Branstad: Increased Gas Tax Unlikely, Need New Way to Raise Road Construction Funds

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Lauren Mills/IowaWatch

Gov. Terry Branstad in an interview with IowaWatch on July 2, 2013 in the Iowa Statehouse in Des Moines.

Don’t expect to see a gas tax increase in Iowa next year.

While Iowa’s roads and bridges are in desperate need of repair, Gov. Terry Branstad does not see the sense in raising the state’s gas tax, which, while below what surrounding states charge, lacks public support, he said.

“It’s very unpopular,” Branstad said in an interview with IowaWatch on Tuesday, “and frankly the Legislature couldn’t get the votes before they adjourned.”

At the same time, he acknowledged as this busy Fourth of July travel period kicks into high gear that the state’s road and bridge needs are critical. “I recognize there’s a need for additional money for the road fund,” he said.

Senate Majority Leader Michael Gronstal, D-Council Bluffs, favors raising the gas tax by 10 cents and said others do as well, despite the failure of an increase by that amount to move through the Legislature this year.

“I think there is significant bipartisan support for additional resources for the Road Use Tax Fund,” Gronstal said Tuesday.

Eight states increased their gas taxes on Monday, July 1.

Branstad said he is considering other options to increase revenue for Iowa’s roads and bridges, such as raising the one-time registration fee for vehicles, earmarking a portion of sales tax revenue or using surplus gambling revenue.

“I hope I can even find a proposal to recommend next year,” Branstad said, “but I think it would not be just a strict increase in the gas tax by 10 cents a gallon.”

Instead, he said he would try an alternative that Iowans find more palatable than higher prices at the pump.

Iowa’s roads and bridges are in bad shape, according to the American Society of Civil Engineers’ 2013 Report Card for America’s Infrastructure, which listed 5,193 structurally deficient bridges in the state. Repairing or replacing the bridges would cost almost $1 billion, the civil engineers’ group said.

The group also ranked 46 percent of Iowa’s roads as being in mediocre or poor quality. Mediocre means the road displays signs of deterioration but is not yet dangerous. Poor means there is a “strong risk of failure.”

The civil engineers’ report adds that driving on such roads costs Iowan drivers an average of $381 per year.

However, funding for critical repairs in Iowa has fallen short. “We do have a critical funding need,” Iowa Department of Transportation Director Paul Trombino III said.

Iowa’s state gas tax is 22 cents per gallon, a rate that hasn’t changed since 1989. Federal taxes bring Iowa’s total gas tax to 40.4 cents per gallon, less than the national average of 49 cents and every adjacent state except South Dakota, which also is at 40.4 cents, and Missouri, which pays a total of 35.7 cents for each gallon.

Gov. Terry Branstad in an interview with IowaWatch on July 2, 2013 in the Iowa Statehouse in Des Moines.

Gov. Terry Branstad in an interview with IowaWatch on July 2, 2013 in the Iowa Statehouse in Des Moines.

Branstad earlier this year supported a 10-cent gas tax increase in exchange for income tax reform. But when the Legislature passed Senate File 295, a broad tax-relief package, Branstad reversed his position on the gas tax.

Branstad said gas tax revenue will diminish over time, in part because of more fuel-efficient vehicles and federal requirements that encourage their production and use. “Also, many consumers, because of the high cost of gasoline, are going to hybrid vehicles, or electric vehicles, or trucks now are converting to natural gas because it’s cheaper,” Branstad said.

Trombino and the Iowa Transportation Commission, the DOT’s decision-making body, have been tasked by Branstad to determine additional funding sources for roads and bridges. Trombino said it is too early to say what sources would supply that funding.

“What the governor has asked myself and the department to do is to review all options for transportation funding,” he said.

Revenue from the state gas tax goes into the Road Use Tax Fund, which is constitutionally protected, meaning it must be spent on infrastructure and doesn’t need to compete against other government programs for appropriations. The fund also gets money from a Motor Vehicle One-Time Registration Fee amounting to 5 percent of the vehicle’s sale price.

“The last time they increased that they left that at 5 percent, whereas the sales tax on everything else is at six,” Branstad said.

Senate Majority Leader Michael Gronstal (D-Council Bluffs)

Senate Majority Leader Michael Gronstal (D-Council Bluffs)

Gronstal dislikes the idea of raising the registration fee, saying the full financial cost falls on Iowans, unlike the gas tax, which also raises money through non-residents buying fuel in the state.

“You get the same amount of resources, but Iowans end up paying about 25 percent more,” Gronstal said.

Gronstal questioned Branstad’s changing positions on the issue. “I don’t think the governor knows what he wants on this subject,” he told IowaWatch.

Virginia and Washington State have begun charging an increased registration fee for hybrid and electric vehicles to help offset lost gas tax revenue and other states are considering doing the same.

Branstad called such fees a possibility for Iowa.

“I think recognizing the reality of the types of vehicles that are going to be on the roads in the future makes sense. It needs to be fair,” he said.

The DOT cited on May 14 nine long-term projects for fiscal 2014-18 that had only enough funding to complete currently planned sections. Because of funding concerns, the DOT will not be able to add additional segments of road in need of repair or expansion.

For example, the plan includes a 12-mile stretch between Moville and Correctionville in Woodbury County, which will cost $114 million. But no plans exist to widen the remaining 32 miles in from Correctionville to Highway 71 that has been identified as needing work.

The DOT attributed the reluctance to fund more long-term projects to “flat or uncertain revenue at the federal and state level, increasing construction costs, and the need to invest in the existing highway system,” a news release from the department said. The DOT went on to question the solvency of the Federal Highway Trust Fund, predicting drastic cuts in fiscal 2015 and afterwards.

Paul Trombino III, director of the Iowa Department of Transportation

Paul Trombino III, director of the Iowa Department of Transportation

Annually, the DOT needs about $215 million more than it has in order to fix the state’s most critical problems at roads and bridges, according to the 2011 Road Use Tax Fund Study.

Trombino said the DOT’s five-year funding projection calls for about $600 million for the primary highway fund in fiscal 2014 and only $460 million by fiscal 2018. “If we have, as a state, $150 million less to invest in our state highway system than we do today, that’s going to have an impact,” Trombino said.

Branstad said he still believes a funding bill could pass next year, acknowledging that it would be difficult, requiring bipartisan support in an election year.

“I think with the right kind of approach that the public can see is fair and that is not as unpopular as just raising the gas tax, I think there might be a possibility of getting it done next year,” he said.