Top senators eye state's sales tax for road needs

January 24, 2013

Lawmakers wrestling with how to pay for road and highway needs amid a growing funding shortfall are considering using money from the state's sales tax on gasoline to pay for transportation projects.

Senate Appropriations Chairman Luke Kenley, R-Noblesville, said the General Assembly should consider guaranteeing some or all of the roughly $500 million the tax generates each year. And Senate Minority Leader Tim Lanane, D-Anderson, said the state should take a modest chunk from that pool to give to cash-strapped areas.

It's a novel concept, lawmakers say.

Kenley, the Senate's lead budget writer, said he has not settled on the move, but is floating it along with other options as the state stares down an annual transportation spending shortfall of roughly $250 million a year. Kenley previously suggested raising the excise fee on license plates, but has backed off.

Indiana has long been able to rely on the $3.8 billion generated from the leasing of the Indiana Toll Road for 75 years, but that money is largely either spent or committed to projects. The problem is compounded by declining gas tax collections — a tax levied in addition to the sales tax on gas — as fuel efficiency improves greatly across all vehicles.

Kenley estimates the state need to find another $100 million a year just for upkeep of existing roads because of the decline in gas tax money and at least another $100 million for localities. Add in the roughly $50 million it would cost each year to finance projects, including the last leg of Interstate 69 and expansions of Interstate 65 and Interstate 70, and the need becomes clear, he said.

"You put that all together, and you've got a big problem that's going to come upon us. And, to me, we need to be ahead of the curve in solving this problem rather than behind it, because road infrastructure is so important in Indiana," Kenley said.

Kenley's push for more transportation money comes as state lawmakers eye a budget and a state surplus that is being pulled in multiple directions: Gov. Mike Pence is standing firm on his call to spend $500 million a year on a cut to the personal income tax. House Speaker Brian Bosma, R-Indianapolis, is saying more of that money has to be returned to schools and Democrats are calling for the restoration of $300 million in education cuts made during the recession.

Both Kenley and Lanane praised Pence this week for diverting money that would go to state employee pensions to create a transportation investment fund, calling it a sign that the new governor at least understands the pressing need for road money. But they both are asking for more.

As it stands now, the sales tax on gas goes into the pool of money used to pay for most state services and the money raised by the gas tax is divided among the transportation department, the Indiana State Police and the Bureau of Motor Vehicles. Lanane, who would like to see roughly $50 million from the sales tax used on gas for transportation, noted that most residents would support a logical source of revenue.

"I don't think that Hoosiers have a problem with a tax revenue source that makes sense to them," Lanane said. "Think about it, you're out there, you're buying gasoline to ride on those roads and streets, so this would be a user fee and this would be a logical way to help us catch up and keep the funding there to be adequate."

Senate President Pro Tem David Long, R-Fort Wayne, said Thursday that he was considering diverting the sales tax on gas and House Speaker Brian Bosma, R-Indianapolis, said last week that the House budget proposal would find more money for transportation than Pence allocated.

But Kenley cautioned that the four-month session is still young and said he expects more fluidity in the debate, as lawmakers continue to float ideas.

"It seems to me that it's very important for Indiana's economy and for the rest of us consumers who drive I-65 and I-70 to have a better state and local road infrastructure system," he said. "It's a key component of Indiana's — not only businesses — but just the average taxpayer or consumer driving around this state."


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