Higher fuel tax considered in Indiana

| 3/30/2005

In an effort to come up with road dollars, some lawmakers in Indiana are considering a boost in the state’s fuel tax. As often is the case in state government, the governor has other ideas.

Gov. Mitch Daniels has advised against plans to raise Indiana’s fuel tax to pay for road repairs, saying it is not a good idea this year.

Some lawmakers have suggested that increasing the state’s fuel tax would be a better option than borrowing more money to finance needed highway repairs.

Adding pennies onto fuel prices that already are more than $2 a gallon would be politically unpopular, but it might make more financial sense than adding to the state debt, some members of the Senate Appropriations Committee have said.

Daniels, however, said that he opposes plans to hike the tax, in part because of prices now being paid at the pump.

The governor also told local media the state could not increase the tax enough to pay for all transportation needs. He encouraged lawmakers to come up with a better solution.

Highway officials expect the state to take in only enough transportation money this year to cover road repairs, leaving nothing for new construction, The Associated Press reported. The Indiana Department of Transportation estimates ongoing state revenue will fall more than $1 billion shy of long-term needs.

The gap was due in part by the end of a bonding program formerly used by the state.

A bill offered by Sen. Tom Weatherwax, R-Logansport, would fund roadwork in the state with grant-anticipated revenue vehicle bonds, or GARVEE bonds.

The funding program allows the state to borrow money against the federal transportation dollars that come each year to pay for construction. The assumption is that federal funding in future years would pay off the bonds. This allows the state to get money needed for the project up front.

Some lawmakers, however, are hesitant to increase Indiana’s debt.

The bill – HB1729 – was held up for a possible fuel tax amendment to be added later.

Indiana Department of Transportation Commissioner Thomas Sharp favors the bill. He told The AP the state’s highway-repair needs would require a 10-cent hike in the fuel tax every year. Each penny raises about $33 million a year.