Ige wants to increase gas tax to fund repairs

In an unusual election-year move, Gov. David Ige is asking lawmakers to raise the state’s gasoline tax from 16 cents to 19 cents per gallon while also boosting the state’s vehicle registration fees and weight taxes, steps the administration expects will cost a typical motorist about $55 extra per year.

The revenue from those taxes goes to the State Highway Fund, which finances road maintenance projects and new construction.

Ige’s proposal was immediately rejected by House Republican Minority Leader Beth Fukumoto Chang (Mililani, Mililani Mauka, Waipio Acres), who said the gas tax increase would disproportionately hurt those who have to drive longer distances to work.

She said everyone wants to find ways to repair the roads, but added, “I think we need to look at it a lot more carefully and find maybe a more equitable way to do that. No, I don’t think we should be increasing gas taxes.”

Tax increases are generally not favored by politicians during election years. While the next gubernatorial election is in 2018, most of the state’s legislators will face re-election this year.

House Finance Chairwoman Sylvia Luke said transportation officials are worried about depleting the State Highway Fund and leaving the state without enough money to fix roads, and said Ige’s proposal clearly “warrants some type of discussion.”

However, she pointed out the state Department of Transportation already has a difficult time spending the federal funding it receives. The department is allocated about $160 million each year in federal funds, and currently has a backlog of more than $600 million in unspent federal funding for highway projects in Hawaii.

Federal Highway Administration officials have warned the state it could lose federal funding if it doesn’t quickly spend that federal money, and transportation officials say they significantly reduced the backlog from a peak of about $940 million in 2010.

“If that’s the case, maybe the thing is, we need to encourage them to use up all the federal funds instead of losing that before they try to replenish anything,” Luke said.

The Ige gas tax proposal was panned by Tax Foundation of Hawaii President Tom Yamachika, who also cited the backlog of unspent federal funds.

“They should efficiently spend the money that they have and the money that the feds have given us before deciding to pick our pockets for some more,” Yamachika said.

House Speaker Joe Souki was more supportive, saying that the proposed increase in the gas tax “would seem at this point rather small” compared with the recent dramatic decline in gas prices at the pump.

“This three cents increase in price, the impact should be minimal, but the result will be more maintenance for the highways,” he said. “The governor is showing a little courage in doing this.”

The current state gas tax is expected to generate about $87 million for the State Highway Fund this fiscal year, and the state weight tax will generate another $78.4 million. The vehicle registration fee is expected to net another $44.7 million for the fund.

State Department of Transportation officials warned lawmakers earlier this year that collections from the existing state gas tax are expected to grow at an average rate of only one-half of 1 percent a year, which will limit the amount of highway work the state will be able to do in the years ahead.

With vehicles becoming more efficient or using alternative fuels, the gas tax is becoming a less effective way to fund public highways, lawmakers were told. Statewide, fuel consumption is not expected to keep pace with the increasing cost of highway maintenance or the public’s demand for highway improvements.

Souki said that if state fuel tax collections are allowed to decline, federal funding for highway projects will also decline because that federal support is calculated using a formula based on the amount of gas taxes the state collects.

Senate Ways and Means Chairwoman Jill Tokuda said the highway fund “is not in a good place in terms of really being able to manage all of the expenditures that have been put on it, or will need to be put on it.”

She added, “We’ve been asking since last year, what are you going to do to maintain the health of this fund? I suspect that this is their answer … but there will need to be a good public discussion about the plan, what it’s going to be used for, and how we make sure it continues to be stable going forward.”

Tokuda said she thought Ige would have mentioned the gas tax increase in his State of the State address earlier this week “because it’s a pretty significant piece of legislation.”

The bill formally introduced by the Ige administration on Monday would increase the state vehicle registration fee from $45 to $60 per year, and raise the motor vehicle weight tax from 1.75 cents per pound to 2.75 cents per pound for passenger vehicles.

Larger vehicles that weigh more than 4,000 pounds would have their state weight tax increased from 2 cents to 3 cents per pound, while vehicles weighing more than 7,000 pounds would pay a flat fee of $400 per year per vehicle.

The Ige proposals in House Bill 2409 and Senate Bill 2938 would also double the tax on diesel oil from 1 cent per gallon to 2 cents, and increase the tax on aviation fuel from 1 cent per gallon to 2 cents.