NC Budget and Tax Center, Uncategorized

Cap on gas tax would further strain NC transportation budget

An efficient, safe, and convenient transportation system is integral to the health of North Carolina’s economy and North Carolinians’ quality of life. The state’s vast transportation system is struggling to serve this need because it faces serious challenges. The system is under considerable pressure due to aging infrastructure, increasing congestion, and strained revenue sources that are failing to keep pace with rising construction and maintenance costs.

Despite these problems, Governor Perdue’s FY2012-13 budget proposal places a cap on North Carolina’s gas tax, which is currently 38.9 cents per gallon and accounts for more than half of state revenues dedicated for transportation projects. The legislature is poised to follow suit. The Budget and Tax Center released a report earlier today on the pitfalls of capping the gas tax.

A cap on the overall gas tax rate would be a short-sighted policy proposal that has huge long-term costs and minimal benefits. If the gas tax were capped at 37.5 cents as recommended by the Governor, North Carolina will miss out on an estimated $63 million in transportation revenue in FY2012-13. Meanwhile, the average motorist would likely see minimal savings at the pump.

What would be cut from the transportation budget to cover this gap in funding? The House Appropriations Subcommittee on Transportation is currently weighing a decision to cut funding dedicated to primary and secondary roads—each program would absorb roughly half of the $63 million. If you think that the state’s roads are in great condition, data suggests otherwise. The American Society of Civil Engineers downgraded the state’s grade on its roads from D to D- in 2009. A permanent or long-term cap on the gas tax would further delay much-needed repairs and upgrades, adding pressure to local governments who are already fiscally pinched.

Local governments may meanwhile face another burdensome cut: the subcommittee is also weighing a decision to cut public transportation grants from the current 6 percent reduction (in the continuation budget) to a full 15 percent reduction—a loss of nearly $8.7 million. Data shows that 60.4 percent of North Carolinians traveling to work by means of public transit have incomes below $25,000. People who are not able to own a car need and rely on these services and local governments depend on these funds to draw down federal funding.

The debate over capping the gas tax would be enhanced if lawmakers were to place prioritization reform on the table. With scarce resources, it is important for transportation officials to consider the state’s true transportation needs. Failing to move away from the 1989 Highway Trust Fund list of projects and age-old transportation priorities is not sustainable, especially as the state faces strained sources of revenue.

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  1. […] Meanwhile, a Plan to Cap the Gas Tax in North Carolina Probably Isn’t a Good Idea (NC Policywatch) […]