Erdman Edition: What's up Nebraska? Your Gas Tax!

During this session, the Legislature has debated two different gas tax increases in an attempt to provide more funding for NebraskaÕs highway system. As the costs of construction and maintenance have increased dramatically, traditional revenue sources have not kept pace. Of all the bills introduced on roads funding, only bills that increase the state gas tax are still alive.

LB 959, the budget bill, increases the gas tax by 1.2 cents to 26.5 cents on July 1, 2008. This increases funding to the Department of Roads by $14.5 million to fund salaries and benefits. During debate on the budget, I offered two amendments to pay for the salary increases from the cash reserve fund instead of raising the gas tax. Both amendments failed. Opponents argued we should save all cash reserve funds in the event revenue declines over the next few years. It is impossible to save enough money to get out of a recession; it is done by stimulating the economy by lowering taxes. At the same time, raising the price of gas through taxes ignores the current pressures on Nebraskans to make ends meet now as well as the potential impact of taking that money out of NebraskanÕs pockets and the stateÕs economy.

LB 846 would change the way that gas is taxed. It creates a wholesale tax based on 5% of the average wholesale price of gasoline for the prior 6 months. It would be similar to a sales tax and effective January 1, 2009. LB 846 would in turn lower the fixed tax rate from 10.5 cents per gallon to 2.5 cents and replace that with what is estimated to be an 11.3 cent wholesale tax, or a 3.2 cent overall increase. Based on current projections the gas tax would increase from 26.5 cents to 28.6 cents. This does not include the tax increase in the budget. Proponents contend that gas taxes are a Òuser feeÓ that ensures individuals who use our roads pay for them.

If both bills pass, the gas tax would increase to 26.5 cents on July 1, 2008, and jump to a projected 29.8 cents on January 1, 2009. Again these amounts are projections and the actual tax rate could vary. While either bill would raise additional revenue, neither would solve all problems with funding roads. The problems are not just with the funding side.

There are millions of dollars of federal funds currently appropriated for specific road building projects going unused due to the unwillingness of the Department of Roads to prioritize state funding on those projects. This increased burden will not resolve the failure to complete important expressway projects or leverage existing federal funds. Additional federal funds for specific road construction projects will likely be in jeopardy in the future given the inability of Nebraska to use those funds in a timely manner.

While I can agree with the principle of user fees to fund roads, it is clear we must evaluate how we fund roads and not just do what the Legislature typically does Ð raise taxes Ð as the solution. We know that vehicles are becoming more efficient and the price of gas has a direct impact on consumption. LB 846 increases the gas tax when the price of gasoline rises, a formula that further penalizes drivers when gas prices are high. I am disappointed the focus of the debate is how to raise the gas tax rather than exploring alternatives to fund projected shortfalls. Again, we have nearly $500 million dollars in reserve. I did not support an increase in the gas tax last year and I am not inclined to support any bill that adds to the increasing burden fuel prices place on Nebraskans. I remain confident long term funding for expressways and roads can be found without increasing the gas tax.

The Legislature is nearing the end of the session and many major issues await debate. I welcome your opinions, insights, and comments. Please contact me at my Lincoln office either by mail: Sen. Philip Erdman, District 47, P.O. Box 94604, Lincoln, NE 68509-4604; by email: perdman@leg.ne.gov; or by phone: (866) 800-7445.