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Tags: Gas | State Highway Funds | Congress

State Gas Taxes Directed to Other Purposes

By John Blosser | Thursday, 17 July 2014 02:16 PM EDT

States are depleting their highway repair funds raised by gasoline taxes to pay for education, medical care and debt, intensifying the demand on Congress for federal funds to take up the slack.

The Wall Street Journal reports that state infrastructure funds, largely raised by state gasoline taxes, have been directed to other purposes and governors are pressing federal legislators to extend funding to the Federal Highway Trust Fund to pay the tab for road and bridge repairs.

However, federal infrastructure funds are also running short, causing the House to pass a bill which will keep the fund alive through May of next year, at a cost of $10.8 billion, and the Senate is expected to take up the bill next week.

According to the Eugene, Ore., Register Guard, if federal lawmakers fail to extend the fund, states will lose 30 percent of their highway repair funding and up to 700,000 highway construction jobs will disappear.

Gas taxes, frozen at 18.4 cents since 1993, and lessened use of gas as vehicles become more fuel-efficient, are seen to be the root of the problem. Rep. Earl Blumenauer, D-Ore., wants a 15 cent increase in gas taxes to raise $170 billion over 10 years.

However, states' choices to redirect funds intended to pay for highway repairs to other uses are increasing demands on the federal funding. For example, while states raise about $40 billion a year from gas taxes, the Journal reports, Texas spends 25 percent of its fuel tax income on education. New Jersey, which will collect $541 million in gas tax revenue, plans to spend $516 million trying to shrink $1 billion in debt interest the state owes. New York collected $2 billion in gas taxes, but $1.4 billion went to pay off debt.

Oregon began paying for highway construction with bond debt, and pays about $210 million a year in interest. Travis Brouwer, Oregon's assistant transportation department director, told the Journal, "We will not have any additional money from the state side so we will have to rely on federal funding going forward."

The House bill passed handily with a vote of 367-55, and House Speaker John Boehner, R-OH, said, "On the whole, this bill is good news for workers and taxpayers and we appreciate the President's support for our responsible approach. We certainly hope he will urge Senate Democrats to pass this bill so we can prevent highway projects from shutting down in a matter of weeks."

However, the Heritage Foundation's spokesman Dan Holler told the New York Times, “No one really believes today’s bill, which is chock-full of gimmicks and revenue raisers, represents good policy."

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