States to Watch in 2016: Transportation Funding

Eight states—Georgia, Idaho, Iowa, Michigan, Nebraska, South Dakota, Utah and Washington—raised their gas taxes in 2015. Two other states—Kentucky and North Carolina—made adjustments to their gas tax mechanisms to make revenues more reliable. The state of Delaware meanwhile enacted legislation to raise several vehicle and license fees in order to fund road repair and maintenance. And states such as Maine and Texas approved ballot measures that will result in more money going to transportation. All that activity surpassed 2013 when six states produced major transportation revenue packages. But despite all that activity and despite the fact that 2015 could see Congress approve a new long-term federal transportation bill, 2016 also could see a large number of states join the club, particularly if many of those states that have come close in recent years or have had processes in place to examine revenue options end up moving forward. Here’s a roundup of the states to watch in transportation funding next year and some additional resources where you can read more.

  • Alabama: Gov. Robert Bentley said this month there’s a good chance the legislature would support a gas tax increase during their 2016 session. A House committee in August approved a 5 cent increase, which would have raised an estimated $70 million in its first year, but the measure stalled as lawmakers focused on patching a $200 million budget deficit.
  • Arizona: A study from the office of the state Auditor General earlier this year reported that Arizona faces a $62.7 billion gap in highway funding over the next 25 years. The study recommended a legislative task force to find ways to bridge the gap and proposed options including higher gasoline taxes. Gov. Doug Ducey is said to oppose a gas tax increase. Senate Transportation Committee Chairman Bob Worsley meanwhile has proposed replacing the gas tax with a sales tax. Arizona’s gas tax has not increased since 1991.
  • Arkansas: Back in May, Gov. Asa Hutchinson created a 20-person panel of state, local and business leaders to devise options on how to fund road projects before the end of the year. Among the proposals listed in the Governor’s Working Group on Highway Funding’s preliminary recommendation: increasing motor fuel taxes, transferring revenues from the sales and use tax on new and used vehicles from general revenue to the highway fund, and increasing registration fees for alternative fuel vehicles; a “revenue neutral” package that would redirect diesel and sales tax revenues back to the highway fund; a three-pronged approach that would index existing gas and diesel taxes to inflation, increase the taxes over three years and move toward a reportable mileage fee starting in 2017; a proposal that would eliminate the sales tax exemption for motor fuel and diesel; and a proposal that would increase the diesel tax by 5 cents per gallon.
  • California: Gov. Jerry Brown estimated last year that deferred maintenance needs on the state’s highways total $8 billion annually. The state has just $2 billion available each year for that purpose. The governor called a special session in 2015 during which he and Democrats fought for an increase in fuel taxes and fees while Republican lawmakers suggested redirecting existing transportation money the state currently diverts for other uses and reducing redundancy at the state transportation department, Caltrans.
  • Colorado: Some Republicans are said to be pushing a gas tax increase but Gov. John Hickenlooper, a Democrat, has been noncommittal. Next year is going to see some of the fruits of a big 2004 Colorado tax increase finally come online, including five new transit lines. But many believe it may be time to go back to the voters and say more money is needed for transportation to prepare for the significant growth the state is expected to see in the years ahead.
  • Connecticut: Gov. Dannel Malloy has proposed a 30-year, $100 billion plan to overhaul the state’s aging transportation network. The legislature kicked that off by approving $2.8 billion in bonding in 2015. A half percent of the sales tax is also being tapped to fund the plan. Meanwhile, a task force created by the governor is expected to issue recommendations next month on other potential funding options. Malloy also has said he’ll continue to fight for a constitutional lockbox amendment to prevent lawmakers from redirecting transportation revenues to fill other budget holes.
  • Delaware: The legislature this year approved a measure to increase DMV fees and generate an additional $23.9 million annually for the state’s Transportation Trust Fund. That’s expected to be matched by $24 million in borrowing over the next six years and comes on the heels of a 2014 toll hike that generated $10 million for transportation funding. But the Delaware Department of Transportation has reported a $780 million deficit for the next six years and Gov. Jack Markell has urged lawmakers to consider new sources of revenue.   
  • Indiana: A report last month from the transportation policy advisory group Cambridge Systematics found that the state’s fuel tax revenues will decline sharply in the decade ahead and make it impossible for the state to adequately maintain its 30,000 miles of roads and 6,000 bridges. Governor Mike Pence has introduced a plan to borrow $240 million to pay for $1 billion in road maintenance over 4 years. But Rep. Ed Soliday, who chairs the House Roads and Transportation Committee, has questioned the idea of increasing state debt for maintenance and suggested raising the state’s cigarette tax by $1 per pack could bring in $300 million in new revenue. Soliday says lawmakers will address immediate road and bridge preservation needs next year but a long-term solution may have to wait for the next two-year budget cycle in 2017.
  • Louisiana: State lawmakers this year rejected a proposed 1 percent state sales tax to be directed to road and bridge projects. In August, an organization of current and former transportation officials called for a 10-cent increase in the per-gallon motor fuel excise fee. The state’s legislative auditor issued a report this year that said revenues coming into the Transportation Trust Fund (TTF) may not be sufficient to address infrastructure needs without increased or additional revenue sources or allocation of funds. Transportation became an issue in the governor’s race this year with candidates suggesting devoting more of the TTF to construction costs without saying how to pay for activities currently covered by the fund.  
  • Minnesota: There are two competing plans that lawmakers will consider next year: a $10.6 billion plan from Gov. Mark Dayton that relies on a mix of tax and license tab fee increases and borrowing and another from House Republicans that would tap a portion of the state’s projected budget surplus and dedicate tax revenues from the sale of motor vehicle parts and equipment to transportation. Minnesota is a state that has been talking about addressing transportation funding for the last several years.
  • Mississippi: Another push to increase state transportation funding is expected in the 2016 legislative session but Gov. Phil Bryant, who just won reelection, already rejected tax increases a couple of years ago and Republicans picked up seats in the legislature. Bryant said during the campaign he didn’t think the state’s infrastructure was in as bad a shape as some have said. The governor this year approved the issuance of $200 million in bonds for transportation infrastructure, including bridges.
  • Missouri: The state is gearing up to try again in 2016 to find a way to fund maintenance of highways and bridges after voters rejected a statewide sales tax last year and a gas tax increase proposal didn’t get off the ground this year. Some groups have called for raising the state’s 17 cents a pack cigarette tax to fund transportation projects.
  • New Jersey: The state’s Transportation Trust Fund is due to run out of money at the end June. Democrats in the state Assembly picked up seats in this month’s election, which may embolden them to move forward with a gas tax increase. New Jersey’s 14.5 cents-a-gallon gas tax is the second lowest in the country after Alaska and was last raised in 1988.
  • Rhode Island: Gov. Gina Raimondo has proposed a plan to start tolling commercial trucks in the state to pay for bridge repairs. The plan would use borrowed money to speed up repair and reconstruction and pay the money back with truck toll revenues. A group of Republican lawmakers has proposed an $875 million plan for bridge construction that would not include tolling or tax increases but would draw upon a variety of existing revenue sources.
  • South Carolina: Some legislators and mayors are supporting a gas tax increase. Tolling has also been discussed. But budget forecasters said this month that the state will have an additional $1.2 billion for the next budget year thanks to the state’s growing economy and unallocated or unspent money from this and previous budget years.
  • Tennessee: Gov. Bill Haslam and Transportation Commissioner John Schroer have been laying the groundwork for a potential gas tax increase next year by making a couple of laps around the state to hear about the Tennessee’s infrastructure needs and make the case for additional funding. There is still a lot of apprehension from lawmakers, however. Tennessee, a non-debt state, has been one of the states hit hardest by the federal uncertainty of recent years, which has prompted the postponement of millions of dollars in transportation projects. Tennessee has a backlog of transportation projects totaling more than $6 billion.
  • West Virginia: A Blue Ribbon Commission appointed by Gov. Earl Ray Tomblin recommended increasing taxes, tolls and fees to generate more than $419 million annually for roads. Republican leaders have expressed concern about raising taxes and suggested the focus needs to be on cutting wasteful spending.
  • Wisconsin: The state borrowed $350 million this year for transportation but is still in search of a long-term funding plan. Higher gas taxes, increased registration fees for electric vehicles and toll roads all have been mentioned as potential options.

Other States

  • New Mexico: There was a gas tax increase proposed in that state this year that failed. It could come up again, but New Mexico has a very short legislative session next year so it’s unlikely.
  • Oregon: The short length of the 2016 legislative session is also being given as a reason that a transportation revenue package will likely be put off to 2017 in Oregon at the behest of Governor Kate Brown, despite the fact that they were a “close-but-no-cigar” state this year.

Further Reading