States taking lead on road fixes
Many increase fees, fuel taxes to pay for overdue repairs
For the first time in nearly 30 years, Tennessee will soon tax motorists more to fill their tanks. So will California, Indiana and Montana.
Lawmakers across the U.S. have approved new proposals this year to pay for transportation improvements, including tax increases, vehicle fee increases and bond packages. Those measures extended an existing trend to a new milestone: Two-thirds of all states have stepped up highway funding over the past five years.
It’s happening in both Democratic- and Republican-led states as their transportation departments strain to overcome backlogs deepened by the 2008-09 financial crisis. And lawmakers are acting regardless of promises from President Donald Trump for a $1 trillion national infrastructure program that his administration has yet to detail.
“We really don’t know what’s in [Trump’s plan]. We haven’t seen anything,” said Tennessee state Rep. Eddie Smith, a Republican from Knoxville. But “it sounded like there wasn’t going to be a lot that we would directly benefit from.”
Trump has said his plan will depend partly on spurring private investment in infrastructure.
That could include tax incentives for those who subsidize big-ticket projects, with an expectation that investors could recoup costs through tolls or fares on roads, bridges, rail systems or airports. Tennessee currently uses neither tolls nor bonds for its highway system.
At least two dozen states adopted higher fuel or sales taxes to pay for transportation improvements.
“That’s highly unusual for that many states to be in agreement about raising taxes, and these are oftentimes fairly conservative states as well,” said Carl Davis, research director at the Institute on Taxation and Economic Policy, a Washington-based nonprofit think tank.
In Arkansas, voters in 2012 approved a half-percentage-point sales tax increase for 10 years to cover $1.3 billion in bonds for highways. Last year, Republican Gov. Asa Hutchinson approved redirecting $50 million from the state’s budget surplus, investments and other funds to highways to help address an estimated $750 million of needed repairs to roads and bridges.
The state’s gasoline tax has remained at 21.5 cents a gallon since 2001.
The U.S. has an $836 billion backlog of needed repairs and improvements to roads and bridges, plus an additional $90 billion backlog for public transit systems, according to the Federal Highway Administration.
Those needs have grown as the money available from the Federal Highway Trust Fund for states fell by more than 9 percent from 2010 to 2015, according to an Associated Press analysis of the most recent figures from the highway administration.
A 2015 federal law increases Highway Trust Fund money for states by $20 billion over five years through traditional matching funds and new competitive grants. But some financial analysts project that will merely hold funding flat when accounting for inflation.
States are “bellying up to the bar and actually increasing their own gas taxes to make up for the lack of an increase of federal spending,” said Julius Vizner, an assistant vice president at Moody’s Investors Service.
Republican-led South Carolina, which has long resisted tax increases, is among those seriously considering a gas tax increase this year.
Separate tax proposals have passed the House and Senate, even though Republican Gov. Henry McMaster has threatened a veto and wrote a letter to Trump in February asking for $5 billion in federal funding for infrastructure.
South Carolina House Majority Leader Gary Simrill said the federal money would be welcome but doesn’t provide a long-term solution. The state’s Department of Transportation wants an additional $1.1 billion annually over the next 25 years to improve roads.
“People who are waiting on the federal government usually just get old and tired,” said Simrill, a Republican who has led the House’s road-funding efforts for several years. “South Carolina cannot wait on the federal government to take care of our problem.”
The federal gasoline tax has remained at 18.3 cents a gallon since 1993, breaking a record this spring for its longest gap between increases. The last record was set when the tax remained at 4 cents from October 1959 through March 1983, when President Ronald Reagan approved increasing it to 9 cents.
Trump recently said he could consider higher fuel taxes as part of his infrastructure plan, although that could meet resistance from fellow Republicans in Congress.
Only about a dozen states have gone longer than the federal government without raising their motor fuel taxes.
One of those was Tennessee, where Republican Gov. Bill Haslam signed a bill last month to phase in a 6 centa-gallon gas tax increase and a 10-cent diesel tax increase. To win passage in the Republican-dominated state, the fuel tax increases were paired with tax cuts on groceries, investment gains, corporate manufacturers and disabled veterans so that supporters could tout them as “pocketbook neutral.”
The transportation plan in Republican-led Indiana raises an average of $1.2 billion annually by increasing gas taxes and vehicle fees and gradually shifting fuel sales taxes from the state’s general fund to infrastructure.
California’s $5 billion annual plan raises fuel taxes and vehicle fees to pay for repairs to state and local roads, while also providing money for public transit and biking and walking trails.
Davis said transportation funding measures have enjoyed bipartisan support around the country because the business community has backed them as economic necessities.
Transportation plans also have enjoyed widespread success at the polls. Voters approved 269 of the 361 transportation funding measures placed on the 2016 ballot by states, counties, cities, townships and other districts, according to the American Road and Transportation Builders Association. The nearly three-quarters approval rate was right on the 10-year average for transportation ballot measures.