Indiana looks for local, rural road funding boost

By Keith Goble, Land Line state legislative editor | 2/4/2013

Multiple efforts underway at the Indiana statehouse would provide a boost for local and rural road funding.

State lawmakers are scouring for funding sources as Indiana’s “Major Moves” initiative comes to an end. State officials say that something must be done because money remaining from then-Gov. Mitch Daniels’ $3.85 billion lease of the Indiana Toll Road is mostly spent or due to be spent for specific projects.

As a result, Indiana must again rely on the state’s 18-cent-per-gallon fuel tax to address a $200 million budget shortfall for state roads.

Gov. Mike Pence’s recommended budget for the upcoming year addresses the problem. It focuses on providing additional funding for transportation. Specifically, the governor’s proposal targets about $350 million in excess reserves during the next two years and would put that money in Indiana’s roads and infrastructure.

The governor’s administration describes it as “a key component in growing Indiana’s transportation and logistics networks.”

However, leading lawmakers have voiced concern about the proposal to use one-time, surplus revenue to fund road repairs and construction. They say the quick fix poses long-term issues.

In response, lawmakers have introduced several dozen bills that address aspects of state and local transportation funding.

The House Ways and Means Committee recently took up for consideration multiple bills that would raise more than $400 million annually for roads.

HB1141 would route 50 percent of the nearly $550 million collected each year in sales tax on gas and diesel purchases to counties, cities and towns for local projects. Currently, money from the 7 percent sales tax is routed to the state’s General Fund.

The state’s fund receives 99.8 percent from all sales tax collections. Rail service funds split the rest. In 2012, the total sales tax revenue was about $6.63 billion.

The estimated increase in funding each year for local road work is $171.6 million

Two more bills would raise more money for roads by stopping diversions to the Indiana State Police and the Bureau of Motor Vehicles.

HB1363 would prohibit any fuel tax revenue from being used to pay operating expenses of license branches. The state estimates the change would result in another $42.5 million available to local governments.

Another bill would end fuel tax diversions to the state police.

One more bill would stop diversions to the Bureau of Motor Vehicles and state police to pay for operating expenses. HB1286 would increase the amount of fuel taxes paid to local governments and the Indiana DOT from $25 million to $175 million.

Other funding options:

  • SB441 would direct 0.67 percent of the state general sales tax revenue to be sent to counties, cities and towns for road and street use.
  • SB505 would index the state’s fuel tax for inflation. The change is estimated to raise an extra $39.9 million during the next two years. Additional revenue would be distributed to INDOT, counties, cities and towns for transportation-related purposes.
  • HB1292 would increase the fuel tax by 2 cents to 20 cents per gallon on gas with an octane number greater than 87. Additional revenue anticipated at $5.4 million each year would be split between the state and local governments for bridge repair.
  • HB1324 would charge compressed natural gas vehicles the same fuel tax rate as other vehicles. Currently, affected vehicles don’t pay the 18-cent-per-gallon tax. A fiscal note on the bill estimates the change would generate $1 million annually.

To view other legislative activities of interest for Indiana, click here.

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