States Address Future Transportation Funding As New Fiscal Year Begins

July 1, 2015 marks a big day for the future of transportation funding in a number of states. Six states see their gas tax rates increase today, the result of not only 2015 legislative actions but also actions that took place in previous years as well as automatic increase mechanisms. Meanwhile, Oregon begins a closely watched program that could determine how transportation will be funded in the years ahead. And a number of state legislatures are in the process of completing work on major transportation funding packages as they prepare to adjourn for the year. It all sets the stage for a month in which Congress must come up with a plan to address federal transportation funding before a July 31st deadline.

Gas Taxes Going Up in Six States

According to Citizens for Tax Justice and the Institute on Taxation and Economic Policy, six states see their gas taxes rise today, which is the first day of the new fiscal year in all but four of the 50 states. The six are:

  • Idaho, which sees a gas tax increase of 7 cents per gallon. The state was one of six that enacted increase legislation during the first half of 2015.
  • Georgia’s tax for gas goes up 6.7 cents while the tax for diesel goes up 7.7 cents. Georgia was another state that enacted legislation this year.
  • Maryland’s 1.8 cent increase is the result of 2013 legislation.
  • Rhode Island’s 1 cent increase is the first automatic adjustment for inflation scheduled under 2014 legislation.
  • Nebraska’s gas tax goes up 0.5 cents, not as a result of the legislation lawmakers passed this spring, but as a result of the state’s variable rate gas tax structure.
  • Vermont’s 0.35 cent increase is another of these automatic changes.

But revenue increases aren’t the only things happening today. State laws linking gas tax rates to gas prices will mean the tax rate will fall by 6 cents in California (while, quirkily, the diesel tax goes up 2 cents) and by 4.2 cents in Connecticut. Kentucky and North Carolina both passed legislation earlier this year to avoid similar automatic cuts that were scheduled to take place in those states.

Meanwhile in Maryland, today marks the day toll rates fall on the Bay Bridge and other toll facilities, The Kent Island Bay Times noted. Just in time for 4th of July weekend on the Eastern Shore, travelers will save a couple of bucks on the trip as a result of recommendations made by Gov. Larry Hogan that were adopted by the Maryland Transportation Authority Board of Directors on May 7. Maryland Secretary of Transportation Pete Rahn explained the thinking behind the move and how it impacts state revenues during our Transportation Policy Academy in May:

“The governor had equated during his campaign two significant toll increases … to tax increases and had said that he was committed to reducing taxes in the state,” Rahn said. “In looking at tolling, we tested our revenues against certain financial commitments that we’ve made for trust agreements and bond covenants and management letters as far as what our cash balances would be and our overall coverages by policy rather than just by covenant. We tested all of those and we determined that we could lower tolls by $54 million a year or a quarter billion dollars over a five-year period. We could do that and still deliver on our capital program to maintain our systems in good condition and so we did it. Are there things that we’re not going to do as a result? I guess anytime you make a choice. What are you going to do with a dollar? In this case, there’s going to be some things that would have occurred but I don’t believe we will not be doing anything that is critical to the condition and safety of our system. It’s a policy choice that the governor has made and I support it because we still have a program in place that’s going to do what’s necessary to protect our facilities and the public and the long-term health of these toll facilities.”

Oregon Mileage Fee Program Begins

Today also marks the start of the latest step in Oregon’s more-than-a-decade-long quest to assess the viability of what some say could one day replace or supplement gas taxes at the state and possibly, eventually the federal level—mileage-based road usage fees.

Under a program called OReGO, the state is enlisting as many as 5,000 volunteers to pay a mileage-based rate and be reimbursed for the gas taxes they pay. The volunteers are able to select which one of three companies will supply the plug-in devices to count their mileage.

Many states are watching Oregon closely and, faced with declining gas tax revenues, making plans of their own to experiment with mileage-based fees. As I reported in May, Oregon Congressman Earl Blumenauer is among the champions of the program at the federal level.

“The gas tax is no longer a good proxy for road user benefit,” Blumenauer told attendees at a conference I attended in April.

But some say the OReGO program is off on the wrong foot even as it’s just getting underway. Willamette Week reported today that the Oregon Department of Transportation is having trouble luring drivers of hybrid and other fuel efficient cars into the program because they stand to pay more. Moreover, the program will create “perverse incentives” at the other end of the spectrum.

“OreGo would reward drivers of gas guzzlers who already pay plenty in fuel taxes now,” writes the alternative weekly’s Anthony Macuk. “OreGo’s flat rate of 1.5 cents a mile would actually cut such drivers’ costs and create an inducement to keep driving their carbon-spewing vehicles.”

But the man who has been the architect of Oregon’s mileage fee experimentation, the Oregon DOT’s Jim Whitty, told the newspaper there is one thing that might prompt drivers of more fuel efficient cars to join the program—guilt.

“Every Oregon driver has an interest—indeed an investment—to ensure that the roads are available and in good shape,” Whitty said. “Maintaining the road system reduces personal costs for each individual in addition to ensuring a pleasant driving experience.”

ODOT spokesperson Michelle Godfrey told Oregon Public Broadcasting that only 1,500 vehicle owners are being allowed to sign up in each of three mile-per-gallon categories (low, mid and high). Godfrey said about 2,600 drivers expressed their interest in the program on a preliminary list. More volunteers are expected to enroll over the next few months.

Further Reading: Eric Jaffe at The Atlantic City Lab offers “18 Reasons America Should Adopt a Per-Mile Driving Fee.”

More States Consider Transportation Funding Options

The end of the fiscal year and of several legislative sessions around the country is prompting another wave of activity on the transportation funding front. Here’s an update on several states:

  • Connecticut: Lawmakers this week approved $2.8 billion in bonding for Gov. Dannel Malloy’s transportation overhaul initiative, The Connecticut Mirror reported. They agreed to dedicate a portion of state sales tax receipts to the state’s Special Transportation Fund to help cover debt service on the new borrowing. But Malloy didn’t get the legal lockbox he wanted to ensure bondholders that dollars earmarked for transportation would be spent for that purpose. Connecticut, with about $21 billion in bonded debt, already ranks among the nation’s most indebted states per capita.
  • Delaware: With lawmakers set to recess for the rest of 2015, Republicans and Democrats agreed to a deal on infrastructure funding just before midnight Tuesday, Delaware Public Media reported. Republicans reportedly won concessions on which prevailing wage will apply for state projects and in return supported increases in certain DMV fees that will produce $23.9 million in revenues. The state also will borrow $24 million over the next six years to eventually raise half of what a plan proposed by Gov. Jack Markell would have through a 10-cent gas tax increase. 
  • Michigan: A Senate committee passed a $1.4 billion road funding plan this week that would raise the state gasoline tax by 15 cents-per-gallon and lower the income tax if the state’s general revenues rise above inflation in any given year, the Associated Press and Michigan Live reported. The gas tax would go up 5 cents in October, another 5 cents in January and another 5 in 2017. The gas tax rate would be adjusted annually to rise with inflation. Under the plan, $700 million in general funds also would be redirected annually toward road and bridge projects. A vote by the full Senate was expected as early as today.
  • Oregon: Gov. Kate Brown announced late last week that a $343.5 million transportation funding package drafted by a bipartisan, bicameral group of eight legislators is dead for this session, The Statesman Journal reported. The measure would have raised just over $200 million through gas tax and motor vehicle fee increases and authorized bonding for new projects as well as separate tax and fee increases for transit. Republicans insisted the package also repeal legislation passed earlier in the session to extend Oregon’s clean fuels program and replace it with other carbon-reduction measures. The Oregonian looked at how the deal fell apart.
  • Washington: Lawmakers early Wednesday approved a $16.1 billion transportation revenue bill that includes an 11.9-cent increase in the state gas tax over the next two years, the Associated Press reported. A 7-cent increase would take place on August 1 and a 4.9-cent increase on July 1 of next year. As of this morning, the House still needed to pass a bonding bill and another measure to designate the revenues to specific projects in order to complete the package. In order to reach agreement on the final funding package, Gov. Jay Inslee and Democrats had to swallow a “poison pill” provision that Republicans wanted, which would prevent the state from adopting low-carbon fuel standards, Seattle Transit Blog noted.