Back To Square One
After Repeal, A New Approach To Gas Tax
Funding For Transit Circles Back To The Legislature And A New Governor
By William F. Lyons Jr., PE, Esq.
Special to Banker & Tradesman
The electorate has spoken: The citizens of the commonwealth do not want the gas tax indexed to inflation. While this is not my policy preference, it is an understandable position and we are bound to follow the will of the people. Now the hard work begins: We have to identify a new means of funding our future transportation needs.
While the electorate has decided that they do not want our future transportation funding raised by indexing the gas tax to inflation, we still have serious funding requirements to ensure that our transit and highway systems are safe and serve to enable our economic growth. In fact, by most accounts, the repeal of the gas tax index will result in a $1 billion gap in funding for the next 10 years. This is no small budget shortfall.
The question for our governor-elect and the legislature is how they will fill this budget gap. During the campaign, Governor-elect Charlie Baker expressed his support for the repeal of the gas tax index. Now that the repeal of the gas tax index has been successful, Baker must play a leading role in determining how to make up for the $1 billion shortfall. To date, he has expressed a desire to pay for transportation improvements out of operating funds. However, this approach is how our transportation system became severely underfunded.
The 2013 transportation finance legislation marked a significant departure from the old way of funding transportation through appropriations from the state’s operating budget. The legislature elected to create a dedicated revenue stream for transportation projects to ensure that there was adequate and sustainable funding for the commonwealth’s fragile transportation system. While the indexing of the gas tax has been repealed, it is unlikely that the legislature will revert to funding our transportation system from operating budgets. Nor should they.
Organizations as diverse as the Massachusetts Competitive Partnership, the Boston Fund, AAA, the Chamber of Commerce and the Boston Society of Civil Engineers all supported the new approach to funding transportation from dedicated funding sources. Their support is due to the need to ensure that we have a transportation system that can fuel our economic growth and provide for the safe travel of our residents. Decades of underfunding our transportation system resulted from reliance on operating fund appropriations. These organizations, representing business and industry, as well as consumer interests, know that to go back to funding our transportation system out of operating funds would be catastrophic for business and for everyday citizens.
Which leads us to the real question now that the election is over: How will the legislature respond to the repeal of the gas tax index? There are, of course, numerous different policy approaches. The legislature could move in the direction of a sales tax, rather than an excise tax on fuels. A sales tax is automatically indexed to the price of gasoline. The state of Vermont has adopted this approach.
Another idea is for the legislature to adopt an annual schedule of gas tax rates. The schedule would raise the gas tax each year roughly along the lines of historical inflationary growth, but only for a set number of years. In this case, the schedule would last for the duration of the 10-year, $13 billion dollar capital plan. Upon the completion of that plan, the legislature would need to re-evaluate the gas tax schedule based on the then-current transportation needs. Like the index, it would result in annual increases in the gas tax through a single vote of the legislature. Unlike the index, it would be tied directly to a specific capital plan, with the funding matching the costs, and would not result in a perpetual tax increase without another vote of the legislature.
Yet another possibility would be to skip the gas tax entirely and move to a vehicle miles traveled approach to funding our transportation system. Rather than relying on the gas tax to fund our transportation improvements, drivers would pay for each mile they traveled. Emerging technologies make this possible. It is certainly an idea worth considering.
Whatever approach the legislature and our new governor choose, they must act in the next legislative session to address this looming shortfall in transportation funding. Hopefully, the legislature and the governor can agree on a policy approach to this vexing problem. The stakes are high – for our economy, for our safety and for the sanity of the commuters who use the system every day.