Gas Tax Increases take Teamwork—and Footwork

In an ironic twist, state transportation leaders say if you want to help shore up your state’s transportation funding, you’re going to have to hit the road.

“You’ve got to take it on the road,” said state Sen. Mike Vehle, chair of South Dakota’s Senate Transportation Committee and co-chair of CSG’s Transportation Public Policy Committee. He was one of the featured speakers on a recent CSG eCademy, “Status of Federal Transportation Programs, State Impacts & Activities.”

Vehle was talking about legislative efforts in his state to get Senate Bill 1 passed this year, which secured an additional $88 million in revenue for state and local roads, with an option for local governments to raise an additional $85 million in wheel and property taxes. He said in preparation for the bill, a summer transportation study group held meetings across the state last summer to explain what condition the roads in South Dakota were in and how revenues were decreasing from both the federal and state gas taxes.

“We had about 120 people that testified and probably 120 at each meeting,” he said. “Out of that, we had about two who said we didn’t need to do anything.”

Vehle said he worked on gaining the governor’s support and creating a broad-based alliance—ranging from AAA and agriculture groups to chambers of commerce and county commissioners—who threw their support behind improving roads.

Vehle said South Dakota’s roads are in good shape right now due to the infusion of cash the state received from the American Recovery and Reinvestment Act. Almost 90 percent of the state’s roads are rated as in either good or excellent shape.

“People always say, ‘What’s the problem, Vehle?’” he said. “I say, ‘Look where we’ll be in 10 years.’ At the current funding we have now from the feds and the state, we are at 25 percent poor and 27 percent fair. That means that over half our roads (will be) at poor or fair condition. That was kind of a startler for most people.”

Decreasing funding for roads is nothing new for states, said Joung Lee, policy director for the American Association of State Highway and Transportation Officials.

“The motor fuel tax, which powers the Highway Trust Fund to the tune of about 90 percent of the revenues generated has suffered a significant loss of purchasing power over the years,” Lee said. “When you look at something like the gas tax, which hasn’t been raised in 22 years at this point and you compare it just to the cost of life in general, … it lags substantially behind.”

Lee said the Highway Trust Fund spends about $13 billion to $15 billion more each year than it has been taking in. While that has been covered by Congressional transfers from the general fund, a reluctance by some federal legislators to keep making those transfers and a lack of agreement on a long-term reauthorization of the federal transportation program is throwing states into doubt. The current short-term extension of the federal program, called MAP-21, expires May 31.

“There have been a number of these (new funding) proposals that are all on the table,” Lee said. “There hasn’t been much movement really on any of them, especially in the context of a long-term bill. So where Congress is sitting right now is facing few options. It all really pertains to just how long of a short-term extension will they consider.”

In the face of that uncertainty, Tennessee Department of Transportation Commissioner and Vice Chair of CSG’s Transportation Public Policy Committee John Schroer said his state has chosen to remain cautious. Tennessee is one of four pay-as-you-go states, he said, which means they carry no transportation debt.

“What we realized is that we needed to be in a very strong cash position in order to withstand any shortfall that we would get in funding from the federal government,” he said. “What we realized very quickly is that the best way for us to raise cash is not let as many projects out.

“We’ve pushed back 33 projects to a tune of about $400 million. We plan on, if something is passed on May 31 and there’s funding attributed to that, then we would let those projects go between July 1 and Sept. 30. If not, we’ll then be in a position to pay for the construction that’s currently underway.”

Two years ago in Vermont, the state found itself in much the same position as South Dakota did this year. They were facing a $240 million gap—out of a total transportation budget of $550 million—just to keep current roads in good repair.

Vermont state Rep. Diane Lanpher, co-chair of CSG’s Transportation Public Policy Committee, said she hit the road in the summer of 2012.

“There’s a lot of hitting the road, meeting with constituents and meeting with groups,” she said, “really getting the community to understand why we’re proposing what we’re going to propose in the coming year.”

In 2013, the legislature approved a restructuring of the gas tax that established both a floor—to help the state should gas prices drop dramatically—and a ceiling, to help protect the consumer should gas prices increase dramatically.

“That was a really, really important piece in this,” Lanpher said. “We wanted to hit that right balance. These actions actually did help to stabilize our revenue to some degree.”

Vehle said he would end all of his public meetings the same way to try to drive home the point of how important a sound road system is to all residents.

“If you got it, a road brought it,” he said. “Not much is parachuted in.”