States are once again forging their own pathways to fund their roads and bridge programs.
In the meantime, four more states (California, Indiana, Montana and Tennessee) join the 19 others that have increased or modified their gas taxes to increase revenue since 2013. In each state the gas tax increase was just one piece of a larger transportation infrastructure funding package that enacts additional revenue streams to ensure a steady revenue stream for roads and bridges despite increasing fuel economy.
Here’s what these states have done:
- California was the first state this legislative session to raise its gas tax. The 12-cent per gallon for gas and 20-cent per gallon for diesel takes effect November 1, 2017. The new rate will be indexed to the Consumer Price Index starting July 1, 2019 and will help ensure a steady revenue stream for state road and bridge maintenance and improvements. To ensure all road users are paying their fair-share a $100 electric vehicle registration fee will be implemented with 2020 model years and beyond.
- Indiana’s legislature approved a $1.2 billion annual investment in its transportation infrastructure through a 10-cent per gallon gas tax increase that for the next seven years will be indexed to increase no more than a penny per year. In addition to a gas tax increase, user fees in the form of vehicle registration as well as special fees for hybrid and electric vehicle fess were increased. To ensure roads and bridges receive adequate funding the entirety of gasoline sales taxes will be deposited into the State Highway Fund beginning in 2020. The package also requires the state study tolling as a future revenue source.
- Montana’s legislature has also sent a gas tax increase bill to its Governor’s desk. A compromise for each chamber the bill awaiting Governor Bullock’s signature will raise the gas tax by 4.5 center a gallon and diesel by 1.5 cents. Like Indiana and California, Montana will also see a gradual increase in the tax rate to 6.5 cents per gallon and 2 cents for diesel by 2022. Accounting for increased fuel economy, vehicle registration fees were increased by 3% and new sales tax on cars and recreational vehicles that exceed $150,000 were included in the bill. These increases will take effect on July 1 and are expected to generate $49 million when fully implemented, sorely needed for the states roads and bridges, which received a “C” grade for transportation in the 2014 Report Card for Montana’s Infrastructure.
- Tennessee like many states who recently increased its gas tax, saw its first increase in nearly 30 years. The 6-cent per gallon increase for gasoline and 10-cents per gallon increase will be gradually phased in beginning July 1, 2017 with an initial 4-cent increase. It is expected to generate approximately $350 million for roads and bridges in its first year. The 2016 Report Card for Tennessee’s Infrastructure, which graded roads a “C+” noted “an estimated $475 million is needed annually to keep up the current state of good repair on state-maintained roadways, and this number grows with inflation every year.”
These states took action as uncertainty at the federal level continues. The additional funding guaranteed by the passage of 2015’s FAST Act cannot be appropriated without a new federal budget. Additionally, the administration’s promise of a high-dollar federal infrastructure package has yet to come to fruition.
There are still a few other states that may join the ranks this year: Colorado, Minnesota, and South Carolina. Colorado’s legislature is trying to reach a compromise on its transportation funding package. While HB 1242 cleared the House, the bill is currently awaiting approval by the Senate Finance Committee. Minnesota’s legislature is current currently working through a conference committee to find a way to fund its roads that balance the funding need with the potential for a budget surplus. Governor Mark Dayton recently put forward the possibility of funding roads without a gas tax increase in an effort to bring both sides together. South Carolina’s Senate is nearing the end of debate on a 12-cent per gallon gas tax increase. Their version of HB 3516 is 2-cents apart from the 10-cent per gallon version passed by the House back in March and will require an additional vote by the lower chamber.
ASCE recommends that adequate funding for operating, maintaining, and improving the nation’s transportation system be provided by a comprehensive program with sustainable dedicated revenue sources. We will keep a watchful eye on these states as they move to close their transportation funding gaps and improve their transportation network.