States struggle with solutions to solve road revenue crunch

By Keith Goble, Land Line state legislative editor | 5/19/2016

States around the country continue to struggle with reaching resolutions to raise revenue for transportation work while one state is doing away with a small portion of regular income.

Reasons cited for the stateside tax push include changing driving habits, more fuel-efficient vehicles, increasing construction costs, and fewer dollars available from the federal government.

Minnesota lawmakers are trying to beat the clock on a $600 million transportation funding plan as the regular session winds down.

With changes being made seemingly on a daily basis elected officials are searching for a plan that all sides can live with.

Gov. Mark Dayton has offered two compromise proposals. The first proposal would raise fuel taxes by a nickel and increase vehicle license fees to total $600 million each year.

The Democratic governor’s second proposal includes $400 million raised via higher tab fees and diverting $200 million from other programs.

However, the House Republican majority says a fuel tax increase is a no-go. Instead, they are on board with higher tab fees to collect $100 million and transferring $300 million from other state programs. Another $200 million would come from bonding.

Senate Democrats, the chamber’s majority party, want to raise tab fees $180 million and increase the state fuel tax rate by 12 cents. The plan would increase state revenues by about $1 billion.

Any resolution must come quick in order to beat the Legislature’s mandated May 23 adjournment.

Gov. Dayton said lawmakers must act now because their inability to come up with a solution will not sit well with voters this November.

“It’s either success or failure – there’s no in-between,” the governor said in prepared remarks. “I wouldn’t want to go before voters next fall and say, ‘We failed on the most important measure this session that faced us.’”

As states such as Minnesota pursue efforts to raise additional road revenue, Iowa Gov. Terry Branstad signed into law one bill that lops off a penny from the state’s fuel tax rates.

The move comes one year after Iowa raised the tax rates on gas and diesel by 10 cents to generate $230 million annually for transportation.

Previously HF2464, the new law repeals a program in place since 1989 that collects 1 cent per gallon on fuel purchases to fund the repair of underground fuel storage tanks.

The tax generated about $21 million annually for tank cleanup.

Despite the steady stream of revenue for the state’s road use tax fund, the governor said the program served its purpose and is no longer needed.

“This is a historic day. We’re getting rid of a tax,” Branstad said at a bill signing ceremony.

Branstad has the distinction of being the same governor to sign bills enacting and ending a program in place for nearly three decades. The Republican governor’s first stint at the statehouse stretched from 1983 to 1999.

Effective Dec. 31, the diesel tax rate will be set at 31.5 cents and the gas rate will become 30 cents.

Elsewhere, efforts to raise road revenue in Missouri and Oklahoma have failed to gain statehouse passage.

The clock ran out on pursuit of a fuel tax rate increase in Missouri. House lawmakers failed to vote on a Senate-approved bill before the regular session wrapped up to raise the state’s 17.3 cent-per-gallon fuel tax.

The Republican-led measure to increase the gas and diesel tax by 5.9 cents met the same fate as other efforts at the statehouse in recent years that sought more road revenue. The list has included a sales tax increase and applying tolls to Interstate 70.

Missouri officials continue to lose ground on what is described by the state Department of Transportation as an approaching funding cliff.

The state’s construction budget for roads and bridges has fallen from about $1.3 billion annually in 2010 to a projected $325 million by next year – the lowest since 1992.

Voters in the Show-Me State would have made the final decision this fall on whether to approve the fuel tax increase that was estimated to raise $236 million per year.

Democratic Gov. Jay Nixon said earlier this year he would support a fuel tax increase of about 2 cents per gallon.

In Oklahoma, a House panel voted to kill a bill to increase the state’s fuel tax rates by 3 cents to get road and bridge work done.

The Sooner State now collects 14 cents per gallon on diesel purchases and 17 cents on gas purchases.

The bill specified that the tax rates would revert to their current levels if the price for fuel topped $3 per gallon.

Every one-cent increase was projected to raise $28 million in new revenue.

Instead of backing a fuel rate increase, bill opponents said they would take a serious look at how the Oklahoma DOT is funded.

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