Why Alabama Lawmakers Could Still Consider a Fuel Tax Increase

Jay Williams/Flickr

Back in 1992, when gasoline cost about $1.13 per gallon, the Alabama Legislature hiked the state's fuel tax by a nickel.

It hasn't been touched by state lawmakers since.

"We worked real hard and it barely passed," recalled Mack Roberts, who was then the assistant director at the Alabama Department of Transportation before heading up the department in 1993.

He was an advocate of a fuel tax increase then, and remains so today.

"Somewhere down the line, we have to do it," said Roberts, now vice-president of engineering with American Roads in Montgomery, Ala.

But a quarter-century later, the Legislature is likely to leave Montgomery this spring without having approved a fuel tax increase to pay to improve roads and bridges. It would leave the state's levy at the same 18-cent-per-gallon rate it has been at since Guy Hunt was governor.

House Speaker Mac McCutcheon declared a gas tax increase dead in April, and he hasn't budged since. "The legislation will not come up again this session," his spokeswoman said on May 10.

'Business decision'

Despite McCutcheon's decree, a laundry list of state officials and organizations are holding out hope that something can be done in the waning and frantic final days of the spring legislative session.

Most of the backers support a measure sponsored by Rep. Bill Poole, (R-Tuscaloosa), that would increase the tax on gas and diesel 4 cents a gallon on Sept. 1, another 2 cents a gallon on Sept. 1, 2019, and allows for an option to increase it 3 cents a gallon on Sept. 1, 2024.

The revenue would be used to support a $2.45 billion bond issue to pay for road and bridge upgrades, with $1.25 billion going to county and municipal governments.

The new transportation program is called "ATRIP-2," named after 2013's Alabama Transportation Rehabilitation and Improvement Program, or ATRIP, which was financed through long-term borrowing.

More than 600 projects throughout Alabama were paid for through ATRIP. The remainder of those projects financed through the program, are anticipated to be out for bid before the end of 2017.

Supporters of a fuel tax increase include newly-minted Alabama Gov. Kay Ivey. It's become one of her top priorities, and is the only tax she has publicly come out in favor of since taking over as governor on April 10.

"I strongly support the gas tax and I encourage the members of the House to do likewise," said Ivey, during a visit to Mobile on May 5. "Our commerce needs good transportation. It's a business decision. I'm a conservative. I'm a Republican. I got the facts. Who better to make a business decision than a conservative Republican who has all the facts? That's the message and I hope all Democrats and Republicans will step up to the plate and let's do business for Alabama."

Trump effect

Aside from Ivey, there is another new twist in the gas tax push: President Donald Trump, and his pledge to roll out a massive nationwide infrastructure program.

Trump, recently, signaled his support for an increase in the federal gasoline tax to support a sweeping federal infrastructure program. The federal gasoline tax has remained at 18.3 cents a gallon since 1993.

"I think that is a game changer," said state Sen. Arthur Orr, R-Decatur, who is also backing two pieces of separate legislation in the House and Senate that would give counties the authority to ask voters, via referendums, whether they support a fuel tax increase within county boundaries. Orr classifies those two pieces of legislation as an "alternative" to Poole's proposal in case it meets McCutcheon's predicted fate.

"If there is a required match, I know that would definitely influence the disposition of the Legislature for any gas tax," said Orr, referring to the likelihood that a federal transportation program would require matching funds from state governments.

Sonny Brasfield, executive director of the Association of County Commissioners of Alabama, put it this way: "There will be an infrastructure program. We're not talking about 'if,' we're talking about 'when' and the folks at ALDOT will say Alabama, at the state level, is not prepared to match federal money. This won't be free money."

Opinion polls show that most Americans are supportive of a major infrastructure program. A CNN/ORC poll, released in March, showed that 79% of U.S. adults back increased spending on infrastructure.

A Gallup poll, earlier this year, showed that among Trump's campaign priorities, a "major spending program" supporting infrastructure at No. 1 with 69% support. Repealing and replacing ObamaCare, comparatively, was backed with 46% support.

The Alabama legislation, if approved, would bolster ALDOT's funding which has been limited for new road projects, such as widening lanes on congested roads.

That limitation has been blamed on two circumstances since the last time the state's fuel tax was increased: The soaring cost of building roads, and the increase in fuel efficient vehicles that require fewer trips at the pump.

"(A fuel tax increase) is a tax so it takes money out of consumer's pockets," said Amah Ijaz, executive director of the Center for Business and Economic Research at the University of Alabama's Culverhouse College of Commerce and Business Administration. "But it's a necessity, too, because the more fuel efficient cars get, the less money that goes into the highway trust funds."

Ijaz said with fuel prices still at affordable levels about five years after reaching all-time highs for many cities and states in 2012, the timing could be good to pitch an increase.

"You don't want to impose the tax when prices are, say, at $4 a gallon," he said. "So if you have to do it, it's better to do it when the price of gas is low."

Raising taxes

Nearly two dozen states have pushed forward with their own gas tax increases in recent years as a way to finance big-spending highway and bridge projects.

Tennessee is among the most recent. After not touching its fuel tax since 1989, Republican Gov. Bill Haslam signed into law last month a plan to raise the tax by 6 cents per gallon over the next three years to raise $355 million for road and bridge projects.

To offset the increase, Tennessee lawmakers agreed to drop its tax on food and ingredients by 1 percentage point.

Tennessee's state tax on gasoline was 21.4 cents per gallon before the increase.

Groups like the conservative-leaning Alabama Policy Institute support a similar plan for Alabama. Said spokeswoman Taylor Dawson: "Our position is we are opposed to an increase in taxes without a decrease somewhere else. We are looking at, right now, solutions that are alternatives to the gas tax."

Alabama's tax, while set at 18 cents per gallon by the Legislature in 1992, is actually more around 22.9 cents per gallon, according to an in depth analysis by the American Petroleum Institute which takes into account additional fees for underground storage tanks, environmental transportation fees and additional levies by cities and counties.

Alabama's tax is below the national average, and it currently ranks at No. 37, according to the Tax Foundation. The most expensive fuel tax is in Pennsylvania, which levies a 58.2 cent tax on fuel purchases.

In the Southeast, Alabama's fuel tax is cheaper than neighboring Georgia and Florida. Both of those states adjust fuel taxes based on the annual rate of inflation.

Mississippi and Louisiana both have cheaper fuel taxes than Alabama. Neither state has touched their taxes in at least 27 years.

Carl Davis, a research director at the Institute on Taxation and Economic Policy in Washington, D.C., said the recent wave of states adopting fuel tax increases comes more as a necessity than anything as aging infrastructure continues to deteriorate nationwide.

A recent national report indicated that more than 56,000 bridges in the U.S. are structurally deficient, with 1,000 of them in Alabama labeled as in poor condition. According to national transportation research, Alabama records 1.26 fatalities per 100 million vehicle miles of travel, which is considerably more than the national average.

Davis said Alabama, and other states, cannot wait on Congress to enact a federal gas tax increase if it expects to address its own infrastructure woes.

"I haven't seen signs yet at the federal level that there is much of a commitment to the idea that President Trump or legislative leaders in Congress will put in the push needed to get a gas tax across the line," he said.

On the state level, Davis said that the most successful efforts are backed by governors, such as the cases in Tennessee and Maryland.

Tom Layfield, executive director of the Alabama Road Builders Association, said it's been "huge" to have Ivey's backing for a fuel tax increase, even if he's skeptical anything can get done anytime soon.

Aside from this session, lawmakers are unlikely to vote on a fuel tax increase next spring ahead of the 2018 legislative races.

"We are in Alabama," said Layfield. "We have to be forced by the federal government to take a positive step forward. That's what we'll have to wait on."

Brasfield said it could be dangerous for Alabama lawmakers to sit back and wait before addressing a gas tax increase. He said that if Congress moves forward with a Trump-backed infrastructure initiative, the state won't have matching funds.

"We are about as unready as anyone can be," said Brasfield. "The president has said a couple of times that there will be priorities given to states that are ready. Waiting to react is ignoring everything we've been told."

Distributed by Tribune Content Agency, LLC