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FEIGENBAUM: The highway-funding math is getting fuzzier

February 18, 2017

Ed FeigenbaumWhen the session opened, there was universal, bipartisan consensus a gas tax increase was a principal funding source for the massive road and related infrastructure package in House Bill 1002.

All the key participants in the interim examination of needs and alternatives had seemed to agree to a long-term, data-driven, user-funded, sustainable package that would cover repair, rehabilitation, new construction and ongoing maintenance—and no potholes were seen on the road to approval by the Republican supermajority.

Yet funding for the road and infrastructure package is taking serious hits. Reasons behind the temporary reversal are lessons that should have been learned long ago.

The process began in the 2016 session, when agreement evolved during highway funding debate that a long-term solution was needed. Legislative leaders agreed to a holistic summer review. Incumbents skittish about tax increases could make their case to voters that any ambitious plan to maintain and embellish the Crossroads of America—and offer economic development payback—would require serious revenue enhancements.

But a funny thing happened on the way to the election.

As the volatile political environment veered from comfortable to unpredictable, the review was purposely placed on hold before November. General needs were well-established when things stalled, but funding mechanisms hadn’t been identified, much less debated. Republican leaders didn’t want members associated with a mega tax hike shortly before the election.

That determination was made despite (wink-wink) Hoosiers’ understanding that a world-class transportation network and well-paved local roads and streets would require pain. But no one was out selling the specific need for a gas tax hike that would affect most Hoosiers … and other fees to capture cash from those using roads but not paying at the pump, such as electric vehicle owners. 

Then came the dogs that barked—and the big one that didn’t.

Americans for Tax Reform, devoid of subtlety, reminded lawmakers who signed its No Tax pledge in years (often long) past of their promise to voters. Pragmatic GOP leaders were unable to assuage members. 

Then came local attacks on tax hikes.

Americans for Prosperity—Indiana opened a concerted statewide effort that even roped lawmakers into local forums. Joined by Indiana tea party leaders, AFP said funding didn’t require new revenue, but rather, reassignment of existing priorities. Redirecting gas taxes diverted to general-fund use to the perceived purpose was a first step. The Indiana Petroleum Marketers & Convenience Store Association pledged to plaster gas pumps across Indiana with stickers opposing a gas tax hike.

Democrats gleefully piled on, targeting traditional favorite quarry: GOP business tax cuts and mawkish insistence on a major surplus. Freezing corporate tax cuts, tapping Major Moves money, bonding and reducing the surplus could produce tax-free funding.

At events back home, members struggled to sell the program, finding strong anti-tax pushback, victim to lack of marketing.

A council vote on dedicating Marion County local tax funding to mass transit, and further Interstate 69 delay news, arose at a potentially unfortunate moment.

Unlike Major Moves 12 years ago, a governor wasn’t chief salesman, despite legislative entreaties, largely because Gov. Eric Holcomb, a Republican, also wasn’t fully comfortable with the details, particularly the long-term tolling-based backfill. He holds hope for a “yuuugge” federal infrastructure effort providing Indiana big bucks.

So with dogs that barked and a key one silent, HB 1002 currently shifts gas taxes to their perceived purpose, creating a major general-fund shortfall. A tobacco tax hike might be a short-term solution. That, however, could lose lawmakers serious about taxes as user fees being devoted to their source and public health program advocates who want those dollars devoted to tobacco cessation and broader health initiatives.

Holcomb remains uncomfortable with the still-amorphous backfill in out-years that drafters intended to be covered by tolling, but nothing else looms for long-term investment.

You’ll still see a substantial program enacted in April, but what’s inside the outlines is far murkier today than anyone anticipated.•

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Feigenbaum publishes Indiana Legislative Insight. He can be reached at edf@ingrouponline.com.
 

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