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The Journal Gazette

Wednesday, March 16, 2016 1:55 pm

Lawmakers struggle to pay for roads

Niki Kelly The Journal Gazette

INDIANAPOLIS – Indiana is at a crossroads when it comes to funding highway construction and maintenance.

After years of spending billions from the lease of the Indiana Toll Road, the state is in the same boat as the rest of the nation – coping with gas tax revenues that are not keeping pace with inflation and wondering what the long-term solution is.

"We can’t hook to the gas tax because it’s a losing proposition going forward," said House Ways and Means Chairman Tim Brown, R-Crawfordsville. "We’ll always be back asking for more gas tax money, both in efficiency and less miles traveled by Hoosiers."

Indiana has lost 19 percent of the gas tax’s worth because of inflation since 2003, according to the Build Indiana Council.

Indiana Department of Transportation Commissioner Karl Browning said the state can maintain the status quo with no new funding. But the question is, is that what lawmakers and residents want?

It’s a policy choice for Indiana lawmakers.

For instance, Browning said that for real improvement, he would need an additional $100â ¯million a year for bridges and $150â ¯million a year for roadways. That would lead to a lower percentage of Indiana’s highways and bridges being in poor condition.

"I want to put all of this in context of what does the public want to buy," he said. "We can manage what we’ve got. Even the anticipated declining numbers can be managed, but obviously, things will degrade. The question for your readers is: What is acceptable to you?"

He said Indiana gets about the same amount of money in motor fuel taxes as it historically has. But as consumers buy less gas because cars become more fuel-efficient, it will be a problem.

Revenue from the state gas tax was $504 million in 2013; $603 million in 2014; and an expected $597 million in 2015.

Indiana also received about $690 million in federal gas tax dollars in those years, with the same expected in 2015. Additional money goes to local units of government.

When Toll Road lease revenue dropped off in 2013, it brought down Indiana Department of Transportation spending by about $300â ¯million the next year.

In the 2014-15 state budget, lawmakers filled the gap by diverting a percentage of sales tax revenue from gasoline purchases to INDOT.

And they set aside $400â ¯million over a two-year period to be used by INDOT for major highway projects. This came from General Fund dollars – aka sales and income taxes.

Legislators are looking to do the same again as they craft the 2016-17 biennial budget. Gov. Mike Pence suggested $300 million additional money for INDOT outside its regular appropriation. House Republicans upped that to $400 million.

A final budget will be done in late April.

Browning said the plan for that money this time is to repair pavement on the state’s interstate system.

"That would fix a lot of pavement. I’m not talking about painting it black," he said. "I’m talking about fixing it. It would go a hell of a long way."

He said using other tax dollars to supplement user fees won’t solve the underlying systemic problem of funding, but it will solve the underlying quality of roads.

The Indiana Chamber of Commerce is also advocating that more state sales tax dollars be dedicated to roads. The chamber wants to index the state gas tax to inflation, meaning that it would rise gradually on its own in the future. But many lawmakers see that as a tax increase, and it is not moving forward this session.

Instead, the General Assembly is waiting for a study commissioned last year that INDOT is undertaking to present options on funding. It is set to come out this summer.

Browning said it will cover alternative demands versus funding mechanisms, and he noted that funding choices for preserving roads might be different from funding choices for new construction.

One idea getting traction in some states is a tax or fee on miles driven or on the sale of high-mileage cars.

A study released by the Indiana University School of Public and Environmental Affairs showed that only 1 in 3 Americans support benefit principle taxes, such as a mileage tax, to replace fuel taxes and make up for falling revenues.

The benefit principle is based on the idea that people should pay for the goods and services they consume in proportion to the benefits received from those goods and services.

Author Denvil Duncan said economists like the idea of benefit-based revenue to fund roads because it’s efficient: When consumers are paying for a service, they are much more likely to monitor their use.

One could also argue that it is fair on the grounds that it distributes the cost of roads in proportion to benefits received from roads.

Currently, roads are financed largely by the fuel tax, which at the federal level has remained unchanged at 18.4 cents per gallon since 1993. 

Indiana recently changed how the state gas tax is collected and calculated. It now fluctuates monthly based on the price of gas. In recent months, the highest price was 22.9 cents per gallon. The March rate is 11.8 cents per gallon.