INDIANAPOLIS | Indiana may need to raise taxes just to maintain its transportation infrastructure, according to a new analysis commissioned by the General Assembly.
If the state doesn’t raise takes, it’ll need to come up with another plan to increase revenue in the not-too-distant future.
The state’s top road funding sources — an 18-cent per gallon excise tax and 7 percent sales tax on gasoline purchases — are set to drop fast due to Hoosiers driving fewer miles than in the past and doing it in more fuel-efficient vehicles that travel farther between fill-ups.
Over the next 10 years, the $450 million Indiana currently collects in fuel taxes is projected to fall to barely $300 million after accounting for inflation, according to the report by Cambridge Systematics, a Massachusetts-based transportation policy advisory group.
That decline will make it impossible for the state to adequately take care of the 30,000 miles of roads and nearly 6,000 bridges that support Indiana’s $246 billion in annual economic output, let alone grow the system.
Joe Guerre, a civil engineering principal at Cambridge Systematics, explained recently to the Legislature’s Interim Study Committee on Roads and Transportation that Indiana does not yet face a road funding crisis.
But the state needs to begin deciding the acceptable quantity and quality of its roads, and how Hoosiers are willing to pay for them, he said.
“There is no one single answer to the question: What should Indiana buy?” Guerre said. “There’s a lot of needs out there.”
He noted bridges and overpasses on Indiana’s interstate highways are going to be a significant burden. Many of them were constructed in the 1960s and are nearing the end of their estimated 50- to 75-year lifespans.
Guerre said local governments also have pressing road needs, but they are harder to quantify due to the different techniques used across the state to measure road use and quality. The Cambridge report focused only on state-maintained roads and bridges.
Many of Indiana’s most heavily traveled roads, including the Borman Expressway through Lake County, recently were rebuilt using proceeds from the $3.8 billion, 75-year lease of the Indiana Toll Road.
However, over the past decade, “extra” funds have been entirely spent or committed to ongoing projects, forcing the Indiana Department of Transportation to rely on traditional revenue sources to maintain the state’s roads and bridges.
What can be done?
Gov. Mike Pence last week proposed spending 10 percent of the state’s budget reserve fund, increasing INDOT appropriations by $150 million a year for three years and borrowing $240 million to pay for $1 billion in additional road maintenance between 2016 and 2020.
The Republican emphasized his plan, which requires legislative approval, will bring the condition of the state’s roads and bridges above the national average and do it without raising taxes on Hoosiers.
“These additional funds will help INDOT make future maintenance and repairs as the interstate system comes of age, and will help ensure that our roads can support the economic and employment growth our state has seen over the last few years,” Pence said.
“Just as Hoosiers seek to build a financial reputation that allows them to build a future, our state has put in the hard work to guarantee that Indiana’s future is bright as we enter our third century.”
Better alternatives to borrowing?
Republican legislative leaders, including state Rep. Ed Soliday, R-Valparaiso, the chairman of the House Roads and Transportation Committee, aren’t sold on the wisdom of increasing state debt to maintain roads.
“I don’t mind borrowing for capital (new projects), but borrowing for what would in business be classified as an operating expense? Usually, you don’t long-term bond for short-term expense,” Soliday said.
As an alternative, Soliday suggested raising the state’s cigarette tax by $1 per pack. That would bring in $300 million in new annual revenue with little pain for most Hoosiers.
Soliday expects the General Assembly will address immediate road and bridge preservation needs during the 2016 legislative session that begins in January.
He said a long-term solution likely will have to wait for at least the next two-year budget proposal, set to be crafted during the 2017 session.
The Cambridge analysis evaluated 17 possible revenue sources for increased road and bridge funding that could boost annual revenue anywhere from $10 million to more than $1 billion, depending on the combination of options selected.
They run the gamut from a one-time gas tax increase; automatically hiking the gas tax with inflation; new charges on the millions of trucks that pass through Indiana; adding tolls to interstate highways; assessing higher driver’s license fees; imposing a higher sales tax on new vehicle purchases; and even replacing the gas tax with a per-mile charge.
“This tool is a really good tool, and it really tells you the consequences of various behaviors,” Soliday said.
But before any of those revenue options can be enacted, Soliday emphasized the state needs to do more to educate Hoosiers about how little they are paying for their roads.
According to the Cambridge report, the average Indiana driver pays about $17 per month in state excise and sales taxes on gasoline, far less than what most households pay each month for Internet service, cable television or their telephone bills.
A Cambridge survey of Hoosier motorists found most believe they pay more than $50 per month in road taxes, more than twice as much as they actually spend.
It also remains to be seen whether the Republican-controlled Legislature, which prides itself on regularly cutting taxes, would ever be willing to vote for a tax increase, even to improve road and bridge conditions that most Hoosiers say are inadequate.
State Rep. Dan Forestal, D-Indianapolis, the top Democrat on the House transportation committee, said there clearly is a need for action and nothing stopping lawmakers from addressing the issue immediately.
“There’s really not anything that we cannot do as the General Assembly. If we want to appropriate money, we can appropriate money,” Forestal said.
“Now whether the supermajorities and the governor will be able to come together to figure out what that looks like, that’s a totally different story.”