Legislative proposals to increase Indiana’s transportation funding could lead to the state’s first gasoline tax hike in 12 years.

DALLAS – Road-funding legislation proposed this week by Republicans in the Indiana House would raise the state's fuel taxes and link them to inflation to provide up to $1.5 billion per year of new revenues dedicated to transportation projects.

The legislation competes with Republican Gov. Mike Pence's $1 billion, five-year "21st Century Crossroads" funding plan that relies on $240 million of new debt but would not raise taxes. It also differs from the House Democrats' measure that would raise $2 billion over four years by dedicating revenues from the existing sales tax on gasoline to transportation projects.

Pence's plan was unanimously approved Tuesday by the Transportation Committee in the Republican-led Senate.

The Republican funding proposal released Monday by House Speaker Brian Bosma would raise the gasoline tax by four cents per gallon and the diesel tax by seven cents. It would link the taxes to inflation.

Indiana currently taxes gasoline at 18 cents per gallon and diesel at 16 cents. The state also has a 7% sales tax on fuel purchases, but only 1% is dedicated to highways with other revenues going into the general fund.

The funding proposal from House Democrats would dedicate the fuel sales tax to transportation, while the Republican plan would raise the road-dedicated tax portion to 4%.

The House Republican plan also includes a $100 per year fee on electric vehicles and calls for a study on whether the state should put tolls on I-65 and I-70. A transportation funding report in 2015 said full tolling of the two highways could bring in an additional $33.6 billion over 30 years.

Bosma said the Republican proposal would generate $1.3 billion to $1.5 billion per year for the Indiana Department of Transportation.

"I feel very comfortable saying it's time to invest in our roads and infrastructure," Bosma said. "I'm anti-tax. I am however pro-growth, and this is an economic growth proposal."

Indiana spends about $570 million per year on state roads, but the 2015 transportation funding study said the state needs to spend $1.5 billion per year over the next 20 years just to keep its existing transportation infrastructure in good condition.

The transportation study commissioned by Pence and conducted by Cambridge Systematics said the $450 million per year that Indiana's fuel taxes now generate will dwindle to $300 million due to inflation over the next 10 years.

Pence's plan, which would go into effect in fiscal 2017, would draw on $241 million from the state's budget reserves, which are expected to total more than $2 billion by July. An additional budget appropriation of $150 million in fiscal years 2018, 2019 and 2020 would also fund the program.

House Democratic Leader Scott Pelath said the dedication of the 7% fuel sales tax to transportation would have generated an additional $525 million in 2015, with 53% going to the state and 47% to local governments.

"We need to begin the era where everything you pay the pump that goes to the state of Indiana goes back to paying to fix, maintain or create a road or a bridge," Pelath said. "What the people of Indiana don't know, and one of the reasons the roads are in bad shape, is because when they pay at the pump those dollars are not going to where they belong."

Pelath said Pence's plan was a "get-off-my-rear-end proposal" after a 37-mile stretch of I-65 was closed for a month last summer due to a broken bridge.

"Our plan is based on a simple concept," he said. "Every tax you pay at your gas station should go to fix your street or highway or bridge."

 

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