Senate budget expected to boost road funding

April 3, 2013

Indiana's road-building fund appears to be on track for a significant boost as lawmakers enter the home stretch on the next two-year state budget.

Senate Appropriations Chairman Luke Kenley, R-Noblesville, cited road funding as a top priority heading into the session, and he even floated the idea of a new license-plate tax to make up for the long-term decline in gas-tax revenue.

Lobbyists predict that such measures won't be necessary, however, as Kenley has said he's pleased with the way the House budget provides an additional $500 million over the next two fiscal years for state highways and local roads. The House budget restores gas-tax revenue—which in the past was diverted to non-transportation agencies—to roads and also provides a portion of gasoline sales tax for roads.

The Senate's version of the budget likely will mirror that increase in road funding, lobbyists say. Kenley will unveil the Senate version of the budget Thursday morning and declined to comment until then.

Road builders are optimistic. "We as a group are glad we're at this point where we're talking about something meaningful making it through,” said John Ayers, chief engineer for Hendricks County and legislative liaison for the Indiana Association of County Highway Engineers and Supervisors.

A 2010 Purdue University study estimated that local governments were $500 million short on road-maintenance money. Indiana Department of Transportation Commissioner Michael Cline says his agency faces a $200 million annual shortfall, $70 million of which is necessary to continue drawing the maximum available federal matching grants.

Fuel-tax receipts have rebounded since 2007, but INDOT officials don't believe they'll ever reach pre-recession levels because cars continually become more fuel-efficient. The excise tax, 18 cents per gallon, generated $815 million last year.

Last year's fuel-tax revenue was better than the recent low of $760 million in 2010, but still off the pre-recession peak of $881 million. The money flows into the Motor Vehicle Highway Account and gets divided among INDOT, counties, cities and towns, based on miles of road, population and other factors.

If the House version of road funding survives, counties would see an additional $63 million; cities would get another $30 million and the Indiana Department of Transporation would get $130 million, Ayers said.

This year, Hendricks County has $2.9 million for road maintenance, which means it would take about 100 years to repave all 770 miles of roads in the county, Ayers said. The House budget would increase that by $940,000, cutting the maintenance cycle down to 48 years. “Every county's going to see a similar improvement,” he said.

Laurie Maudlin of the transportation lobbying firm Appian Inc. is also optimistic that the Senate's funding will mirror the House. “It definitely is going to have a big impact" on road-maintenance funds around Indiana, she said. Indianapolis-based Appian represents the Build Indiana Council, a group of construction companies. 

The House budget proposal is a best-case scenario for roads but not for the state's general fund, and that's likely to draw opposition from Gov. Mike Pence.

The House would end the long-standing practice of diverting some fuel-tax revenue to support the State Police, Department of Revenue and Bureau of Motor Vehicles. That would put another $140 million a year in the Motor Vehicle Highway Account, but it also means those agencies would have to take all their support from the general fund, or generate additional fees.

The House budget also would carve off 20 percent of the revenue from the state's 7-percent sales tax on gasoline, generating another $110 million a year.

Pence does not object to shifting the State Police and BMV off the gasoline excise tax, but he is concerned about diverting sales-tax revenue, press secretary Kara Brooks said. “The sales tax is the state's largest revenue source for schools, health care and public safety, and the governor wants to carefully consider the implications of that move before committing to it long-term,” she said.

Pence's budget proposal also includes more money for roads, but the amount would be $347 million over the next two years. The additional funds would come from the state surplus.

“You can't always bet there's going to be a surplus,” said Cam Carter, a lobbyist for the Indiana Chamber of Commerce. The chamber prefers the House proposal, he said. “It seems like a very rational way to fund our road infrastructure.”



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