State Politics

House revises gas tax plan

House leaders rolled out a plan Tuesday to drop the state gas tax to 36 cents per gallon in April and keep it from falling below 30 cents in July. And they promised to decide – this year – how to pump up the state’s anemic transportation revenues for the future.

“We have a major problem here that we need to fix, and this will give us the time to more fully debate permanent changes,” said Rep. Bill Brawley, a Charlotte Republican.

To wean the state Department of Transportation from its heavy dependence on waning gas tax collections, legislators said they intend to develop a broad-based package of stable funding sources for future years.

“We’ve targeted $1 billion in increased annual revenue” for DOT, said Rep. John Torbett, a Stanley Republican.

Torbett and other legislators echoed calls from state business leaders for a mix of new money streams that would spread the tax burden across North Carolina’s economy. Sen. Bill Rabon, a Southport Republican, said DOT should be able to count on stable funding every year.

“If the DOT is not assured there’s going to be money, then they can’t let projects,” Rabon said.

The Senate last month approved Rabon’s proposal to set a minimum gas tax rate of 35 cents, starting this month. Two House committees approved and sent to the House floor Tuesday a rewrite of the Senate bill. It would drop the tax from its current 37.5 cents to 36 cents, starting next month, and maintain that rate through December. Otherwise, under the existing statutory formula that ties the tax rate to changes in wholesale fuel prices, the tax would be expected to fall to about 29.9 cents on July 1.

Democrats protested that the bill means higher gas taxes starting in July.

“Those consumers will pay 6 cents more a gallon for gasoline than they would otherwise without this bill,” Rep. Paul Luebke, a Durham Democrat, told Finance Committee members. “There’s a 6-cent tax increase for the consumer at the pump.”

The Senate bill included a provision that would have required DOT to lay off 500 workers immediately. Rep. Paul Stam, an Apex Republican, protested that the rewritten House bill still included language that could eliminate the jobs.

DOT layoffs averted

“I’m hoping we’re going to start building highways and filling potholes, and I just can’t imagine those 500 people are sitting there twiddling their thumbs and not doing anything,” Stam said. “(Transportation) Secretary (Tony) Tata, whatever you would think of him, is a great manager.”

The Finance Committee approved Stam’s amendment to remove the 500 job cuts, protecting current DOT employees.

Legislative staffers said that cutting the gas tax by 1.5 cents in April would drain $13.4 million from DOT revenues for the fiscal year that ends June 30. The DOT would have to reduce spending and eliminate 40 unfilled positions, but would not be required to lay off employees.

When some committee members asked why a commitment to increase transportation spending should start with a transportation tax cut, Brawley said it was part of a compromise that secured support from business and political leaders.

Torbett said later that other leaders had started out with different ideas for a gas tax rate.

“The governor was wanting maybe 37,” Torbett said. “The Senate said 35 for a period of time. And 36 just seemed to be the logical midpoint.”

A McCrory spokesman did not respond to a request for comment on the House proposal. Tata issued a statement thanking legislative leaders for working out “a compromise on the gas tax and protections for the hard-working NCDOT employees.”

The original Senate plan was expected to increase DOT tax collections by about $1.2 billion over the next four years, but the House measure covers only the remaining months of 2015. If the legislature approves it and takes no further action on transportation funding for future years, the state gas tax is expected to fall in January to around 29.6 cents per gallon, according to projections by state government economists.

Long-term solutions

“This is not a permanent fix,” said Rep. Larry Hall of Durham, the House Democrats’ leader. “This is on the road to talking about trying to do something later on.”

Brawley said the prospect of a sharp drop in the tax rate, which could cost DOT $500 million a year in funding cuts, should move the legislature to find dependable sources for increased transportation revenues in the future.

“The intent is to give us stabilized transportation revenues for the rest of the year, with the expectation that all of this would be replaced by comprehensive legislation to deal with (long-term) transportation funding,” Brawley said. “If we solve the problem, we don’t need the 500 layoffs. If we don’t solve the problem, the layoffs are going to be significantly more than 500.”

Rep. Charles Jeter, a Huntersville Republican, said legislators will find new ways to pay for North Carolina’s needs.

“It’s on us to make sure we sit down and come up with a permanent, long-term fix for transportation funding in this state,” Jeter said. “The gas tax as it is currently written will not work.” N.C. Insider editor Patrick Gannon contributed.

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Where to get more transportation money

Recent studies have pointed out possible sources for hundreds of millions of transportation dollars. North Carolina political leaders have been shy about endorsing specific taxes or fees.

Two legislative leaders – Rep. John Torbett and Sen. Bill Rabon – said Tuesday that they’d like to end the yearly transfer of $255 million from DOT’s budget to the state’s General Fund.

“Oh yeah, that’s always been target No. 1,” Torbett said.

Other ideas in discussion, Torbett said, include a higher tax on car sales, a one-penny sales tax dedicated to DOT, and new motor vehicle fees.

State leaders are already talking about how to spend the new money. Torbett said it should be aimed at just three uses: “roads, bridges and port modernization.”

He suggested a four-year plan that would start out with an emphasis on road maintenance, shifting to increased money for new projects in later years.