Two states — Nebraska and Utah — recently enacted new laws diverting a sizeable chunk of their state sales taxes to transportation. Education, human services, and other vital programs are expected to suffer as a result of this diversion. Instead of siphoning off much-needed revenues from other areas of the state budget, these states should have boosted their traditional transportation revenue sources, most notably the gas tax.
In Nebraska, Governor Heineman reluctantly signed a bill last week that will divert 0.25 percentage points of the state’s 5.5 percent sales tax to road repair and construction. Just two months ago, Heineman had called the same proposal “risky” and “unwise,” though the state’s improved revenue picture apparently caused him to abandon this position.
A wide range of people, including both opponents of the bill and the bill’s sponsor, have pointed out that the inadequacy of Nebraska’s gas tax is to blame for the state’s unmet transportation needs.
However, given the lack of real interest in raising the gas tax, lawmakers ultimately decided to meet those needs by simply prioritizing roads over education, public safety, and other services.
In Utah, a very similar law was enacted earlier this month when the state’s legislature narrowly overrode Governor Herbert’s veto of a measure redirecting up to $60 million in sales tax revenue to transportation each year. Herbert had vetoed the bill out of concern for its impact on education funding, and on the state’s ability to be flexible in dealing with future budgetary challenges.
An increase in Utah’s gas tax, which hasn’t been raised in fifteen years despite rising transportation costs, could have precluded the need to redirect such a substantial sum of money away from vital public services.
Making matters worse, an analysis from Utah Voices for Children points out that a significant amount of general fund revenues in Utah are already earmarked for transportation. These earmarks, as well as additional borrowing, have allowed transportation spending to swallow up an increasing share of the state budget over the last five years, with spending on education, health, and environmental quality suffering as a result.
Unfortunately, this decline in other areas of the budget may not be an accident. The Utah bill’s original sponsor, Sen. Stuart Adams, has reportedly touted the siphoning-off of revenue from other areas of the state budget as a major benefit, since it shrinks the size of programs he tends to dislike.
Given that basically every state levies a gas tax that won’t keep pace with transportation cost growth unless its rate is periodically raised, this argument (whether made explicitly or not) will no doubt remain powerful among conservative lawmakers for years to come.
Raising transportation-specific taxes and fees, while not always the most progressive solution, is no doubt preferable to allowing other areas of state budgets to be gutted in order to fund road repair and construction.
*MAY 28 UPDATE* Wisconsin Republicans are also working hard to redirect revenue away from schools and toward transportation. The legislature's budget committee recently voted, along party lines, to redirect $125 million in sales and income tax revenue to transportation in 2012, and to redirect 0.25% of such revenue to transportation in 2013 and each year thereafter. It's important to note that Wisconsin's gas tax used to be indexed to inflation — which allowed it to grow alongside increases in transportation infrastructure costs. Inflation indexing was eliminated in 2006.