked with Gov. Sarah Sanders, and said he believes, “She is a champion of our highway system and will make a big difference in our funding going forward.”
Wiley said that ARDOT is already talking to elected officials about the challenges the department is facing and the impact of inadequate funding, and he added, “I think it’s important that we educate the general public.” They need to see how revenues remain flat while costs skyrocket. For example, Wiley said, “Five years ago, it cost $250,000 to overlay two lanes of highway (for one mile). Today, it’s $400,000.”
Gibson added, “It’s our responsibility to educate and inform legislators at the state and federal levels. We need to communicate effectively.”
2025 Was a Very Productive Year
It’s been almost 18 months since Wiley transitioned from his position as Chief Engineer for Preconstruction at ARDOT to the role of Director. In part because of the leadership change, Wiley said last year was about introducing fresh ideas and building renewed momentum.
Before his appointment, the passage of the Transportation Sales Tax Continuation Amendment, commonly known as Issue 1 tax of 2020, made permanent the 10-year, 0.5% sales tax authorized by Issue 1 of 2012, which would have expired in 2023.
The 2012 tax funded the 31 CAP (Connecting Arkansas Program), raising about $2 billion. Collection of the second and permanent Issue 1 tax started on July 1, 2023.
The Department of Finance and Administration estimated that the 0.5% sales tax authorized by the amendment would generate $293.7 million in revenue based on 12 months of collections.
That revenue is directed to state and local transportation, including highways, roads, and bridges, and was to be allocated as follows: 70%, about $205 million, to state highways; 15%, about $44 million each, to the state’s counties and cities.
The 2020 tax, along with Arkansas Legislative Act 416 of 2019 and other state and federal funding sources, brought ARDOT’s annual funding to about $300 million, with the cities and counties splitting about $133 million.
The money is having an impact on Arkansas’s roadways, Wiley said.
Gibson said, “Roads are more than moving people from one place to another.” He wants the state to continue its progress toward building a reliable transportation system that supports economic development and provides residents with access to education, specialized healthcare when needed, and better job opportunities. He added, “Roads provide that.”
For example, he would like to see the completion of Interstate 49; at this point, about a 150-mile stretch from around Fort Smith to Texarkana is unfinished. He said, “Its completion is critical to the development of that portion of the state. It would connect Southwest Arkansas with the rest of the state.” But in fact, the planned I-49 would run from Canada to New Orleans, and Gibson said the entire country would benefit from it.
I-49 is only one part of the puzzle, and there are several other proposed projects, such as converting U.S. Highway 412 into an interstate running across northern Arkansas from Oklahoma to Missouri and Tennessee, and constructing I-69 in southern Arkansas, running from Arkansas City to El Dorado. Gibson said, “We have made great progress over the past five years, and we expect to make even more over the next five. I believe people want us to get it done, but we can do very little without the funding to do it.”
“2025 was a milestone year for our interstate system. Construction continued on the I-57 corridor, and Ark. Hwy. 440 was officially renamed I-440, adding to Arkansas’s growing interstate network. In western Arkansas, ARDOT broke ground on an I-49 extension.” — Jared Wiley, ARDOT Director
Promises Made, Promises Kept
2025 was a year of change, marked by the retirement of ARDOT Director Lorie Tudor and Arkansas Highway Commission (AHC) Chairman Alec Farmer’s term ending, but Wiley said, “We have a lot of good work coming in 2026.”
Wiley said, “2025 was a milestone year for our interstate system. Construction continued on the I-57 corridor, and Ark. Hwy. 440 was officially renamed I-440, adding to Arkansas’s growing interstate network. In western Arkansas, ARDOT broke ground on an I-49 extension.
The new I-55 bridge, a partnership between Arkansas and Tennessee planned near Memphis, received its official name: King’s Crossing. The name is a nod to Elvis Presley, “King of Rock ‘n’ Roll”, B.B. King, “King of the Blues”, and civil rights leader Dr. Martin Luther King, Jr.
Further down the Mississippi River, ARDOT is partnering with the Mississippi DOT on a rehabilitation project for the Highway 49 Bridge in Eastern Arkansas. Wiley said at this point, “We’re working through some complex maintenance of traffic issues.”
In 2025, ARDOT held 29 public meetings, hosted seven project completion celebrations, and contracted 191 projects, worth more than $580 million.
While ARDOT crews were hard at work in the fields, Wiley said, “Our leadership was hard at work at the Arkansas State Capitol. The regular session of the 95th General Assembly brought several major wins for safety.”
They doubled traffic stop fines in all work zones, including mobile work zones; installed green lights on ARDOT work vehicles for increased visibility; and added work zone safety information to the state’s driver’s license requirement test, needed to legally operate a vehicle.
Work Underway
ARDOT’s 2026 Construction Program includes about $375 million for widening and new work; $300 million for Pavement Preservation; as much as $150 million for bridge improvements; $100 million for miscellaneous projects; and $10 million for safety improvements.
The department has several large projects on the books for 2026, including phase three of Arkansas Highway 612, known as the Springdale Bypass, in Benton County. It will construct three miles of roadway on Highway 612 from Interstate-49 to Arkansas Highway 265 at an estimated cost of between $200 to $250 million. It’s scheduled for late 2026. Wiley said, “We built phase one, and the second is getting close to completion. We should wrap it up in about a year or so.”
A second project is designed to improve I-57 at the Arkansas Highway 5 interchange in Cabot and is estimated to cost between $50 and $75 million.
A third project is slated to construct six structures and a roadbed for I-49, including ramp and frontage road improvements, near the intersection of I-40 and Clear Creek Road, at an estimated cost of $100 to $150 million. The Crawford County project is also scheduled for late 2026.
Any road construction work done in Arkansas creates jobs and economic development in communities. The obvious goal is always to make driving safer for everyone and to make travel more convenient. But federal and state road funding is also critical to the state’s overall economy. Companies that design, build, repair, and finance infrastructure work in Arkansas will be paying close attention to the coming budget discussions. The need has never been greater for Good Roads members to cohesively work together to tell this critical story of economic and transportation growth.
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