The state Department of Transportation’s proposed budget shows that the Perdue administration is counting on the Republican-led legislature to allow gas taxes to keep rising this year.
But without lifting a finger, Republicans have the power to let gas tax rates fall sharply instead.
[2/18/11 correction: Legislative action would be required to prevent gas tax rates from rising again in July. See below.]
The variable tax rate fluctuates as a portion of the average wholesale gas price, and in January it climbed to a record high level of 32.5 cents a gallon. Perdue’s budget, released today (see below), projects an increase of another penny a gallon, to generate record-high gas tax collections of $1.74 billion in 2011-12.
[2/18/11 correction: That assumes the Republican-led legislature will allow the tax to keep rising. A GOP legislative spokesman says that seems unlikely.
The gas tax is based on a formula: currently, under a temporary law enacted in 2009, it is 17.5 cents plus the higher of two numbers -- either 12.4 cents or 7 percent of the average wholesale price. A minimum of 29.9 cents a gallon, and no maximum.
Democrats were in charge in 2007 when the gas tax rate was climbing and motorists protested, so the legislature took action to make 29.9 cents the maximum rate for two years. We got the current law in 2009, with wholesale prices falling and DOT worried about losing money for road repair and construction. The legislature replaced the tax ceiling with a two-year floor, to make 29.9 cents the minimum rate through June 2011.
Got that? When the current two-year law expires, we'll revert to the gas tax formula that was in effect until 2007: 17.5 cents plus the higher of 3.5 cents or 7 percent of the wholesale price. In other words, a minimum gas tax of 21 cents, and no maximum. So the rising wholesale price will continue pushing the tax rate higher from its current 32.5 cents.
That's what will happen unless the legislature decides to put a cap on the tax again.
Stay tuned. Apologies for my error on this yesterday.]
But that assumes action by the legislature this spring to prevent the tax from falling in July to 29.9 cents. This was the legal ceiling on the tax rate until 2009 when the legislature agreed to let it climb higher – a temporary measure that is about to expire. Republicans have said they are not likely to do anything about the gas tax. If they do nothing, the tax rate will fall in July by 2.6 cents a gallon. That would cut DOT revenues by about $125 million.
Elsewhere in her budget, Perdue indicates that DOT Secretary Gene Conti will take two independent state entities under his wing – the State Ports Authority and the Global TransPark Authority – and to have more direct oversight over the private but state-owned North Carolina Railroad. But Conti said there won’t be a big change.
"While the GTP, Ports and NCRR remain autonomous in this governor's budget, this new reporting structure allows for better coordination immediately and will lead to increased efficiencies in the future though continued collaboration," Conti said in a prepared statement today.
North Carolinians were cutting back on gasoline purchases even before the recession, because their cars were increasingly fuel-efficient. But the rising pump price of gas has pushed the variable tax rate higher, to the current 32.5 cents. (Details of this exciting history, complete with the fascinating formula for calculating the gas tax, are here.)
DOT’s other main sources of state funds – motor vehicle fees and the highway use tax on car sales and leases – also are rising slowly after the recent economic slump. But they’re still well below their record levels of two and three years ago, respectively.
Perdue proposes a one-time addition of $30 million to the DOT Ferry Division budget in 2012-13, to buy three new vessels and make other improvements to the state’s aging ferry fleet.