The North Carolina House has approved a plan to halt a decline in the state’s fuel tax rate to buy time for lawmakers to work out details of a long-term transportation funding solution.
The state’s per-gallon rate now is 37.5 cents. The fuel tax is composed of a flat rate and a wholesale component. It is adjusted twice annually based on wholesale prices, which have plunged in recent months.
State estimates show the tax rate is expected to drop below 30 cents this summer. As a result, the state is anticipated to lose $14 million in revenue through June for road and bridge work.
Without legislative action, Rep. Bill Brawley, R-Mecklenburg, said the state is facing the loss of hundreds of millions of dollars.
“This year we have a crisis. We have tied our transportation revenue to a volatile internationally traded commodity,” Brawley said during House floor discussion. “In the current market environment (the fuel tax) has crashed. The potential revenue has crashed with it.”
House lawmakers later voted 72-42 to approve an amended Senate bill that would set the state’s tax rate at 36 cents for the rest of the year. The change is expected to raise $142 million during the upcoming fiscal year.
The Senate version called for setting a 35-cent-per-gallon floor for the state’s fuel tax. Also removed from the bill, S20, was a provision to alter the tax formula to permit faster and higher increases once fuel prices rebound.
The current version of the bill would also remove the twice annual adjustment in the tax rate. The July 1 adjustment would be eliminated while the Jan. 1 change would remain.
Another change dropped from the House-approved bill was a provision to eliminate 500 full-time jobs at the state DOT. The cuts were sought to help counter the $33 million that would be lost during the Senate’s planned 2.5-cent fuel tax reduction.
Instead, House lawmakers favor a change that would avoid layoffs and instead eliminate unfilled positions at the agency.
In an effort to reduce the state’s dependence on fuel tax revenue for transportation work, Brawley said House and Senate lawmakers need to spend the coming months looking for more stable funding sources for future years.
“This bill proposes to stabilize revenue through the end of the year. That will allow us the time to work with the Senate and create a better answer for how we are going to fund transportation in the coming years,” he said.
Democrats opposed to the bill say their constituents should not be asked to pay more taxes. Others say without the fuel tax increase property tax rates would need to be raised to replace lost road money.
If lawmakers fail to come up with a long-term solution, the state’s fuel tax rate is expected to drop below 30 cents after the first of the year.
S20 has moved back to the Senate for consideration of changes.
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