Gas Tax Increases and Indexing Still Getting a Look in Some States But Face Long Political Odds

A gas tax increase in Minnesota appears dead for this session. A plan to index Louisiana’s gas tax to inflation failed to win votes this week. And transportation funding plans are moving forward in New Hampshire and Pennsylvania but face political challenges ahead. Here’s the latest roundup of what’s going on around the country as states seek solutions to meeting their transportation needs.

State Transportation Funding Updates

  • Louisiana: The House Ways & Means Committee this week rejected legislation (HB 675) that would have linked the price of Louisiana’s gas tax to the consumer price index, a cost of living measure, The (Baton Rouge) Advocate reported. Supporters are concerned about a $12 billion backlog of road and bridge needs in the state, which they were hoping to prevent from becoming even larger by enacting the change. But opponents said the change would negatively impact truck drivers and small businesses. The state’s 16-cent gas tax, which goes to “rank-and-file” transportation projects, has remained unchanged since 1984 and due to inflation now has a value of just 7.1 cents per gallon. Consumers also pay an additional four cents a gallon at the pump as a result of a 1989 voter-approved plan that financed 16 specific projects around the state. HB 675 would have raised about $120 million over five years … Meanwhile, the House Transportation Committee this week approved a bill that would allow voters to create local transportation districts for collecting an annual motor vehicle fee to help raise additional transportation revenues, The Times Picayune reported. House Bill 211 is scheduled for debate in the full House next week.
  • Minnesota: Two freshman state legislators write in an op-ed for The Star Tribune this week that “Minnesota needs a comprehensive, balanced transportation package this session. Anything short of this doesn’t deserve a vote this year—and it will not get ours.” Sen. Vicki Jensen and Rep. Jason Metsa contend that while a proposed Twin Cities-only sales tax dedicated to transit may help improve mobility in that region of the state, “it does not help Minnesota’s 80 other counties that are looking for needed infrastructure funding to build and maintain roads and bridges. We have important transportation needs in Greater Minnesota and we cannot afford to wait while our highways become more dangerous and costly to fix. That’s why more than 60 counties have passed resolutions asking the Legislature for new funding for a comprehensive transportation package.” But Jensen and Metsa are unlikely to get their wish this session after the Senate Taxes Committee voted Wednesday to reject a plan to increase the state gas tax by 7.5 cents-a-gallon in order to raise about $216 million annually in additional revenues, The Star Tribune reported. Both the Democrat-controlled House and Senate would now appear to be on the same page with transportation packages that don’t include tax hikes. Governor Mark Dayton has said he opposes any gas tax increase right now. The governor has expressed support for the sales tax hike for metro transit, but passing it could be difficult without increasing revenues to satisfy legislators outside the Twin Cities region.
  • New Hampshire: A House-passed phased-in 12 cent-a-gallon gas tax increase received a hearing in the Senate Ways and Means Committee this week, The New Hampshire Union Leader reported. The state’s 18 cent-a-gallon gas tax has not been raised since 1991 and the legislation’s chief sponsor, Rep. David Campbell, told the committee roads and bridges are deteriorating and completion of an Interstate 93 project from Salem to Manchester can’t be finished without additional revenues. The tax increase would raise $816 million over 10 years, state DOT officials say, with $183 million going to municipalities through block grant aid and state bridge and highway aid programs. But the legislation faces an uphill battle in the Senate and truckers, foresters and independent grocers are all lined up against the bill. Some Senators would prefer to fund road repairs through revenues from a new casino, which is now under consideration in the House.
  • Pennsylvania: The Senate Transportation Committee this week approved a plan that would increase transportation revenues by $2.5 billion more annually by eliminating the longstanding price caps on a tax on wholesale fuels (which could raise the per-gallon price by as much as 28 cents) and increasing license and registration fees, The Patriot News reported. The plan, sponsored by committee chairman Sen. John Rafferty, builds on a plan proposed by Gov. Tom Corbett in February that would have only raised an additional $1.8 billion. But Rafferty’s plan is expected to face a difficult road in the House, where Republicans have shown an unwillingness to support any tax or fee increases. Rafferty hopes to win support by familiarizing the public with projects in their community that would be funded under the plan and Transportation Secretary Barry Schoch said the state DOT would post on its website a list of projects along with three possible scenarios—the projects the governor’s plan would fund, the ones Rafferty’s plan would fund and what would happen if no plan were enacted. Rafferty hopes his plan will be considered by the full Senate in early June.
  • South Carolina: A plan to help meet the state’s road and bridge needs could involve tying the state gas tax to inflation in the Palmetto State, WBTW reported recently. It’s one idea begin considered by a special state Senate subcommittee. The panel is reportedly also looking at borrowing $1.3 billion for roads and bridges if the state can pay off school construction bonds in 2015 and free up some borrowing capacity. Under the plan, revenues from the sales tax on cars and trucks would be moved into the State Infrastructure Bank, which would provide more borrowing capacity. While Republicans are against raising the gas tax, subcommittee members say indexing the tax doesn’t constitute an increase since it is just ensuring the tax remains the same relative to other prices. “Had we done this 25 years ago, we wouldn’t be in the condition we’re in today,” said Sen. Joel Lourie, a subcommittee member.

Other Items of Note

  • Mileage-Based User Fees: Two Indiana University educators write in a recent column for McClatchy newspapers about the potential advantages a mileage-based fee would have over the current gas tax. “First, the more drivers use roads, the more money is available to maintain them,” they write. “Second, the tax may persuade us to reduce needless trips and combine errands, car-pool or use public transportation. Third, it’s simply fairer than the current system. Drive more, pay more, and it doesn’t matter whether you’re behind the wheel of the latest hybrid or the oldest gas-guzzling jalopy. Both chew up the roads at the same rate but their drivers don’t pay the same amount of fuel tax. Finally, a GPS-based mileage user fee allows policy-makers to address multiple issues with one policy, as a GPS is able to track miles driven in real time. For example, a surcharge could be implemented for heavier vehicles, driving during peak hours in congested areas, and driving on particular bridges or expressways—similar to a toll.
  • Colorado: Legislation signed by Gov. John Hickenlooper last month gives cities and counties in the state new freedom to spend tax dollars on transportation projects other than roads and bridges, The Denver Post reported. For the first time, communities will be able to use their share of the $250 million the state collects from fuel sales taxes and license plate fees on things like bike/ped facilities, bus purchases, rail-station construction and other transit-friendly projects.
  • Missouri: Missouri Department of Transportation CFO Roberta Broeker said this week that as her department’s budget continues to shrink, it will have to limit the scope of its work to rehabilitation and maintenance, The Kansas City Business Journal reported. Missouri hasn’t raised its 17 cents-a-gallon gas tax in more than 20 years.   
  • North Carolina: The House this week granted tentative approval to Gov. Pat McCrory’s plan to direct more money to high-impact transportation projects, the Associated Press reports. The plan would end a system of dividing funding equally among the state’s 14 transportation divisions and would instead place the money in competitive pools at the state, regional and local levels. While supporters say the plan removes political concerns from transportation decision making and directs money more effectively, opponents worry it would overlook rural areas and emphasize toll roads.
  • The Associated Press and Nextgov both had articles this week noting that gas prices would go up in Maryland and Virginia if the U.S. House of Representatives fails to follow the lead of the U.S. Senate in passing a bill empowering states to collect sales taxes from Internet purchases.