An advisory panel formed by Gov. Mike DeWine met this week to discuss alternatives for infrastructure funding ahead of the governor’s proposed transportation budget. Following two days of discussion, members of the panel agreed that Ohio’s 28 cents per gallon motor fuel tax, or “gas tax,” should be increased. The panel’s full recommendations are expected in the coming weeks as the governor prepares to introduce his transportation budget later this month.
The proposed gas tax increase would generate revenue to fund road and bridge construction and maintenance. According to Ohio Department of Transportation Director Jack Marchbanks, there is an “impending crisis” in which state funding for paving, snow plowing, fixing potholes and maintaining bridges is set to fall from $2.4 billion in 2014 to $1.5 billion in 2020. Funding for new infrastructure projects would be nearly eliminated absent additional funding. The need for maintenance funds is particularly acute, Marchbanks says, because Ohio has the fourth largest interstate system and the second most bridges.
Dean Ringle, Executive Director of the County Engineers Association of Ohio, echoed these concerns and told the Governor’s panel that $1 billion is needed for state projects and another $1.5 billion is needed for local government infrastructure spending. Without such funds, Ohioans could see additional traffic congestion, safety hazards, and decreased construction employment.
The need for infrastructure funding arose from a confluence of circumstances including a stagnant gas tax rate, fuel efficient and alternative fuel vehicles, and diminished capacity for borrowing funds. Ohio has not increased its gas tax rate since 2005 and the tax rate is not indexed to inflation. The 28 cent per gallon rate in Ohio is 6 cents lower than the national average and generally lower than gas taxes in neighboring states. Pennsylvania’s gas tax is 59 cents, Michigan’s 44 cents, Indiana’s 43 cents, West Virginia’s 36 cents, and Kentucky’s 26 cents. Each one cent increase is expected to raise $67 million in annual Ohio gas tax revenue .
With the increase in fuel efficient and alternative fuel vehicles on the roads, gasoline consumption increased just 0.0033% from 2003 to 2013. While new fees on electric and hybrid vehicles could raise revenue and promote fairness among all vehicles using the roads, they would raise only approximately $2.5 million annually. Policy makers may also resist such fee hikes that could discourage consumers from purchasing fuel efficient vehicles.
There is also very little leeway for additional public borrowing for infrastructure spending. Former Ohio Gov. John Kasich plugged the infrastructure funding gap in 2013 by issuing $1.5 bonds backed by revenue generated from Ohio turnpike tolls. The state annually makes $390 million in debt service payments on nearly $4 billion in recent borrowing. ODOT Director Marchbanks told the Governor’s panel “the credit cards have been maxed out.”
Transportation Budget Ahead
The Governor’s panel is keen on a gas tax hike, but the Governor himself has yet to formally present his transportation budget and legislators and other interested parties are sure to weigh-in. The details of any gas tax increase are likewise uncertain, as policy makers are likely to consider how large a rate increase may be warranted and whether to index it to inflation. We are monitoring the situation as the Ohio transportation budget unfolds in 2019.