CSG Midwest
Stuck between the reluctance to raise taxes and the omnipresent need to fix transportation systems, legislators and governors may well feel the frustration of drivers caught in traffic. In Wisconsin, for example, Gov. Scott Walker and Assembly and Senate Republicans have been at odds over how to close an almost $1 billion deficit in transportation spending. Walker’s initial $6.1 billion transportation budget, unveiled earlier this year, included a $40 million increase in general transportation aid to local governments and $500 million in borrowing.
In early May, Assembly Republicans proposed raising gasoline taxes to pay for roads while significantly cutting income taxes over the course of a decade, moving from the state’s progressive income tax to a 3.95 percent “flat tax.” Their plan includes new fees on hybrid ($30) and electric vehicles ($125) and the elimination of tax credits aimed at homeowners. It also would cut the existing 30.9-cent per-gallon fuel tax by 4.8 cents while applying the 5 percent state sales tax to fuel purchases.
The Legislative Fiscal Bureau estimated those changes would increase revenue by about $380 million over the next two years, most of which would be used to reduce the borrowing that Walker proposes (from $500 million to $200 million) and to eliminate a transfer of funding from the general fund to the transportation fund.
Gov. Walker rejected the plan’s new sales tax on gasoline, saying it amounts to a new gas tax, but has indicated that he’s open to the tolling of interstates (another proposal from Assembly leaders), if such a plan brings in revenue from out-of-state drivers and is linked to a reduction in the gas tax.
A budget all sides can accept remained elusive as of mid-June. Absent a budget in place before the state’s new fiscal year began on July 1, funding would continue at current levels until one is approved.
Since 2012, six Midwestern states — Indiana, Iowa, Michigan, Nebraska, North Dakota and South Dakota — have raised gas taxes to provide additional transportation funding. Collectively, half of all U.S. states have enacted transportation funding packages since 2012 to make up for the erosion of gas tax revenues by inflation, says Joung Lee, policy director at the American Association of State Highway and Transportation Officials.
CSG Midwest
Indiana has become the latest state in the Midwest to raise the gas tax and user-based fees to generate more revenue for its transportation infrastructure. The 10-cent increase on motor fuels takes effect on July 1; it will result in Hoosier motorists paying a total of 28 cents per gallon of gasoline. In subsequent years, through 2024, Indiana’s gas tax will be indexed to inflation, though annual increases will be limited to 1 cent per gallon.

Last December, I compiled my annual list of the states to watch on transportation funding. Last month we followed that up with a CSG eCademy webinar featuring Alison Premo Black of the American Road & Transportation Builders Association and reporters from three key states. With legislative sessions well underway in many places, it’s time to see where things stand in the debates about transportation funding going on around the country.

Issue: During the campaign, Donald Trump called for a $1 trillion package to invest in the nation’s infrastructure. But the devil likely will be in the details for both Republicans and Democrats when it comes to funding the plan and deciding what to fund. Beyond any one-time infrastructure investment in 2017 though, will Congress be able to hit the ground running so they can be ready when it comes time to reauthorize the FAST Act transportation authorization bill in 2020?

Issue: State transportation funding efforts could be back in the spotlight in 2017. The list of those that could tackle transportation revenues includes as many as 16 states. Some have been at this for several years and haven’t achieved success due to political challenges. Some have had a task force or special commission in place in 2016 to come up with funding ideas. Plenty of old ideas (gas taxes, registration fees, tolls) are likely to be considered. But mileage-based user fees and other innovations are likely to get a look as well.

After a year in 2015 when eight states raised gas taxes, 2016 saw less activity. New Jersey raised its gas tax by 23 cents and Rhode Island funded a multi-year bridge repair program with a new toll on large commercial trucks and a combination of borrowing and refinancing. But other than those states and a couple of others that approved bond measures for infrastructure projects and the like, most postponed or agreed to extend their transportation revenue discussions into 2017. That means a large number of states could see activity next year on that front. While some have been embroiled in the funding debate for months or years and will continue those conversations, others had a special task force in 2016 to explore revenue ideas and could look to move those ideas forward during the 2017 legislative sessions. Here’s a list of the 14 most likely candidates.

Tuesday November 8th appears likely to be a pivotal Election Day for the nation’s transportation and infrastructure. With control of The White House and Congress on the line, the future direction of the federal transportation program is also at stake. With control of governorships and state legislatures on the line, so too could be initiatives to seek additional state transportation investment. Meanwhile, communities like Atlanta, Detroit, Indianapolis, Los Angeles and Seattle will consider ballot measures that could enable major investments in public transit over the next few years. And voters in Illinois and New Jersey will decide whether to place constitutional protections on the use of transportation funds.

New Jersey’s Democrat-led legislature approved a 23-cent gas tax increase last week after lawmakers struck a $16 billion, eight-year deal with Republican Gov. Chris Christie that will also reduce the sales tax and eliminate the estate tax in the state. The deal will allow stalled transportation projects to resume after Christie halted all but the most essential ones in July as the state’s transportation trust fund ran out of money and expired. But the hard-fought, months-in-the-making agreement also demonstrated once again how different 2016 has been compared to last year when it came to state efforts to increase revenues for transportation.

While not likely to be a major issue in the fall campaign, the future of the nation’s infrastructure did receive some attention in the party platforms released last month in advance of the Republican and Democratic presidential nominating conventions. The platforms reveal very different philosophies that could guide the federal government’s approach to infrastructure in the years to come and have a huge impact for states seeking to meet their future infrastructure needs. But the statements of the presidential candidates themselves on infrastructure issues are also prompting some attention this week.

Despite concerns about the long-term solvency and sustainability of the federal highway trust fund, the Fixing America’s Surface Transportation or FAST Act passed by Congress in December 2015 did not include what many said was a much needed increase in the federal gas tax, which has remained unchanged since 1993. Congress instead offset a transfer of general funds to supplement gas tax revenues by tapping a Federal Reserve surplus fund among other sources. The action came at the end of a year in which eight states did raise their own gas taxes. With the fuel efficiency of the nation’s vehicle fleet improving and the greater adoption of electric vehicles on the horizon, some states are also looking to a new revenue mechanism that some believe could one day replace the gas tax—a mileage-based user fee. Concerns about how the fees would be administered and whether it could ever be done as efficiently as the gas tax are causing doubts it will be ready in time to help fund the next long-term iteration of the federal program when the FAST Act expires in 2020.

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