The major fiscal story of this “fiscal” session of the Legislature has been tax reform. Those bills got off to a fast start and are still in play. But another potentially big issue that had been on the backburner earlier began to move this week. That one deals with transportation and infrastructure.
In the months before the session began, there was a lot of fanfare, and what seemed like momentum, for a major infrastructure bill. The proposal developed in coordination with various groups would have increased the gasoline tax by 10-cents per gallon beginning in July, ratcheting it up two-cents every other year until it eventually reached 22-cents per gallon.
That would represent a significant tax increase, but also a huge investment for road repairs and maintenance, as well as a number of high-profile mega-projects.
But the COVID economy, the influx of billions of new federal dollars, and the desire of legislative leaders to focus their attention more on tax reform than a tax increase seemed to take the wind out of the transportation sails.
This week, some legislators returned to the transportation issue with a couple of greatly scaled back proposals that passed out of committee and are awaiting debate in the House of Representatives. The only tax increase is a $400 annual levy on electric vehicles and a $275 charge on hybrids. That’s to make up for the fact that they currently contribute little or nothing to infrastructure even though drivers use the same roads as those driving gas-powered cars and trucks.
The other bill doesn’t raise any taxes, in fact it ultimately lowers them slightly. What it does do is take 10% per year from a temporary .45 cent sales tax out of the State General Fund and dedicates the revenues to transportation projects. That tax expires in 2025, but this bill renews it at a rate of .4 cents through 2031.
Ultimately, it amounts to a tax swap that shifts funds from one part of the budget to another and keeps most of that expiring sales tax on the books for an additional five years.
To many, that might seem to be a rather painless way to pay for road improvements, but it does have a significant catch – it doesn’t raise near the amount of money that the larger gasoline tax would have and it won’t come close to meeting the state’s needs. The approximately $370 million the tax swap raises after 10 years is about half of what the tax increase would have provided and it takes those dollars out of the State General Fund.
While it is clear by almost any measure that Louisiana needs to do much more to provide for an infrastructure that is built for commerce and the safety and convenience of drivers, this effort does represent a start. The 10% hit on State General Fund Revenues each year is not ideal, especially considering all of the other areas where we need to invest. But it seems manageable if lawmakers would simply put the limited state dollars that remain available toward the priorities they say they support like education and early childhood.
What makes at least some investment in infrastructure so important right now is that our existing gasoline taxes are not generating enough revenues to meet the match we need to draw down all the federal transportation funding that is available to us. We have managed to find those dollars in other places, but that is not sustainable, especially if Congress does in fact pass a major transportation bill where a greater state match will likely be required.
With big issues there are rarely easy solutions and transportation funding is certainly one of them. These proposals don’t meet all of our needs, but they do keep us from falling farther behind than we already are.
This year, if the Legislature passes some degree of meaningful tax reform and makes a rare new investment in our infrastructure, this will have proven to be a legislative session that exceeded most expectations for success.