State Politics

Proposed transportation budget counts on higher gas tax receipts

Gov. Pat McCrory’s budget proposal, which he released Thursday, avoids drastic cuts in state spending for road construction and bridge repairs such as the project on I-40 on the south side of Raleigh.
Gov. Pat McCrory’s budget proposal, which he released Thursday, avoids drastic cuts in state spending for road construction and bridge repairs such as the project on I-40 on the south side of Raleigh. NEWS & OBSERVER FILE PHOTO

Gas tax collections are expected to fall by several hundred million dollars over the next two years, under a statutory formula that pegs the tax rate to plunging oil prices.

But in his transportation budget, released Thursday, Gov. Pat McCrory avoids drastic cuts in state spending for road construction and bridge repairs.

McCrory’s budget assumes that the General Assembly will change the law this spring, to fix the gas tax at 35 cents a gallon. The Senate approved this adjustment last month, in order to keep the gas tax from dropping to a projected average 30.4 cents in fiscal year 2015-16 and 31.3 cents in 2016-17.

His budget makes use of $475 million in additional gas tax receipts that will be available for the state Department of Transportation only if the Senate plan – or something like it – becomes law.

“We assumed the Senate proposal in modeling revenues for purposes of a forecast,” said Lee Roberts, the state budget director. “That was the only proposed legislation that was out there when we put the budget together.”

But the House has different ideas about the gas tax. Instead of setting a minimum rate of 35 cents for future years, the House changed the Senate bill this week to set the rate at 36 cents for the rest of 2015, then allow the tax to plunge in January. Each penny of gas tax is worth $52 million for DOT, so the reduced tax would force layoffs and spending cuts worth a few hundred million dollars.

The House gave final approval to the 36-cent tax Thursday in a 72-42 vote. Now the two chambers will negotiate over their differences.

In McCrory’s budget, the Division of Motor Vehicles would receive an additional $30.5 million in technology upgrades for its automated driver’s license system. Powell Bill funds to help towns and cities with street maintenance needs would be cut by $9.6 million, or about 6 percent. Other funds are moved around to put $113.7 million more in DOT maintenance reserves for state road preservation work.

Without offering details, the governor reiterated his proposal for $1.2 billion to $1.4 billion in transportation bonds – borrowed money the state would use for road construction projects.

Key stat: Not counting $1.17 billion in federal money, the state DOT budget for the year that ends June 30 is $3.19 billion. McCrory’s budget predicts a slight drop to $3.16 billion for fiscal year 2015-16.

Anything’s possible: Legislators will be negotiating this spring over much more than a one-penny difference between possible gas tax rates. House leaders say they are determined to settle on new and increased revenue sources to generate at least $1 billion a year for expanded transportation spending in the future, and that would mean a big expansion for the DOT budget.

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