Iowa Gov. Terry Branstad

CHICAGO — Iowa Gov. Terry Branstad Wednesday signed into law a transportation funding package that raises the state's tax on gasoline and diesel fuel by 10 cents a gallon and increases permit fees on oversized vehicles.

The hike that takes effect March 1 will generate an additional $215 million in new revenue annually to finance projects on a pay-as-you-go basis.

The governor's signature on Senate File 257 came one day after lawmakers approved a funding package that won the governor's OK after funds were earmarked for local projects. It marks the first time the gasoline tax has been raised in Iowa in more than 25 years.

"This is important for economic development. This is important for our farmers to be able to get their crops to market. I know that many people have been waiting a long time for this," Branstad said.

Supporters argued the new funds would both cover a $215 million deficit in available funds needed for maintenance on the state's 114,000-mile road network and would allow for the acceleration of major projects like an expansion of US Highway 20.

They also promoted the need to invest in road building and bridge repairs as an economic development tool that would help the economy and highlighted that the pain would be spread out as 20% of gasoline tax revenue come from out-of-state travelers.

Sen. Matt McCoy, D-Des Moines, voted for the bill.

"I think shame on us for not doing as much as the generation before us in investing in infrastructure," he said.

A coalition representing various business, local government, and farm interests pressed for support while anti-taxation groups opposed it saying the state had other alternatives such as tapping its general fund.

Legislative detractors said more time was needed to consider the legislation and accused supporters of ramming it through the legislative process without consideration of its impact. Support and opposition was mixed among Democrats and Republicans.

"Passage of this bill will do more to harm my district than a minimum wage increase would do to help it," said Sen. Amy Sinclair, R-Allerton. She pushed for a 10-year expiration on the hike but it failed.

Momentum for a hike in transportation funding has been building this year as supporters cited recent studies that warned the $2 billion spent annually on roads in Iowa falls short of needs to keep urban and rural roadways and bridges safe and in a state of good repair.

The bill ended up passing in the Republican controlled House by a 53-46 vote and the Democratic controlled Senate by 28-21. Branstad is a Republican.

Iowa is among a handful of states looking at gasoline tax hikes to raise new revenue amid dwindling federal transportation aid and stagnant revenue growth.

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