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6:00 am
Tue January 21, 2014

The Sidebar: N.H. Legislators Will Make Another Run At Raising Gas Tax

A year after failing to agree on how to pay for a long list of road and bridge improvements, lawmakers will take another shot at bolstering the state’s chronically underfunded infrastructure this session.

Several bills are on the table, including one that would channel proceeds from a casino into the state’s highway fund.

Sen. Lou D’Allesandro, D-Manchester, plans to reintroduce legislation from 2013 that would license a single casino with 5,000 slot machines and 150 table games. Last year, the Senate passed D'Allesandro's bill, which projected $50 million a year toward road and bridge repairs and the widening of I-93. But the bill was rejected by the House.

This year’s proposals also include three bills that would once again try to coax more revenue out of the state’s gasoline tax, which has been idling at 18 cents per gallon since 1992.

Sen. Jim Rausch, R-Derry, chair of the Senate Transportation Committee, wants to link the gas tax to the Consumer Price Index, a standard measure of inflation. His proposal would raise the levy by four cents this year and generate $28 million for the Department of Transportation. Future rates would be adjusted every four years, starting in 2018.

Rep. Candace Bouchard, D-Concord, who chairs the House Transportation Committee, wants to extend the tax to drivers of vehicles that use alternative fuels. Bouchard’s bill would mostly apply to commercial and governmental fleets making the switch to natural gas and propane.

“It won’t bring in a lot of revenue,” Bouchard said. “But everything helps, and everybody would be paying their fare share.”

Another proposal, by Sen. David Watters, D-Dover, would impose a surcharge on electric vehicles and hybrids.

The transportation department needs whatever help it can get. Over the last decade, the backlog of maintenance projects has grown to $1.3 billion. That includes nearly 500 state and municipal bridges that have serious structural problems, and 1,600 miles of state-maintained roads that are beyond re-paving and need to be rebuilt.

There’s no money in the state’s long-range road plan for the legislature’s top transportation priority, the I-93 expansion between Salem and Manchester, which needs $250 million to complete. Another $500 million in projects, including the widening of I-93 from Bow to Exit 16 in Concord, were left unfunded as well.

Commissioner Chris Clement says his agency needs $48 million to avoid cutting programs and laying off workers. “We’re going to have a significant problem staring us in the face July 1, 2015,” Clement told NHPR’s Laura Knoy last week, “and we need to talk about it now.”

Along with vehicle registration fees, the gas tax is New Hampshire’s primary source of revenue for the state’s highway fund. But it’s become increasingly unreliable, creating a gap between infrastructure needs and the resources available to pay for them.

The biggest problem is inflation. Since the state last raised its gas tax, the cost of a typical transportation project has risen by more than 60 percent, according to the Institute on Taxation and Economic Policy, a non-profit research group that tracks state gas-tax policies. Today, after adjusting for inflation, New Hampshire’s 18 cents per gallon levy is only worth about 12 cents.

At the same time, Granite State motorists are shifting to more fuel-efficient vehicles, which means they’re buying less gas. Motorists purchased almost 60 million fewer gallons of gas in 2012 than they did in 2005. That translated into an $11 million decrease in revenue. State officials predict that unless rates change, revenues will continue to decrease about 1 percent a year. 

Granite State motorists are driving more fuel-efficient vehicles, which means they’re buying less gas. Motorists purchased almost 60 million fewer gallons of gas in 2012 than they did in 2005. That translated into an $11 million decrease in revenue.
Credit Department of Safety Road Toll Bureau

“The root cause of the problem is that the gas tax is badly designed,” said Carl Davis, senior policy analyst at Institute on Taxation and Economic Policy. “You levy an 18 cent gas tax for 23 years and expect that 18 cents to go as far today as it did 23 years ago, it’s just not going to work.”

Davis said that after years of resistance - decades, in some cases - states are beginning to address the problem head on. In 2013 alone, he said, lawmakers in Pennsylvania, Maryland, Massachusetts, Vermont, Virginia and Wyoming agreed to raise their gas taxes.

Two dozen states now have so-called variable-rate gas taxes similar to what Rausch has proposed. Seventeen levy a tax that grows along with the price of gas; three states, including Massachusetts, link the gas tax to the CPI.

“Actually over half the country’s population lives in a state where the gas tax is indexed in some way, either to the general inflation rate or so the tax works more like a sales tax does, as opposed to just a flat rate forever,” Davis said.

Meanwhile, according to the National Conference of State Legislatures, 27 states now tax alternative fuel sources, with most dedicating all the revenue to transportation projects. Nine others have replaced the per-gallon levy with an annual fee for motorists with alternative fuel vehicles.

Some states have explored the possibility of replacing or augmenting their gas taxes with a system that charges motorists for the miles they actually drive.

Between 2007 and 2011, 18 states took part in a Vehicle Miles Traveled fee pilot funded by the U.S. Department of Transportation, although none of them have gone so far as to set up their own version.

Only one state has taken that step. Last year, after more than a decade of study, Oregon created a voluntary VMT program that will charge motorists 1.5 cents per mile in exchange for a gas tax refund.

Bouchard said a special commission created under Gov. John Lynch considered several “sustainable” ways to boost revenues for roads and bridges, including VMT. However, the commission concluded that the technology to gather mileage data while protecting the privacy of motorists did not yet exist.

The panel also looked at increasing registration fees and raising tolls. In the end, though, Bouchard said commission members kept coming back to the gas tax.

“It doesn’t mean we stop exploring and looking at new technology,” she said. “But right now the gas tax is fair, it’s in place and we have the infrastructure in place to collect it. I think that’s why you keep seeing bills to increase the gas tax coming forward.”

As in the past, this year’s gas-tax proposals will likely come up against considerable opposition, especially in the Senate, which voted to kill a 12-cent hike in the tax passed by the Democratic-controlled House in 2013.

In December, Gov. Maggie Hassan’s spokesperson Marc Goldberg said the governor “appreciates the constructive ideas” for more investment in road and bridge projects, and that she’ll work with both parties “to reach a consensus path forward to address our infrastructure needs and help build a more innovative economic future.”

But while Senate President Chuck Morse said he’ll allow debate on Rausch’s bill, he’ll also help lead the opposition to it.

“I believe it hurts the families of New Hampshire who can least afford it and it burdens our businesses trying to make ends meet in a fragile economy,” Morse said in a statement.