Gas Tax Hike Idea Dies If Money to Rural Roads is Jeopardized

By Rod Boshart, Reporter

DES MOINES, Iowa - Fragile efforts to ignite a gas tax debate in the 2013 Legislature will flame out if urban lawmakers try to inject a rewrite of the formula for distributing road-use tax fund revenues into the mix, backers and skeptics agree.

With the next election nearly two years away, supporters of increasing the state's motor fuel user fee – as Gov. Terry Branstad prefers to call it – see the 2013 legislative session as offering a 50-50 shot at best to bump up rates for the first time since 1989.

Currently, motorists who fill their tanks at Iowa pumps pay state taxes of 21 cents a gallon for regular gasoline, 19 cents on each gallon of ethanol-blended gasoline, and 22.5 cents per gallon for diesel fuel. Each penny increase in the state gas tax would raises $23 million in revenue and cost Iowans about $4.75 in yearly fuel expenditures. Proceeds from Iowa gas tax are distributed via a formula that provides 47.5 percent to the state's primary road fund for use on interstate highways and state-owned roads, 24.5 percent to the secondary roads, 20 percent to cities, and 8 percent to farm-to-market roads.

A TIME-21 initiative approved several years ago by lawmakers routed new transportation-related revenue from higher vehicle fees to the highway network by distributing 60 percent to the state system and 20 percent each to cities and counties but capped it at $250 million annually. Now some urban legislators say they would like to revisit the structure of the road-used tax distribution formula as part of a comprehensive review if they are to consider changing the current fee schedule.

Branstad and top lawmakers say that would open an urban-rural split that would stop the issue cold.

"Forget it," Branstad said in a recent interview, noting that the Iowa Farm Bureau Federation's key backing for a motor fuel use fee increase would dissipate if road-use tax money for rural areas was lessened at a time when a proliferation of ethanol plants and more value-added processing is creating a greater reliance and stress on Iowa's infrastructure network. "Are you kidding me? There's no chance that's going to happen. It's going nowhere."

Sen. Matt McCoy, D-Des Moines, a key backer of a gas tax increase, agreed that trying to reconfigure the formula on an issue already struggling to find 51 affirmative votes in the Iowa House and 26 yes votes in the Iowa Senate would be a sure-fire course for failure.

"I already think this thing is very fragile as it is now and I think it would only become more fragile if you tried to change the formula," said McCoy, who expected a gas tax increase would have to win legislative approval in 2013 if it's going to happen during the 85th General Assembly. "It's a tough go, but I can tell you, if doesn't happen now, it won't happen next year. So I can just assure you this has got to be the year for it."

Dan Culhane of the Ames Chamber of Commerce said a nonpartisan alliance of the state's top 16 chambers and economic development organizations see updating and repairing Iowa's transportation infrastructure as central to growth efforts. The Iowa Chamber Alliance would support a gas tax hike of up to 15 cents a gallon provided the TIME-21 cap is removed and consideration is given to distributing needed dollars to Iowa's most-traveled roads.

For the current fiscal year, Stuart Anderson, director of planning and programming for the Iowa Department of Transportation (DOT), said his agency is forecasting the state road use tax fund -- which annually takes in $470 million from various vehicle-related fees and $430 million from fuel taxes -- will provide about $1 billion to be distributed through the regular formula and about $137.6 million will flow through the TIME-21 fund. DOT projections indicate the state faces a yearly $215 million shortfall just to address the most critical needs for a system comprised of 114,000 miles of roadway and 25,000 structures.

Senate Republican Leader Bill Dix of Shell Rock said the public is beginning to recognize that infrastructure upgrades are part of the long-term challenges facing the state's economic growth. He said raising the state gas tax remains a "minority viewpoint" among legislators, but it is "an idea that is gaining support" although it is still short of the votes needed for passage and would "move backwards" if there was a push to change the road-use tax distribution formula.

Overall, Dix said legislative Republicans want to see Iowans' tax burdens reduced during the 2013 session and a gas tax increase may "get some traction" within the context of that big-picture discussion of providing significant relief to taxpayers.

House Democratic Leader Kevin McCarthy of Des Moines said reaching a bipartisan agreement on the gas tax issue will require leadership from Branstad, which has not happened to date, and a change in the percentage of road funds generated by out-of-state drivers. He also did not want to see a proposed gas tax hike coupled with other tax-policy changes, saying "that complicated the complicated."

Senate Majority Leader Mike Gronstal, D-Council Bluffs, said injecting the road tax distribution formula into a gas tax discussion would be "a prescription for killing it." He said passage of a gas tax increase in the Iowa Senate will require a majority of both caucuses – meaning 14 Democrats and 13 Republicans.

"If there is broad and deep bipartisan support, this can move forward. If there's not, it's dead," he said.

McCoy said the fact that Democrat Leonard Boswell came out in support of a federal gas tax increase, which was used in TV ads by GOP opponent Tom Latham to defeat him in a November 2012 matchup of two incumbent congressmen probably has created problems in convincing state legislators to back a state tax hike when "it's easier to vote no than to vote yes."

He also sees mixed messages from the governor, who told a taxpayer group in December he's not going to lead the charge for a gas tax increase but has not indicated that he would veto one either. "I think he's sending a message to Republicans that if they want to flake off on this that he's not going to be pulling them to his office trying to put the votes together for it," McCoy said.

Branstad said the fact that pump prices in Iowa have hovered around or dropped below $3 per gallon probably is helping those pushing for a motor fuel user fee increase in 2013 that would hit commuters and border towns the hardest. At the same time, he hasn't sensed a groundswell of support building for passage once the split-control Legislature convenes on Jan. 14 for its scheduled 110-day session.

"I haven't heard anybody talk realistically about anything that's likely to happen," the five-term GOP governor said in an interview. "They have to have their act together and I don't see that. I'm not threatening a veto, but I'm saying I've got other things I'm going to focus on."
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