Seven state legislatures used this year’s session to address infrastructure investment. These states used a variety of available revenue sources to raise money for their aging roads and bridges. No matter what sort of package these states put together, the common thread was that they all included an adjustment of the gas tax.
ASCE supports an all options on the table approach to ensuring transportation infrastructure receives adequate funding. States that followed suit and pushed through funding measure that included gas tax increases include:
- Georgia – Governor Nathan Deal signed a $1 billion transportation funding package approved by the General Assembly on March 31. The bill converts the current state sales tax on gas to an excise tax set at 26-cents per gallon for passenger vehicles and 29-cents per gallon for commercial vehicles among other fee increases. Despite the size of the package, it is estimated that much of the newly generated revenue will be directed toward the maintenance and improvement of existing roads.
- Idaho – Idaho extended its legislative session for the purposes of addressing its funding shortfall. After pushing through competing proposals, the two chambers came together in a last-minute conference committee to achieve a 7-cent increase effective July 1, 2015 and a combination of increase user fees and access to available funds from future budget surpluses. While a great stride for Idaho, unfortunately, this bill will only generate an estimated $94 million of the $262 million in additional funding the state needs. (This bill is currently awaiting Governor Butch Otter’s signature.)
- Iowa – The first and fastest to act on an increase to their gas tax. While the vote was many years in the making, both chambers consented to raising the gas tax by 10-cents per gallon within a matter of hours. Governor Terry Branstad signed it into law the next day and four days later more money was being raised for transportation projects. The revenue generated by this increase will be used to fund the maintenance of Iowa’s structurally deficient bridges and provide an additional revenue stream for transportation projects at the local level.
- South Dakota – Governor Dennis Daugaard signed into law a 6-cent per gallon gas tax increase effective on April 1. It is estimated the increase in the gas tax and other motor vehicle fees will generate $85 million a year for state and local transportation projects. The measure also creates a “local bridge improvement grant fund” through which some of the newly generated revenue will be distributed.
- Utah – Utah was the second state to approve a gas tax increase in 2015. The increase goes into effect January 1, 2016. It will also continue to increase in future years using a system similar to the state’s sales tax. The bill also imposes a 12% tax on the wholesale price of gas when the price of gas reaches $2.45 a gallon and the overall gas tax rate been capped at 40-cents. Utah has made a number of positive investments in its transportation systems in recent years and this increase will ensure the state can plan accordingly for wear-and-tear and meet the needs of the growing population.
Next up for these states is creating their project lists and allocating the newly raised revenue toward maintenance and construction. Since nearly 20 years have lapsed since the last gas tax increase for many of these states the increase simply allows the Department of Transportation to plan, and purchase, using 2015 dollars. We’re hopeful the states will be able to reap immediate benefits that will make future increases to the gas tax easier to push through.
This gas tax question also posed interesting challenges this session for two states that took action to prevent projected reductions from this revenue stream included Kentucky and North Carolina. In each state the formula for calculating the gas tax would have resulted in dramatic drops come the July 1 adjustment date. Each state’s legislature took action to preserve current levels of funding in order to allow time to develop a longer term, more sustainable funding option. Here’s what they did:
- Kentucky –The legislature here voted to freeze its gas tax at 26-cents per gallon. While this is about a 1.5-cent per gallon decrease, it avoids a projected 5.1-cent per gallon decrease in upcoming months. The legislature also used this measure to modify its funding formula in the hopes of preventing future dips.
- North Carolina – In a single day, the legislature passed and the Governor signed a 1.5-cent decrease in its gas tax effective April 1 and a reduction to 34-cents per gallon by January 2016. While this will not raise funds immediately, like Kentucky’s freeze, this measure will prevent a dramatic drop in the rates later this year. A new formula for calculating the gas tax will take effect on January 1, 2017 and is expected to result in additional revenue, in the form of a projected 2% increase per year, for the state’s Highway Trust.
These states bring the total to 14 states since 2013 who have taken critical steps toward raising additional funds for transportation. With so much activity we ask ourselves “Who will be next?” Well, among the states we are watching closely are Michigan, Nebraska, New Jersey, and Washington. Of course, we are hopeful the legislatures who are still weighing how to vote on transportation funding bills will cast a vote to keep up with their neighbors.